Your Identity Is Priceless

I suspect that you'd have to be living under a rock somewhere to not know about the very real threat of identity theft. We've all read countless stories of Nigerian scam artists sending e-mails telling us they need to get millions of dollars out of the country. They need money to bribe government officials and your bank account information so they can wire the money to you after all the bribes have been paid. These stories and countless variations upon them abound all over the Internet and other news services. We are constantly bombarded by credit card companies during prime time television assuring us they are doing everything they possibly can to protect your identity and your credit. I believe that they are doing all they can to battle this problem.

It wasn't until this morning that I had some personal contact with identity theft. There seems to be a never ending supply of teenagers at our house these days. I have great difficulty in matching names and faces. It seems as though that there are new faces at our dinner table at least once or twice a week. You wouldn't think that teenagers are at risk of identity theft. At worst, you may think they may be at risk for contracting the common cold and other childhood maladies such as mononucleosis. I'm worried more about my teenagers safety while driving then identity theft. I'm not entirely convinced that our teenagers really are at risk of identity theft as much as they can become the vehicle by which our identities may be compromised or, at the very least, taken advantage. My sort-of-kind-of stepson (let's call him Steve) has a friend (let's call him Bob) that recently had his identity compromised. It wasn't through the traditional sense of a lost or stolen credit card or some Internet hacker breaking into an online merchant website. His identity was compromised through a device so common that I never would have even suspected that it can be used for such a purpose. It was a cell phone. I know; I said the same thing: a cell phone! How could a cell phone possibly be used to steal or attack your identity? I can assure you that was the first question that went through my mind.

This is Bob's story as told to my fiancé by his father. Bob is 16 years old. What could he possibly have to compromise at that age? It wasn't so much what Bob had as it was to what he had access. Bob's story begins a few weeks back when he lost his cell phone. Apparently the cell phone fell into the hands of a very capable criminal. This capable criminal used Bob's phonebook/contact list contained within the cell phone. The criminal used the cell phone to contact Bob's Grandmother. The Grandmother was told of a terrible accident that involved Bob while he was traveling in Canada. The thief went on further to tell the Grandmother that unless she was able to electronically transfer $3,900 to the hospital in Canada, that Bob would be unable to receive desperately needed medical care. Obviously the thief appealed to the grandmother's maternal nurturing instinct to come to the aid of a loved one. Sadly, she sent the money. I am absolutely convinced that if my mother had received a similar telephone call telling her of a terrible tragedy that has befallen one of my daughters, she would also become a victim in this type of scam.

What can we learn from this story? Given the state of our economy, I fully expect that there will be a birth of new angles and methodologies to steal from anyone. These threats could and will take on any form. It could be a phone call, an e-mail, a fax or letter appealing to our sense of right and wrong to act on behalf of another or to somehow acquire a treasure or wealth that we so desperately need to insure that our lifestyle is undisturbed or uninterrupted in the wake of the recession. If only Bob's Grandmother had thought to call the parents of this child to confirm the story, there would be $3,900 still in her checking account. I plan to share this story with my family and loved ones. We'll develop a plan to check in with each other before acting on this sort of thing.

I am, as always, Father Tom.

Photo Credit: D70Focus, KB35

It's About the Arithmetic! (Guest Post)

Recently, my company had to go into the marketplace to find health insurance coverage for our employees. I discovered the choices for health care coverage for a small business are varied and complex. It occurred to me that many small businesses like ours (including our clients) are struggling with the same decisions and choices. Our current economic climate makes those choices much more critical. It was clear that I needed professional guidance to help our company make smart choices about our health care coverage. Naturally, I turned to my friend and colleague, Maureen Hedges to ask the question: How should a small business approach to health care coverage decision? Here is her response:

Most of the media has come to use the phrase health care, when they are really talking about health insurance. Health Care – the services provided to maintain your good health or treat illness and injury. Health Insurance – provides protection against financial loss in the event of serious/expensive illness or injury. When evaluating which health insurance benefits you should purchase, it is important to evaluate the combination of an individual’s potential out-of-pocket cost and the insurance premium. The objective should be to find the most cost effective way to pay for your health care needs.
Example: Real Company – 6 employees with an average age of 41

Current Plan:

Office Visits: $20 Primary care, $25 Specialst
Prescriptions: $10 generic, $30 brand-name, $50 specialty brand
Deductible: $1000 per person, $2000 per family
Maximum Patient Expense: $2500 per person, $5,000 per family

Premium:
Employee, $453
Couple, $1043
Parent/Child, $816
Family, $1360

Proposed Alternative:

Office Visits: $20 primary care, $25 specialist
prescriptions: $10 generic, $30 brand name, $50 specialty brand
deductible: $2500 per person, $5,000 per family
maximum patient expense: $3500 per person, $7,000 per family

Premium:
employee, $341
couple, $785
parent/child, $614
family, $1023

It is evident that the premium savings exceeds the potential additional expense of $1,000 per person/$2,000 per family.

