Should the IRS Have the Power to Regulate Tax Preparers?

The Senate Finance Committee has been trying to decide whether or not to give the IRS the authority to regulate tax preparers.  Senator Elizabeth Warren and others have proposed that the IRS be required to fill out simple tax returns. That would deal the “Free File Alliance,” led by companies like Intuit, H&R Block and Jackson Hewitt a major blow. The decision has deadlocked Congress and Warren’s bill is stalled. Kevin Thompson, CPA states “I like the idea that the IRS fill out the simple tax returns. They have all of the data for these returns. They can prepare and send a copy to a taxpayer with a “if you disagree …” letter and we can be done with that return and the millions like it.”

 

The question is; are continuing education and tests for tax preparers the answer or would another solution be more effective?

 

The IRS has tried in the past to impose regulation on preparers without success. Wouldn’t it be a better solution to get rid of bad preparers who may cause financial disaster for their clients? Thompson says “again, I like the idea of getting rid of the bad preparers. What I don’t like is that the people making and enforcing the rules get to decide who is bad. Seems like a conflict of interest to me.”

 

The way it works now, the IRS can’t regulate tax preparers before they start preparing returns. The majority of states allow anyone to become a return preparer without a test, with minimal education, and without a background check. The IRS and Department of Justice can take bad preparers to court, but only one at a time. If several all work in the same practice, they can still continue to do bad work even if a partner is ordered by the court to stop. Injunctions take time and much effort to shut down bad companies. Often it takes years.

 

It’s like trying to pull up weeds individually rather than killing them all with Roundup. Also, if you don’t get the roots, they pop up again. Thompson adds “maybe tax preparation needs Peer Review. Maybe the IRS together with the AICPA and the NAEA can create a program to monitor this.”

 

It’s not that it’s a bad thing to try to get rid of bad tax preparers one at a time. It’s the system that is the problem. Bad preparers should be cut off while good preparers should be able to continue doing what they’re doing. A good preparer doesn’t need to go to mandatory training because they naturally keep up with updates in the tax laws to run their businesses successfully. They need support instead.

 

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Do it Yourself Tax Software Can Be Messy

Many taxpayers use “do it yourself” tax software to file their income tax returns. However, a fair amount makes a mess of it and pay the price when they make mistakes. It’s not unusual for tax preparers to receive calls from clients asking them to fix their messed up self-filed returns. What’s ironic is that the IRS is increasingly regulating paid tax preparers but not the providers of tax preparation software.

 

E-file providers top priority is the security of taxpayer’s accounts. Publication 4557, Safeguarding Taxpayer Data as well as Publication 4600 Safeguarding Taxpayer information provide best practices and guidance. Last year, Intuit, the makers of Turbo Tax, found incidences of stolen identity fraud when personal information was taken and used to file fraudulent claims.

 

Victims of the fraud had to manually file their tax returns as well as file police reports to prove their identities had been stolen. They also had to keep an eye on their credit reports to make sure their information was not being used fraudulently in other ways. Even still, Intuit was not subject to penalties and only had to make changes so it wouldn’t happen again the next year.

 

One of the main problems with using do it yourself tax software is that the majority of consumers have little knowledge about changing tax laws or how the software can work to their best advantage as individuals. They rely on automated prompts as guides, mistakenly thinking the process is simple. Kevin Thompson, CPA says “I remember an old line about automation … Garbage in, Garbage out. I don’t know the statistics of DIY but almost every time I have reviewed a self-prepared tax return, it was wrong.”

 

Costly mistakes happen even in the simplest returns. When something as insignificant as a city tax is missed using the software, it can cost taxpayer thousands of dollars. In the case of audits or other proceedings, the taxpayer bears the burden of explaining why he or she took certain deductions or made errors that could have been avoided if they had hired a tax preparer. Thompson says, “I have yet to see a scenario where I was unable to save the taxpayer a significant amount of additional taxes compared to the self-prepared return.”

 

Small business owners who know little about Schedule K-1s, misclassify expenses or do not send out required 1099’s. They don’t realize that the IRS matches third party filings with an individual return and may incur penalties as a result.

 

When business owners use do it yourself tax software and payroll programs, they may assume their company filed partnership and other forms correctly, when in reality, they did not. They may also not be consistent with filing and meeting deadlines.

 

A taxpayer needs to be aware that do it yourself tax software providers do not have to meet the same high standards that tax professionals do. It’s always better to hire professional help to avoid making costly mistakes. A tax professional’s fee will be significantly less than paying steep penalties incurred from mistakes. Overlooking even the smallest item may make the difference in the size of a taxpayer’s refund check.

