Monthly Archives: December 2017

Why You Should Be Taking a
Year-end Physical Inventory

Depositphotos_12153244_s-300x199Inventory – the Good, the Bad and the Ugly

Taking a year-end physical inventory takes time, resources and can interrupt your daily business activities. Finding time at year-end to count all your inventory is not easy. However, there are many reasons why you should make the time to take a physical inventory at year-end.

The Good

  • You will know exactly how much inventory you have on hand. Knowing how much inventory you actually have instead of estimating (guessing) can help you with your business and tax planning and cash flow.
  • It’s an opportunity to take a look at the layout of your warehouse once a year and make sure everything is structured in an efficient manner. No different than organizing your kitchen cabinets, organizing your inventory saves time and resources.
  • Helps you to understand inventory management as a priority.
  • In the case of an insurance claim it’s important to have accurate amounts to document any inventory losses.

The Bad

  • You might realize you have 20 years’ worth of a particular slow/non-moving items on hand and maybe it’s time to stop ordering those items.
  • It’s an opportunity to compare what you think you have to what you actually have and maybe find out; you have employees taking inventory, sending and/or receiving the wrong quantities, your internal controls are not working or you have too much or too little warehouse space.

The Ugly

  • Your lender does the count as part of a loan collateral audit and you find out you don’t have enough inventory as collateral to support your current borrowings.
  • You may realize your company is not nearly as profitable as you might think.
  • You may find you have inventory on hand that is so bad/hazardous/dangerous that it should have been disposed of years ago.

Make the most of your year-end inventory process. An accurate inventory count will only help you understand your business and potentially identify areas that are working well, and or those areas that need improvement. GKG is here to help. We can guide you on how to put together an efficient inventory as well as perform our own test counts to help ensure everything goes well.

Paul Conniff, CPA, CGMA

 

 

 

5 Things To Do When an IRS Letter Appears in Your Mailbox

iuReceiving a letter from the IRS is unsettling and stressful. Often times, when people receive such a letter, they immediately think that something is wrong and that money is owed. Although this can be the case, there are many other reasons why the IRS contacts taxpayers. These reasons include the simple need for additional information, notification of the status in processing a tax return and a change in connection with an expected refund, to list a few. More often than not, the reason for the contact from the IRS can be easily resolved. The following are five tips on what to do if you happen to receive such an unwelcomed letter.

  1. STAY CALM – Letters from the IRS generally detail the reason for which they have contacted you. Additionally, letters provide instructions as to how to handle the issue. Stick to the directions and act accordingly. If the letter is unclear or confusing, be sure to contact your accountant.
  2. REVIEW YOUR RECORDS – If the communication from the IRS is in connection with a tax return that was previously filed, the taxpayer should compare the information detailed in the letter with the corresponding year’s tax return to see if it is an obvious issue that can be resolved quickly.
  3. DON’T OVERREACT – Unless the letter specifies that a response is needed or instructs you that a payment is to be made, it may not be necessary to even reply to the letter.
  4. ACT TIMELY – If a taxpayer does not agree with the letter, a response should be mailed with an explanation as to why there is a disagreement. Supporting documentation should be included with the communication. The response should be timely, deadlines are shown on the letter and your delay may create additional interest and/or penalties. You should ask your accountant for help in responding.
  5. RETAIN the LETTER – Copies of letters and/or notices from any tax authority, including the IRS, should be kept with one’s tax records for the corresponding year, and retained for five years.

If the IRS does make changes to information in connection with a previously filed tax return, the reason(s) may not seem straight forward and may appear to be complex. If this is the case, one should definitely consult with their CPA.

Finally, if you are skeptical about the letter or if the letter appears to be questionable as to whether or not it is truly from the IRS, call the IRS for verification at 1-800-829-1040.

Have no fear, now you know what do once the tax letter is here!

Lenore C. Sanchez, CPA