This employer does not want the potential increase in expense to be borne by the employee, and has implemented a health reimbursement arrangement so that in the unlikely event someone has a serious medical situation the $1,000 will be available to make up the difference. While the numbers will change based on the employee population, the concept remains valid for every situation. Health Benefits prides itself on providing every client with an in depth comprehensive review to design the most cost effective employee benefit program possible




Maureen Hedges, Certified Employee Benefit Specialist is President of Health Benefits Insurance and Consulting in Bangor, ME She can be contacted at (207) 992-4412 or mhcebs@midmaine.com

Photo Credit: Waldo Jaquith, Lisa Brewer

Git-r-done!

I feel your pain. now that you are receiving all those "IMPORTANT TAX DOCUMENTS" in the mail, you are thinking about filing your tax returns. Suddenly you feel the anxiety pressing down on your chest like a pallet of bricks. You said you were going to do it. You planned on doing it. You didn't do it. Now, you're convinced that there's a large green monster wearing an IRS T-shirt hiding in your closet. Trust me; I know your pain. Last year, after you got your bill from your tax professional, you promised yourself that you would get organized this year. You said to yourself "next year I'm going to get on top of this". I hear these very same statements from dozens of clients every year. Sadly, it's the same several dozen of clients that repeat this behavior year after year. To many of my clients, I am known as "Father Tom". They regard me as their financial priest. They come to my confession booth every year knowing exactly how much and when they have sinned. They come hoping for absolution and redemption mixed in with a little penance. I usually close my annual homily to the sinners like this: "go forth and sin no more". I do my best; but, I'm only human.

I've assembled some ideas to help you in your quest to get better organized for your tax professional. Your mantra is, and always should be, "Organize, Organize, Organize"!

Self-Employed:

• If you own a business, there is nothing more critical than having your income and expenses summarized accurately and coherently for your tax professional. Bookkeeping is not as arduous a task as it used to be since the advent of personal computers and easy-to-use accounting software. QuickBooks Pro is a popular program that is easy to use. You can pick up the hang of using this application by watching tutorial videos on YouTube. Your tax professional probably offers training and consulting services for this program. This program is so incredibly versatile. I'm constantly amazed by the enhancements that Intuit adds to the application every year. A business owner can use this program to invoice customers, accept credit card payments, print checks reconcile bank accounts and connect to online banking applications. The feature that I appreciate the most is called the "Accountants Review Copy". The application allows you to create a carbon copy of your accounting data to share with your tax professional. The review copy allows the tax professional to make corrections and adjustments to your data which can be merged with your "live data "at any time allowing you to continue to conduct your business.

• You receive monthly statements from your bank, credit card merchant service and business credit card companies. The statements all provide valuable information to you and your tax professional. You should definitely save all monthly statements of this type .

• If you're like most businesses, you may have one or more installment loans with your local bank. Most banks provide annual statements documenting the annual interest paid on the loan and the balance of the loan at the close of the year. These statements are incredibly valuable as they corroborate the information contained in your accounting data.

• Treat your tax professional as a trusted, valuable resource to your business. He or she needs to know just about everything about your business to prepare a complete and accurate return on your behalf. I encourage clients to discuss significant events in their business from the previous year. Significant changes in sales, employee layoffs, sales of business equipment all provide valuable clues to the accuracy and completeness of your accounting data.

Individuals:

• To help you get your personal finances in order, consider personal accounting applications such as Quicken and MS Money to organize and categorize your income and expenses. Consistent use of these apps keeps you in touch with your spending habits. You'll probably be shocked about how much you spend on take-out food and drive-thru coffee.

• If you use your personal automobile for business, you should keep track of your mileage using a mileage log. These books are inexpensive and readily available at office supply stores like Staples. In order to use business travel expenses as a deduction for your tax return, you must maintain a log to support the business use of your car. If you use your car almost exclusively from business, I usually recommend to clients that they acquire two or three gasoline credit cards. The use of the credit cards corroborates information in a mileage log and also provides a 12 convenient monthly statements which document where, when and how much gasoline you purchased.

• Try to avoid the use of cash to pay your potentially tax-deductible purchases and expenses. Receipts are easily lost. If you lose a receipt credit card statements and bank statements provide an independent record of your purchases. Relying more on your credit cards and debit cards also makes your accounting task much less burdensome. The bookkeeping applications I mentioned previously provide convenient vehicles for reconciling the statement activity to your records.

• When you go to Staples to purchase your mileage log, please resist the temptation to purchase a Dome Accounting Ledger. Low cost is the attraction to these types of bookkeeping systems. These books are very time consuming to maintain and generally do not provide useful information for yourself or your tax professional.

• Ask your tax professional for a tax organizer. Almost all software used by CPAs and tax professionals include a customized document that organizes your previous year tax return into logical categories. The document will frequently include a questionnaire which is designed to give your tax professional clues about events and/or transactions which may have some bearing on the outcome of your current year's return. Take the time to follow this document meticulously. Using this document as a guideline to gather information will result in significantly improved quality of information that you give your tax professional and thereby lower your taxes.
  

