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Figit For Your Digit
It would probably be ideal if business and life were as simple as producing goods, selling them and recording the profits. But there are often circumstances that disrupt the cycle, and it’s part of the accountants job to report these as well. Changes in the business climate, or cost of goods or any number of things can lead to exceptional or extraordinary gains and losses in a business. Some things that can alter the income statement can include downsizing or restructuring the business. This used to be a rare thing in the business environment, but is now fairly commonplace. Usually it’s done to offset losses in other areas and to decrease the cost of employees’ salaries and benefits. However, there are costs involved with this as well, such as severance pay, outplacement services, and retirement costs.

In other circumstances, a business might decide to discontinue certain product lines. Western Union, for example, recently delivered its very last telegram. The nature of communication has changed so drastically, with email, cell phones and other forms, that telegrams have been rendered obsolete. When you no longer sell enough of a product at a high enough profit to make the costs of manufacturing it worthwhile, then it’s time to change your product mix.

Lawsuits and other legal actions can cause extraordinary losses or gains as well. If you win damages in a lawsuit against others, then you’ve incurred an extraordinary gain. Likewise if your own legal fees and damages or fines are excessive, then these can significantly impact the income statement.

Occasionally a business will change accounting methods or need to correct any errors that had been made in previous financial reports. Generally Accepted Accounting Procedures (GAAP) require that businesses make any one-time losses or gains very visible in their income statement.

I just got a phone call from my accountant and he informed me that I received a 1099 from one of my retirement accounts. I thought that odd since I am well under the retirement age and have not taken any formal distributions. Well, it turns out that when an old account I had got rolled over into a new Roth IRA account, that created a taxable event. The crazy thing is that no one warned me that this would happen. Kind of like no one tells people who try the Medifast diet program that once they lose all the weight, they’ll have to go shopping for new clothes. Funny what you miss when you don’t read the fine print.

Did you know that if you filed a tax return for everything you purchased during the year, and took advantage of all the loopholes you could recover every single dollar you spent on taxes this year! knowing that little known fact stop and consider what you made last year on your tax return. Was it as much as you hoped for? If not it’s time to consider hiring a professional tax preparation specialist. He may not be able to recover every cent you spent on taxes but I’ll bet it will be a lot more than you may think! Accounting Tucson. Get a great accountant.