Corrections or additions?
These articles by Kathleen McGinn Spring, Catherine Barrier,
Barbara Fox, and Bart Jackson were prepared for the February
18, 2004 issue of U.S. 1 Newspaper. All rights reserved.
Weighing the Choices In Business Formation
America is famous for its entrepreneurial spirit. Every year thousands
of people decide to set up their own shops. Many start doing business
almost immediately – often with little understanding of certain things
of vital importance to the success of their business ventures, things
such as liability, taxes, legal formation of the business, and exit
strategies. "These are essential issues that come up in everyday
business life for owners of businesses," says Darren M. Baldo, an
attorney with offices on Quakerbridge Road. "So the best time to
address them is at the beginning; because if you don’t address them at
the beginning, it’s likely that you will not address them until it’s
On Saturday, February 21, at 9 a.m. Baldo offers his expertise in
these and other related areas in a course entitled "Choices in Legal
Formation." The course discusses the differences between sole
proprietorships and partnerships, focuses on S and C Corporations and
Limited Liability Companies, and touches on the topic of mergers and
acquisitions. It takes place at Mercer County College. Cost: $51. For
more information, call 609-586-9446.
Baldo, a graduate of Kean University, received his accounting degree
and passed his CPA exam in 1993. He earned his law degree in 1997 from
Seton Hall and is now a member of the New York, New Jersey, and
Washington, D.C., bars.
Between 1997 and 1998 Baldo worked for Deloitte & Touche in
Parsippany, focusing on tax work. He moved to the mergers and
acquisitions tax department of PricewaterhouseCoopers in Philadelphia
in 1998, and while there, did over 75 deals, ranging from $1 million
to $400 million, performing due diligence, structuring the deals, and
helping clients to choose the best alternatives to ensure that they
left their options open and prioritized their business issues.
In 2001 Baldo went to work for the Regency Group in Ardmore as vice
president of strategic investments. Later, back in New Jersey, Baldo
practiced business and tax law with Stark & Stark, but left after a
year to set up his own practice. For the past two years, Baldo has
focused on small businesses and their owners, mostly doing contract
work and negotiating for his approximately 80 clients. He facilitates
about 20 to 25 business formations per year.
"I think part of the reason why I got involved with this is because
when I was doing mergers and acquisitions work, I saw that businesses
could save potentially hundreds of thousands of dollars in structuring
transactions in one way versus another. In some cases it was millions
– that’s exciting! Better to keep the money in the client’s pocket
than to just throw it away," says Baldo.
"The advantages and disadvantages of each legal business formation
really depend upon the objectives of the business owners and the
assets that the owners are contributing to the business," says Baldo.
With each choice of a legal formation, there are various qualifying
requirements, degrees of liability, tax consequences, and
possibilities for pulling out of the business.
Sole proprietorships and partnerships. The sole proprietorship
contains the most risk because there is no limited liability
protection inherent in this legal business form. The business owner in
this case is personally liable for any claims against his company that
are not covered by some form of business insurance. The business
owner’s personal assets are not protected.
There are several kinds of partnerships, including general
partnership, limited partnership, and limited-liability partnership.
Each is somewhat different, and has different levels of liability for
different classes of partners.
The C Corporation. The C Corporation is the "default corporation." All
corporations are automatically C Corporations, unless they are set up
to be S Corporations. The C Corporation is so named because it is
governed under subchapter "C" of the Internal Revenue Code of 1986.
The general recommendation is that a C Corporation is used to take
advantage of significant and material employee benefits for the owner
and for his employees.
The S Corporation. In a like manner, the S Corporation, known as "the
Small Business Corporation," derives its name from the fact that it is
governed by subchapter "S" of the IRS Code of 1986. To qualify, a
business must meet certain strict eligibility requirements with
regards to the number and type of shareholders. A shareholder can’t
generally be anything but an individual or a certain kind of trust,
and the "single class of stock" rule applies; the business can only
deal with one kind of stock. To have the S-Corporation status granted,
an application containing the signatures of the shareholders needs to
be filed with the IRS, and assuming all the requirements are met, the
S-Corporation status is granted.