You'll receive a small gift from your tax professional in exchange for all your hard work: lower fees.

Thomas Hicks is a Certified Public Accountant working in Brewer, Maine. For more information or to contact Tom, click here.

Photo credits: Joey Harrison, The Daily Hamster

When Distaster Strikes

Nobody wants to think of or look forward to a disaster. Nobody likes to think about death but we cant avoid it either. I recently prepared an amended tax return for a client in Houston, TX that was affected by Hurricane Ike. The worst part of the damage to their property was a beach house that was uninsured. Hurricane Ike and Katrina did a lot of damage, took lives and displaced a lot people. All of this caused me to think about how a business copes with a disaster. To a business, a disaster doesn't have to be a catastrophic event like a hurricane or a an earthquake. A disaster could be a smaller event like a broken pipe. The real disaster is the damage the water does to your work area, inventory and computers. So, you arrive at the shop, office or workplace ready for a productive and profitable day only be shocked by your business literally floating away. It's great if you manufacture boats; not so good if you're a dry cleaner. What do you do? What's your plan? Who should you call? Can you recover?

Here's my point: It's a great idea to have insurance. Insurance will replace your stuff. It wont rebuild your business. I'm talking about a real plan. The kind of plan that you actually commit to paper. The kind of plan that you discuss with your employees (they'll have some great ideas, by the way).

Here's my list of stuff for your plan:

Off site Data Storage - the hardest asset to replace is your business data. It doesn't have to be that way. Off site data storage is easily obtained from hundreds of companies on the Internet. These companies offer simple server applications you can install to direct your computers to copy data at any frequency or time you wish to secured servers. When a disaster, like a broken pipe, puts you computers under water you'll have comfort knowing that your data can be retrieved quickly.

Insurance - If you don't have insurance, get some. If you do have insurance, ask your agent to review the policy to be certain that the policy is adequate to cover possible losses. While you're at it, reconsider your choice of deductibles too.

Call List - Keep a list of contact information and data for people and services that are critical for your recovery. The list should include:

• your insurance agent's phone number/policy numbers
• your banker's phone number/account numbers
• your credit card/merchant service phone number/account numbers
• user names and passwords for off site data storage, email and other websites.
  
• phone numbers for tradesmen like plumbers, electricians and carpenters.
• your real estate agent's phone number. You may need to move to a new location permanently or temporarily.
• contact information for your local unemployment office. Your state may have a team of specialists that deal with employees that have been affected by a disaster.

Shelter - identify possible locations that will accommodate your business if a disaster strikes.

Replacement - what vendors and resources will you contact to replace your equipment and inventory?

Contact - use your local phone company to keep the lines of communications open for your customers. Phone calls can be forwarded to a cell phone or voice mail where they receive a comforting voice that says "your call is important".

Billboard - use your website as a billboard to communicate with customers to keep them informed about your progress toward recovery. If you have a good service or product, your customers will come back to you. In some cases, your customers will even help you in the recovery process.

Experiencing a disaster is a terrible thing from which you can recover more quickly because you have a plan. Let's hope that it never happens and you never need the plan.

Thomas Hicks is a Certified Public Accountant working in Brewer, Maine. For more information or to contact Tom, click here.

Photo Credit: Dan The Webmaster, Adria Richards

Follow Your Bliss

2008 was a bad year me for for more than one reason. I lost a friend to cancer. Marsha was a friend and a client, in that order. During a time in my life when I was mourning another loss, I was struggling to answer critical questions and doubts about the direction of my personal and professional life. Marsha gave me some advice disguised as a casual statement. "Follow your bliss, Tom: it'll take you where you're supposed go" she said. At the time, I didnt it much help. I feel differently now.

When I started writing this series of blogs about starting your own business, Marsha came to mind. Marsha followed her own advice. She started her business because she saw a need for her unique skill and a desire to be financially independent. Marsha was an ESL (English as a Second Language) expert. She was a gifted teacher; she knew and understood the federal regulations that compelled all school districts to provide services to immigrant children in the community. She translated that knowledge and skill into contracts and then into money. She got all that she wanted from the relationship: doing something she loved and financial independence.

That leads me to you and your choices about the business you'll pursue. What is your "bliss"? When making a choice about a business to pursue, consider a few of these ideas:

• What skills do you have?
• What is unique about those skills?
• Do you have specialized knowledge?
• If you don't have the knowledge, what will you have to do to acquire the knowledge?
• Do you know about a need in the community for a service that is unfulfilled?
• How will your business be different from others that are similar?
• What do you like doing?

Remember, your business has to fill a need in your marketplace to have your product or service desired. With the Internet, your marketplace can be global.

Best of luck in your search.

Thomas Hicks is a Certified Public Accountant working in Brewer, Maine. For more information or to contact Tom, click here.

Photo Credit: Brian Moore, TheTruthAbout