Sage North America and Intuit Inc. phased
out some of their online services for accountants and their small business and individual
clients.
In an e-mail in late August, Sage North
America director of partner programs Jennifer Warawa informed members of the Sage
Accountants Network that Sage’s ePeachtree
service, Peachtree Web Accounting, and Sage
Peachtree Website Trader and WebsiteCreator
services would no longer be available.
“These services run on a platform that will
not be supported going forward; therefore we
are retiring the product lines,” she wrote. “A
letter will be going to all customers who are
currently on one of these products inform-
ing them of the changes and the action they
can take or of an alternative solution. If your
clients are due a refund, they can expect the
refund amount to be credited to the credit
card on file with us for their account within
six to eight weeks.”
She then provided links to the letters that
will be sent to clients affected by the changes,
along with a phone number where questions
and concerns should be directed. In one such
letter, Sage is offering users of the ePeachtree
service and Sage Peachtree Payroll Solu-
tion subscribers a desktop version of Sage
Peachtree Complete Accounting and Sage
Peachtree Simple Payroll at no cost.
formed that he has elected early recognition
of income on the property.
Reasonable compensation challenge. In
closely held businesses, a large salary paid to
an employee at the end of the company’s tax
year may be a factor indicating the compensation is unreasonable. The IRS and the courts
have scrutinized year-end salary payments in
the past to prevent attempts by companies to
disguise nondeductible distributions of profits as deductible compensation.
for that year. The remainder of the advance
payment is included in taxable income in
the next tax year. Irrespective of qualification under Rev. Proc. 2004-34, a taxpayer that
receives advance payments can always recognize them as income in the year received,
under the full inclusion method.
ADVANCE/PREPAID INCOME
Traditionally, the IRS has been on the opposite side of the fence regarding advance payments, arguing for the most part that income
from advance payments is income when
received and cannot generally be deferred,
whether the taxpayer is on the cash or the accrual basis method. In either case, payments
received in advance are usually income in
the year received, provided no restriction has
been placed upon their use. Even advances
that are returnable as refunds upon the happening of some specified condition generally
cannot escape immediate taxation.
Under Rev. Proc. 2004-34, however, the IRS
permits accrual-basis taxpayers to defer the
inclusion of advance payments until the next
tax year to the extent that the recipient’s performance takes place after the year of receipt.
An “advance payment” eligible for the “
deferral method” generally includes payments
for services; sale of goods; use of intellectual
property; limited occupancy and use of property ancillary to providing services; sale, lease
or license of computer software; ancillary
guaranty and warranty contracts; subscriptions; and certain memberships.
Under the deferral method, the amount
of the advance payment recognized in revenues in the taxpayer’s applicable financial
statement for the year of receipt (or, absent
a financial statement, the amount earned in
that year) must be included in taxable income
TRADITIONAL IRAS
Assets held in traditional IRAs will eventually be taxed as ordinary income when distributed. Now may be a good time to reconsider when those distributions will occur. If
a higher-bracket individual has reached age
59-½ or has another circumstance that avoids
the 10 percent early-withdrawal penalty, a
current distribution may provide a good way
to accelerate income into the current lower-rate structure.
Another way to accelerate IRA income and
enhance long-term retirement and estate
planning is to convert to a Roth IRA. For a
2010 conversion, the taxpayer has the additional option of recognizing income evenly
between 2011 and 2012, instead of all in 2010.
While full income recognition in 2010 may
appear to be the better choice now, this special election allows an individual to wait until
their 2010 return is timely filed before making
a final decision.
CONCLUSION
Usually, postponing the recognition of income pays dividends in that “time is money”
and postponing income means postponing
the payment of tax. If a taxpayer anticipates
being in a significantly higher rate bracket
in a subsequent year, however, this rule of
thumb must give way. A variety of income acceleration techniques should be considered
and prepared to be at the ready to implement
swiftly once Congress makes a decision on
the 2011 rates. The likelihood is that many
more clients will require year-end tax planning this year because of these changes. AT