The LLC. The popular Limited-Liability Company, or LLC, is the most
flexible of the business legal forms, and it provides a considerable
amount of liability protection. As with any business legal form, it
has some distinct advantages and disadvantages.
The number and type of owners is not restricted in an LLC. Legally,
the LLC is an entity onto itself, and it provides liability protection
to its owners, so long as there is no fraudulent activity. The rules
for administering an LLC are not as strict as are those for
administering a C or an S Corporation.
The single-member LLC. An individual in business by himself, with no
employees, can make his company an LLC. It is treated as a disregarded
entity for tax purposes, so there’s one less tax return that needs to
be filed. In addition, as a single-member LLC, a business person can
treat the business like a sole proprietorship and only needs to file a
There is the option to "check the box", which would allow, at tax
filing time, for a business owner to actually choose what kind of
entity he or she would like to be considered as. So a single-member
LLC could "check the box" and then be treated as a corporation if it
were advantageous, perhaps as part of an exit strategy. Of course,
there are rules governing the possibility of switching back and forth.
Even though it’s rare to make this change, says Baldo, "it’s nice to
have the option."
There are a few disadvantages to forming an LLC. Upon sale, the LLC
would likely have some ordinary income component that would be taxed
at a higher rate than if a business were to end up selling its stock
in an S or a C Corporation, where it would receive capital gains
Losses from single-member LLC’s flow through automatically when filed
on the Schedule C. In fact, from a tax perspective, there’s no
difference between a sole proprietorship and a single-member LLC. Says
Baldo: "You get the benefit of limited liability protection without
having the additional administrative burden of filing an additional
tax return. It can’t hurt you from a tax perspective to form a limited
– Catherine J. Barrier
The boss charges into your cubicle and flops a thick file on your
desk. The firm’s top client needs a new inventory tracking system, he
announces, and you will lead the project development team. Leaning
over your desk and glaring, he says "take all the time you need. This
has got to be absolutely top quality. Just have it on my desk no later
than next Thursday." He exits. His mentoring is done here. You stare
What’s a fellow to do? Veteran executive James Moore provides answers
in his five-session "Successful Project Management," which begins on
Tuesday, February 24, at 6:30 p.m. at Mercer Community College. Cost:
$270. Call 609-586-9446.
Moore’s course outlines the project process from initial analysis and
staff selection through politics and right down to the final
Moore sees himself as guide to "help businesses fill that terrible
void between data and decision making." A Manhattan native, Moore
attended Iona College in New Rochelle, New York, earning a B.A. in
sociology. He has worked for a number of companies, most recently
Xerox, where he spent a dozen years acting as project manager of the
company’s education courses and headed various sales systems. He is
the principal of a consulting firm that helps both individuals and
businesses with project design.
Typically, most project managers respond to deadline threats by
buckling down and working frantically, without a word. They take it on
faith that enough long night labor will make the impossible happen.
"The trouble is, you’re banking on hope," laughs Moore. "Hope is a
religion – not a method."
Be realistic. Supervisors will always, always insist that you can do
it cheaper, faster, and with higher quality. That’s what they do. But
before you panic and plunge into work, stop a minute. Your first task
is to assess the job and determine realistic needs for time,
personnel, and materials.
Flip open that file folder, and write up a list of necessary staff and
equipment, and the time it will take to assemble them. Then work out a
creation timeline, factoring in what Moore calls "the threshold of
work." Of the 168 hours in a week humans typically can only achieve
top quality production 60 to 70. After that, work quality plummets and
requires re-working. So instead of counting on wasteful all-nighters,
determine your staff’s maximum number of efficient working hours.