 

The best way to avoid audits and keep money in your pocket is to let a professional preparer do the work for you. Thompson says “another old adage, you get what you pay for.”

 

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Expect More Tax Audits as the IRS Hires More Enforcement Workers

Do you think the IRS has been lax on enforcing tax audits lately? Well, think again.  They are in the process of hiring 700 new employees, which means there’s more of a chance you will find an audit letter in your mailbox. Kevin E. Thompson, CPA www.kevinthompsoncpa.com adds “it has been years since we have seen the IRS add bodies solely to undertake examinations. If taxpayers have been aggressive, they could get caught up in this catch-up move.”

 

The agency has had a 24% drop in employees since 2010 with tax audits at an 11 year low. IRS commissioner John Koskinen stated that the IRS is losing $4 -$5 Billion a year because they haven’t had enough employees to enforce collections.  Matthew Cooling, EA www.action-tax.com says “the last five years have seen the taxing authorities rely on electronic information for examination and closing the tax gap. Risks of examination include examining all open years and sharing the results with the various states.” Cooling says “once the federal examination is complete, they pass the results to your state and the state has the right to bill you for their share of the audit results.”

 

Despite the fact that the IRS and the Obama Administration have been asking Congress for more funds to hire more employees, they have had little success. Instead, the funds are coming from retirements, other employees leaving and by refiguring their budget. New hires will focus on small businesses and those who are self-employed. Thompson says “it’s risky for the economy to examine small businesses. They do not have the resources to afford representation nor the additional taxes that may be due.”

Even after this year, the IRS will still be down 2,000 workers as compared to the beginning of the year.

 

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Worst Ideas about Paying Taxes

Kevin Thompson, CPA, did a recent internet search revealing some horrifically interesting ideas about paying taxes. Below are just a few of some of the worst ideas that people have come up with regarding doing their taxes.

 

Thinking that filing taxes is unconstitutional by citing the 16th amendment. The whole idea of being “free men” and the unconstitutionality of taxes has been played out for decades. Ask Wesley Snipes how that worked for him. Folks, this has been acted upon by every court in every state and nary has a one expressed any interest in the idea. If this is your position, let it go as it will not work.

 

Telling people they didn’t pay taxes because they received a refund. (It actually means they had too much deducted out of their paycheck.) “In my practice” says Kevin Thompson, CPA, “with our average taxpayers, we try and get clients in the $1,000 range of either owing or receiving refunds.” Thompson goes onto say, “this philosophy has changed for the higher net worth clients. With interest rates at all-time lows, it is often more strategic to overestimate taxes and eliminate the exposure to expensive, nondeductible penalties.” California no longer offers a safe harbor provision for taxpayers with more than $1,000,000 in taxable income. “That means that these taxpayers have to project income on a quarterly basis and pay in their estimated taxes. With the volatility in stock markets, annual bonuses for executives and higher profits in S Corporations and LLC’s, it is not uncommon for a California taxpayer to find himself in a penalty position due to a large transaction in December.”

 

Not counting “cash” as income. “Yeah, right” says Thompson. The IRS estimates they lose $15 Billion in revenues annually due to the improper accounting and reporting for cash transactions. In the UK they believe they lose $8 Billion pounds annually and call cash payments “morally reprehensible.” http://www.theguardian.com/politics/reality-check/2012/jul/24/tax-taxavoidance  “Last time I checked” says Thompson, “the USD states that it is legal tender for all debts.” I just know that the US Treasury Department together with the Worlds taxing authorities continue to crack down on cash. So, if you are living in the world of cash and not reporting it, you should be prepared for a bad ending.

 

Deciding that they don’t have to pay taxes because they are over 70 years of age. There is no magic number. Some have to pay taxes after death. “Although there are many advantages to aging in this country, an abatement of taxes for the elderly is not one of them” says Thompson.

 

Not paying taxes because they’re on Social Security. That is only true if they have no other source of income. If SS is your only source of income, you do not have to pay taxes. But if you have other sources of income like interest, dividends and capital gains, with the provisional tax calculation, some or up to 85% of your SS income can be taxable. https://www.fas.org/sgp/crs/misc/RL32552.pdf

 

Citing a pet as a dependent. “Man, if my wife is reading this she’ll think of new things for the Bully Violent” says Thompson. There is never a scenario where pets can be claimed as dependents.

 

Under the impression that their tax preparer works for the government or on the government’s behalf. In fact, a tax preparer can be their best advocate in tax matters with the IRS. “This can be both true and false” says Thompson. “If a client is being investigated for evasion, conversations with tax preparers are not protected and subject to discovery.”