Clarify with management. Armed with your own exhaustive job
assessment, return to the manager and lay out the schedule. Even if
the manager’s original costs and deadlines are in line with those the
you have computed, you should keep him in the loop. He will sleep
better knowing that a thorough team leader has confirmed his
In the more likely event that your costs and timelines disagree with
your manager’s, you can shout at each other. Or you can lay out your
schedule, backed up by hard numbers, and work through it. With this
task analysis, you are giving him a formal and informal warning. The
manager may listen politely, sweep your schedule aside, and still
hammer on the old deadline. Here is where Moore pulls out his
The one fudge factor most any project has is quality. Comparing your
own timelines with the manager’s due date, present estimates of what
levels of quality can be achieved within each time frame. Deal in
reality, but offer the boss some specific options. Offer to take these
options over to the customer and allow him to choose which level of
quality, delivered by what time, he prefers.
If all else fails, and the boss is still ramming his schedule down
your throat, Moore suggests this diplomatic response, "OK, I’ll work
my hardest and do my very best, but I think both you and I know that I
cannot achieve that level of quality in this time."
Find out where your puzzle piece fits. Throughout your initial
analysis, and as you begin work, you must figure out exactly how this
particular task fits in with the company’s overall strategic mission.
How does it increase profitability? How important is it to upper
management? If your project is merely a test-the-waters effort for
perhaps expanding into a new area, the slightest financial downturn
will drop you and your task to the bottom of the ladder. Your supplies
will be the last shipped, and your funding the first squeezed out.
At the same time, knowing your project’s purpose and importance can
prevent the gold-plating syndrome. Moore recalls that when he working
for the Hughes Aircraft Company, the firm won a contract to build the
circuitry for the space shuttle’s booster rockets. "Now this was a
highly valued NASA contract," he says, "so our engineers wanted
everything to be the ultimate quality." Quite naturally they sought
out gold-plated circuits as the most durable connectors available.
They were wildly expensive, but worth it, they felt. "What they never
stopped to think through," says Moore, "was that the life of a booster
rocket is approximately 15 seconds. And all that valuable gold was
unnecessarily blasted off into space."
Get input from your staff. Resist the temptation to call in the full
crew for an initial team building meeting. Whether you are selecting
them or they have been assigned to you, first visit with each member
individually and discuss the project. Listen. Get their ideas and
write them down. This is a major part of your preliminary assessment,
which you will clarify with your boss.
When you have been saddled with a team member who is the wrong person
for the slot, represent the personnel change to your manager in terms
of cost and time savings. Avoid discussing personalities, even if they
are the actual reason for the misfit. Instead, suggest that the time
spent training this individual for his specific task would prove
costly and counter productive.
Learn from history. You cannot learn from the past if you don’t record
it. Yet one of Moore’s main complaints about most task forces is that
they are rarely debriefed.
Turning in the final product without comment leads to what Moore calls
organizational stupidity – a company making the same mistakes over and
over. If the next leader knows which suppliers tend to be late, where
outsourcing could save costs, and what communication techniques kept
the wheels humming, he can hit the ground running, with better odds of
Everyone wants to complete his task ahead of time and to look like
hero. And certainly hard work remains one of the hero’s sharpest
weapons. But with preliminary planning and a continuing line of
strategy added to his arsenal, he can depend more on his strength and
less on the whimsy of the gods.
– Bart Jackson
Attorney Rick Pinto believes that the business outlook changes on a
five-year cycle. "Every five years," says Pinto, "there seems to be a
reinvention of what’s important in the marketplace." At age 50, Pinto
is himself undergoing some reinvention. He is moving from a white-shoe
Princeton firm, Smith Stratton Wise Heher and Brennan, where he has
been since law school, to a much larger Pennsylvania based firm,
Stevens & Lee (www.stevenslee.com), and is taking 14 attorneys with
With West Orange-based A. Jared Silverman, Pinto has put together a
mock negotiating session for a term sheet for a venture deal, called
"Term Sheets & Contracts – Successful Negotiating Tactics." Over the
past few years this program has proved very popular, and they will
present it as part of the New Jersey Entrepreneurs Forum lunch on
Wednesday, February 25, at 11:30 a.m. at the New Brunswick Hyatt.
Cost: $45. Call 908-789-3424.
The program was snowed out in January and rescheduled for February, so
it will be a full day. Dan Conley of Silicon Garden + Angels hosts a
coffee reception for Biocapitalists@NJ Angels – for entrepreneurs,
angels, and VCs – at 9 a.m. (Register by E-mail: NJAngelsnet@aol.com
or call 732-873-1955.) After the lunch will be the regularly scheduled
NJEF program for that day, a coaching session for companies entering
spring venture fairs.
Pinto’s departure from Smith Stratton might have been predicted. It is
not uncommon for Princeton law firms to be courted by larger
out-of-state practices eager to enter a lucrative market. Another old
line Princeton law firm, Smith Lambert et al, turned into Drinker
Biddle & Reath (now Drinker Biddle & Shanley) and lawyers from
Katzenbach Gildea & Rudner went to Fox Rothschild O’Brien & Frankel.
But the prime example is David Sorin, who until 1993 had been a Smith
Stratton partner. He left to open an office of Pittsburgh-based
Buchanan Ingersoll, and when he was hired away in 2001 by Boston-based
Hale & Dorr, he took 32 attorneys with him.
Now, as announced on February 2, Pinto will manage the Princeton
office of Stevens & Lee and will head the life science, emerging
technology, and venture capital practices. The son of a serial
entrepreneur, he went to Yale, Class of 1975, and to the University of
Virginia law school. Christopher S. Tarr (Lafayette, Class of 1970,
and Cornell) heads the real estate business in New Jersey, and Ann
Reichelderfer (Swarthmore, Class of 1972, and NYU) is in charge of the
New Jersey estates group. For now, at least, everyone will keep their
same physical offices on the fourth floor at 600 College Road, with
their former firm, Smith Stratton Wise Heher and Brennan (U.S. 1,
Pinto says he chose the new firm partly because it does its own
business well. "One of the things they’ve discovered is that business
clients resonate with lawyers who are also good business people. Their
motto is ‘Understanding your business is our business.’" Stevens & Lee
employs more than 200 people in 11 offices in the tristate area, which
is important to Pinto. "This is the equivalent of having several
hundred people available within a day’s drive, as opposed to having to
travel to Chicago." And in the last five years Stevens & Lee had a
higher dollar volume in transactions in public markets than most if
not all of the major firms outside Wall Street.
Pinto denies that he is having a "turning 50" crisis. "It’s not so
much my age, but that I am one who embraces novelty and change," he
says. "Twenty years ago when I was working with emerging technology
companies there was no one else doing it. There were very few
healthcare lawyers, and very few venture capital lawyers."
Two of the hundreds of deals he has done in 25 years are touted on the
Stevens & Lee website. One was a biotech, Alteon, which did a major
deal with Hoechst Marion Russel, and the other was close to home,
Princeton Video Image, or PVI, which has not seen economic success.
This is the company responsible for the technology that generates the
"yellow line" on football turf and the now-you-see-them, now-you-don’t
virtual advertisements behind batters’ boxes and on soccer fields
during televised sporting events.
Everyone had high expectations for Princeton Video Image’s success,
and indeed in 2002 it claimed the number 15 spot on the Fast 50 list,
showing five-year revenue growth of 2,100 percent. But the same year
that PVI’s fast growth was being touted, PricewaterhouseCoopers was
forecasting big financial problems.
Sure enough, just one year later, PVI was delisted from Nasdaq, filed
for Chapter 11 bankruptcy, and was taken over by its secured
creditors, an entity formed by Cablevision Systems and Presencia en
Medios. Now it does business under the name PVI Virtual Media Services
How can this financially struggling company burnish its attorney’s
resume? Is it a case of "the operation was successful but the patient
died?" No, says Pinto, who insists that, like many pioneering
technologies, this one is catching on more slowly than expected –
United States broadcasters being unexpectedly cautious – but that it
will eventually prevail. Broadcasters in other countries, such as
Mexico, have far fewer scruples about plastering advertising in new
places. When an extra point is kicked, they put an ad between the goal
"The people who manage PVI changed the business model several times
trying to figure out how the service could best be used. It was just
an unfortunate interplay of incredible inertia of many major players
that could not have been anticipated by the best of managers," he
In the meantime, the attorneys concentrate on doing good licensing
deals. "For an attorney, this is particularly interesting technology,"
says Pinto. "It travels the air waves and crosses borders, and when
one designs a licensing scheme for international partners, that makes
PVI is also a good example of how the venture capital market can
fluctuate. When public markets are good, and IPOs are popular,
entrepreneurs aren’t chasing venture capitalists. Now that IPOs are
next to impossible, VCs are in the limelight. "It’s a fascinating
trend of which PVI is a perfect example," he says, pointing to how PVI
is getting new money.