 

Making the mistake of not filing W2 or 1099 income if they didn’t receive a form in the mail. That income has to be included. The IRS has an electronic matching initiative most commonly referred to as CP 2000. Thompson says “80% of the letters received by this office from the IRS are a result of that initiative. The IRS has the information and the technology to match to your returns so you’d better report it or be prepared for an examination resulting in interest and penalties too.”

 

They believe they don’t have to pay their tax professional a fee if they don’t receive a refund. Thompson says “do I get a bonus if I get a larger refund?”

 

Can you think of any more dumb ideas?

 

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The Entrepreneurial Spirit from Beyonce to Bill Gates

It’s not easy being an entrepreneur.  It takes a ton of hard work and a bucket full of tears if you want to be successful. Kevin Thompson, CPA says “being an entrepreneur is about the hardest thing I have ever done. As the entrepreneur, I am responsible for customers, vendors and, most importantly, employees.”  Below are observations from 23 well known personalities about the entrepreneurial spirit.

  1. Beyonce

Beyonce finds that the pressure to keep up a hectic schedule and to stay on top is unbearable at times but she loves what she does. She doesn’t think about it and, instead, stays happy by doing her own thing. Thompson says “how many readers see her as an entrepreneur?” Responsibilities for her brand and the various outlets including fashion, cosmetics and, of course, entertainment, keep her very busy.

  1. Mark Zuckerberg

When he first started building Facebook he wasn’t thinking so much about building a company because he didn’t know how to go about it. What he believes made him successful is enlisting the help of other people who knew how to get it done.

  1. Larry Page

Larry, who is a co-founder at Google realizes that everyone has strengths and weaknesses and that you acquire knowledge over time. After a while you pick up things. He believes you have to have a vision for the future and understand the industry you’re in. Starting a company takes hard work, sometimes 24 hours a day. What you lack in skills can be made up in other areas.

  1. Sergey Brin

Sergey is Google’s other co-founder. His take on success is all about serving people. Google serves millions. Google has gone from about 10,000 searches per day to 50 million.  The scale at which the company has grown is where the challenge lies.

  1. Lori Griener

Lori is a “Shark Tank” investor. She finds the biggest challenge is dealing with people who are unethical. She believes that “karma is a bitch.” What goes around, comes around.

  1. Bill Gates

As founder of Microsoft, Bill Gates nurtures the idea of being innovative. He feels that small companies attempting to launch don’t take advantage of this concept. Technology is the strategic weapon of large companies but it can overwhelm the smaller ones causing them to not take advantage of its power.

  1. Travis Kalanick

Travis founder of Uber feels that entrepreneurs must be careful not to let their passion overtake them and compares it to going down the rabbit hole. You have to keep your passion in check.

  1. K. Rowling

The author of Harry Potter remarked that we talk too much about success and not enough about failure.  Most entrepreneurs fail over and over before they succeed. It’s the ability to resist failure or use it as an opportunity to achieve success that’s important. Thompson says “my now departed friend and business confidants, Dave Williams, used the phrase failing forward. I don’t know too many, if any, successful entrepreneurs who have not failed at least once before enjoying success.”

  1. Dr.Dre

Building the right team is crucial to make it to the top. Make sure all the people around you have the same vision and motivation. It takes time to build the perfect team. Once you do that, stick with them.

  1. Mark Cuban

Don’t take “no” for an answer. “Every no takes you to a yes.” It’s all about the numbers.

  1. Jack Dorsey

The founder of Twitter didn’t know what he was doing when he started. His biggest challenge was bookkeeping. He learned from his mistakes and from listening to his customer’s suggestions. His best-selling items came from employees and customers.

  1. Tory Birch

Tory became successful helping women feel and look glamorous but her biggest challenge was her self-esteem. In an article she wrote, a friend mentioned that she had shied away from the word “ambition.” Tory realized that she was right. Thompson says “I quote Sara Bareilles and tell people who are interested in being entrepreneurs that I want to see you be brave.”

  1. Barbara Corcoran

Shark Tank investor Barbara Corcoran says that an entrepreneur’s biggest enemy is fear and noted that after 10 years of experience under your belt, you start to realize how many near death experiences you actually lived through. It only gets scarier because you know what you have to lose. This makes you less open to the universe where you are willing to try a dozen things at once. Thompson says “as entrepreneurialism becomes more and more a part of your existence, you have to learn to manage quicker.”

  1. Charles Schwab

Even though he’s in his 70’s Charles Schwab isn’t slowing down. He is a proponent of innovation like Bill Gates. “It’s the engine that drives our future.” “Those who do not innovate go out of business fast. You have to stay nimble and inventive if you want to survive.” “When I am looking for innovation,” says Thompson, “I just watch young people. They are always innovative in their lives. They accept change easily and adapt to technology quickly. It is free and exciting research and, when you engage them, it can really be a lot of fun.”