"Not only is smart money going into new innovation but a lot of money
is going into innovations that have taken a stutter step, and are
getting a re-do." These companies may have been funded during the boom
times with the proverbial business plan on a napkin. The companies may
have been under managed, under funded, or misplaced in the market.
Says Pinto: "There is a lot of interest in resurrecting the better
"What I like doing is helping companies get big, whether taking them
public or doing joint venture deals," says Pinto. "As a lawyer who
represents emerging businesses, nothing pleases me more than to help
foster the creation of new ones."
– Barbara Fox
Fishing for Work-Life Balance
The Fish! philosophy was born at Seattle’s Pike Place Fish market,
turned into a trio of books on energizing the workplace, and is now
following workers home. Just published, "Fish! For Life" (Hyperion,
$19.95), extends the Fish! principles to family, extended as well as
nuclear, friends, leisure, community involvement, and even weight
Harry Paul, a co-author of the Fish! books, speaks on "Fish! A
Remarkable Way to Boost Morale, Improve Customer Satisfaction, and
Impact Results" on Thursday, February 26, at 8 a.m. at the Conference
Center at Mercer County Community College. The all-day event includes
breakfast, lunch, and a panel discussion on customer service. Panel
members are Barbara Mealmaker, senior vice president and service
director for Wachovia’s South Jersey region; Tim Lockwood, store
manager for Wegman’s Woodbridge store; Dr. Stephen Harrison, emergency
room physician at Princeton Healthcare System; Donna Disbrow of
Bristol-Myers Squibb; and Bill Stecklein, service manager at Precision
Acura in Princeton. Cost: $195. Call 609-586-4800, ext. 3856 for more
The Fish! books came from a casual observation. John Christensen, a
co-author of the series, dropped by the Pike Place Fish market, a
Seattle landmark, and was taken by the energy and enthusiasm of the
fishmongers. Working long hours with odiferous, slimy fish – a
grueling, physically demanding job by any standards – they nonetheless
appeared to be having great fun. Christensen, a film maker, shot a
documentary about the market’s unique work ethic. Stephen Lundin, the
third Fish! principal, distilled the ingredients into the first book.
The main tenets of the Fish! philosophy are Play, which is described
as fun and lightheartedness; Make Their Day, a focus on engaging
others in ways that lift their spirits; Be There, living in the
present moment and giving others our full attention; and Choose Your
Attitude, understanding that whatever attitude you are carrying with
you right now, it is the one you are choosing.
Previous books demonstrate how these tenets can transform a workplace.
In going about the country giving Fish! seminars, Paul and his
co-authors heard stories of how the Fish! keystones were making the
trip from office to home. The new book uses the story of one family to
demonstrate Fish! at work in everyday life.
The family is that of a fishmonger, Lonnie, and his wife, Mary Jane.
He has taught her the lessons of the Pike Place Fish market, and she
has used them to tame her cantankerous underlings at the bank where
she has just been promoted. Then, one day, as the story goes, she
discovers that, while work is going along beautifully for her and for
her husband, things are not as rosy at home. Quality time with family
and friends is suffering, in large part because of the demands of
"What has happened to fun time," Mary Jane asks? Echoing the thoughts
of many overworked managers, she wants to know, "when is the last time
I went to the gym, spent time with friends, or read a book?" Work was
dominating her life.
Soon the picture becomes even more complicated, as the stresses pile
on. Lonnie leaves the fish market to go back to school. Mary Jane’s
mother, her health deteriorating, moves in, and Mary Jane, busy with
two young children, work, and increased responsibilities at home,
realizes that she has become completely out of shape. Money becomes an
issue, too, as the couple struggles with a decision on whether to take
on more debt.
Then there is the matter of time. Is Mary Jane involved in too many
volunteer activities? Should Lonnie work part-time on weekends to
supplement the family’s income? Using Fish! as their framework, the
couple decides to formulate a join vision. They decide to call it
"IT," but do not divulge the reasoning behind the label, which,
apparently, has nothing to do with information technology, a science
that frequently goes by the "IT" moniker. These are the key elements
of the couple’s IT plan:
Communication. We will be a couple that errs on the side of too much
communication. Communication about our finances, financial priorities,
and spending plans will be an area where we take the time to make sure
we are clear. We will never sacrifice time together or family time for
money without a discussion, and we will never assume we know what the
other wants and desires.
Fun. We will bring Fish! into our life so that even a busy schedule
has an element of fun; and when we are together, we will be there for
Example. We will model in our relationship the things we want our
children to learn.
Extended family. We will cherish the time with Grandma Ida as a
special gift and an opportunity to serve another. We will be aware of
the many life lessons our children can learn from our extended family.
Mutual support. We will support one another’s learning, growth, and
Legacy. We will leave a legacy in the way we raise our children.
Over-riding guidelines. Our guiding questions will be: Are we having
fun? Are we serving others? Are we fully present for life’s blessings,
living in the now? Do our lives serve as an example of the power we
all have to live in the now?
401(k) guidelines. While we understand, and will teach our children,
the importance of planning for the future, we will emphasize the
importance of living each moment fully. We will teach by example that
happiness does not come from having things, but from giving things to
others. Happiness is not a function of the size of one’s 401(k), but
the size of one’s heart.
At the end of the book Mary Jane receives a partial explanation for
the weight gain that is weighing on her mind: She and Lonnie are soon
to add a child to their family. But, her doctor adds, that explains
only a portion of her recent weight gain. It’s time to diet, and the
Fish! editors, latching onto a national obsession, include several
diet chapters toward the end of their new book.
The advice includes a list of specific food suggestions – give money
to the Girl Scouts, but don’t accept the cookies; avoid bad fats; buy
fresh foods. It also leans on the Fish! fun credo, and has Mary Jane,
pregnant though she is, excited about giving rollerblading a try.
The book’s ultimate lesson for those struggling with work/life balance
is summed up on one of the PowerPoint-like pages that appear toward
the end of the book. "Contrary to popular belief we can’t have it
all," it reads. "At least not all at the same time."
Joel May used to be an April 15 filer, but now his income tax return
is on its way to the IRS on February 1. The difference? Turbo Tax.
Sold on using software to dispatch one of the most onerous annual
tasks on every American’s calendar, May now donates time to spreading
the gospel. He led the Princeton PC Users Group through the
ins-and-outs of Turbo Tax during its latest meeting, and helps seniors
get onboard with electronic age tax filing during classes he teaches
at Ewing SeniorNet (www.ewingsnet.com).
May is not a professional tax preparer, and in fact he emphasizes that
he provides no tax advice during his Turbo Tax workshops. He instructs
students on how to find and use help features of Turbo Tax, and leaves
them to proceed on their own.
A resident of Titusville, he is retired from a teaching career. Most
recently, he taught medical economics and health administration at the
University of Medicine and Dentistry of New Jersey. A graduate of
Albright College, he holds an MBA and a Ph.D. from the University of
He has been a volunteer at Ewing SeniorNet, where he teaches other
computer courses in addition to Turbo Tax, for 11 years. The minimum
age requirement for course enrollment is 55, and May says some
students are "into their 90s." A big motivation for learning computers
for most of them, he says, is a desire to keep in touch with
grandchildren. Learning to work with digital photographs is another
Turbo Tax is a snap for seniors – or for anyone – to master, he says.
If you can operate a mouse, you are almost there.
While May’s workshops are on mastering Turbo Tax (www.turbotax.com),
he hastens to point out that there are other tax preparation software
packages. Tax Cut (www.taxcut.com) and Tax Act (www.taxact.com) are
two of the big ones. "I’ve used all three," says May. "They’re very
Each package does has advantages, though. A selling point for Tax Cut
and Tax Act is price. Tax Cut costs about $10 less than Turbo Tax,
which sells for about $40, and the basic Tax Act software package is
free. May generally buys Turbo Tax at Staples or a similar office
supply store, but it is also available online, as are the other tax
May has settled on Turbo Tax, despite its somewhat higher cost,
because he finds that it has substantially more features. Those filing
complicated returns would do well to spring for Turbo Tax, in May’s
opinion, while those with simple returns might well be fine with a
less expensive program. Turbo Tax won May’s allegiance for a number of
Time. It takes May about half a day to file his taxes with Turbo Tax.
That is less than half the time he estimates that he would spend
without the software help.
Money. When you go to a tax preparer, he has Turbo Tax, or something
very much like it, up on the screen. "He asks you some questions, and
fills in the blanks," says May. The service generally costs $200. But
do the professional preparers use more powerful software? May doesn’t
think so. He does say that H&R Block uses a proprietary program.
Efficiency. Turbo Tax tells users what documents they need to have in
front of them to complete each section. "Each screen says ‘go to file
cabinet and get documents,’" says May. "You get them and start. It’s
very, very orderly."
Connectivity. A nifty feature of Turbo Tax is that it will import
information from a previous year. There is no need to type in the
children’s Social Security numbers, the mutual fund numbers, or the
day care provider’s information. Pieces of the return that have not
changed will be entered automatically.
In addition, Turbo Tax links to Quicken and to Microsoft Money. Tax
information found on either of those programs also goes in
automatically. May does find a minor flaw with this convenience,
however. He has had situations where he has not bothered to enter a
small dividend payment – 69 cents is the example he gives – on
Quicken. The omission results in a small discrepancy between his tax
return and forms he receives from his brokerage. This being the case,
he is cautious about relying on data imported from Quicken.
But anyone who logs charitable giving, medical expenses, and interest
payments on Quicken or Microsoft Money might find this a most helpful
Accuracy. May, an economics Ph.D, used to worry that his tax return
addition and subtraction might be off. Tax advisers warn every year
that simple math mistakes can flag a return for further scrutiny –
something even the most honest tax payer is loathe to invite. With
Turbo Tax, says May, all computational worries are gone. There is no
chance that the math will be off.
Cross checking. Turbo Tax checks this year’s return against last
year’s return. This is an excellent way of catching missed deductions,
and of comparing the success of tax planning strategies. It also
compares the return against national averages, and against the IRS’s
standard deviation test. This lets tax payers know whether the
deductions they are claiming are about what tax payers with similar
incomes are claiming. The IRS may flag a return in which a deduction
in a certain category – perhaps charitable giving – is considerably
above what a tax payer in a given income group would be likely to
This doesn’t mean that the deduction shouldn’t be taken, but it gives
the tax payer one more chance to go over the items he has claimed, to
make sure they are legitimate, and to get his receipts in order – just
Speedy refunds – and peace of mind. Turbo Tax makes it easy to file
returns electronically. The first time May did so he was "nervous as a
cat." After a lifetime of carrying a fat tax return envelope down to
the Post Office, and sending it certified mail, return receipt
requested, it is hard to let go, push the "enter" key, and believe
that somehow the return will make it into the right hands.
That first year, May received his refund in 10 days. His mind has been
at ease ever since.
Permanent records. When May has finished preparing his tax return, he
saves it to a CD and files it away along with the software. The backup
is important, and could be a lifesaver should a computer crash.
The software is unique in that it really is good for only one year.
The inevitability of yearly changes in tax tables, laws, and even
forms ensures that it will become obsolete before the next tax
deadline rolls around.
Corrections or additions?
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