  1. Oprah Winfrey

Lady O says the hardest time in her life was starting her own network OWN because she knew people were waiting for her to fail. They were lying in wait for her to make a mistake.  You either have to close down or make cutbacks to move forward.

  1. Michelle Phan

Michelle is a YouTube star and was basically an overnight success. It was overwhelming for her. She went from a shy loner to having 10,000 friends overnight and felt an incredible connection with them. Now she has over 7.5 million subscribers and makes friends easily.

  1. Diane von Furstenberg

Every day is a challenge and you have to embrace it. She learned early in her life to roll with the punches and deal with unpleasantness.

  1. Kevin O’ Leary

Shark Tank investor, Kevin O’Leary believes that in order to be a venture capitalist, you need to have started a business first. It’s important to experience the terror of getting started so you avoid making mistakes.

  1. George Foreman

Heavy weight boxing champ George Foreman says that you have to understand that you start at the bottom and work your way to the top in any business you choose to pursue. Most people are afraid of that, particularly celebrities and others who are well known. They hate to think about starting at the bottom again because they know they have a long way to go. When you start at the bottom, you can only go up.

  1. Wolfgang Puck

If you want to be a good chef, you have to multi-task. That means being a manager, businessman and a great cook. This can sometimes be difficult.

  1. Larry Ellison

CEO of Oracle finds the hardest part of being an entrepreneur is having to let people go who have helped build his business because of management problems. He felt loyal but realized that he had outgrown his original team and had to make changes in order to move forward.

  1. Robert Herjavec

Shark Tank Investor Robert Herjavec believes in the power of teamwork and leadership. You have to be able to inspire the people around you. If not, go sell real estate. People don’t want to be managed. They want to be led. “And,” adds Thompson, “they definitely do not want to be entrepreneurs.” Thompson CPA used to present seminars around the topics of How to start and Run successful small businesses. Thompson said “one particular seminar weekend offering in Los Angeles, we had over 1,000 people sign up. One hour in, hundreds of them headed for the door because “they wanted a job and not to be entrepreneurs.”

  1. Arianna Huffington

Arianna realizes that there must be work-life balance. It can’t be all about money and power. Success may work in the short term but after a while you will topple over. Instead the measure of success includes well-being, wisdom, wonder and giving.

Original Article

 

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Is the Big Bang Coming?

Big Bang or Colossal Crash? It may be happening sooner than we think. The Physical Review letters published a paper in which a group of physicists developed a mechanism for “cosmological collapse.” They are saying the universe will stop expanding and collapse back into itself. Needless to say, we would all be annihilated.

 

We’ve heard people spouting “last days” forever but the numbers and models in the paper are suggesting that a collapse will happen sooner than later.

 

Antonio Padilla, from the University of Nottingham, one of the authors of the paper, says, “The fact that we are seeing dark energy now could be taken as an indication of impending doom, and we are trying to look at the data to put some figures on the end date. Early indications suggest the collapse will kick in in a few tens of billions of years but we have yet to properly verify this.” “Personally, this puts tax season in perspective for me” says Kevin Thompson, CPA. “I won’t really kill myself to get all of this stuff done now since I know the end is near. I mean it can wait, right?”

 

A Few tens of billions of years is not a cause for immediate alarm but the team of scientists feel they have found the cause of Earth’s impending doom.  Thompson goes on to say “since most of us don’t make it out alive anyway, I think we can stop worrying about this for this generation and a few to come. But, any of you who wish to continue to worry, please feel free.”

Original Article

 

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8 Reasons You May Get Audited by the IRS

Because of the mix up with tax return related health care issues, you may not be audited by the IRS if you filed an inaccurate return. But beware, the IRS is still looking for other mistakes you may have made and request an audit.

 

Below are 8 reasons you may get audited by the IRS:

 

Your income is incorrect

 

Make sure the income you report from your 1099 and W-2 match up. Kevin Thompson, CPA says “this is by far the easiest to prevent and the most oft overlooked. When I review returns, one of the first things I do is add up the 1099’s and W-2’s and ensure we have accounted for all the income.”

 

Charitable deductions are too high

 

If your donations are not on par with your income level you are raising a red flag. Thompson says “American’s are very giving with their treasures to charity. Sometimes, in the process of looking to lessen our tax burden, we look to our charitable giving as one possible solution. Most of our clients maintain great records with their charitable giving. All should be careful when venturing down the path of charitable deductions.”

 

Your salary is low

 

If you have an S corporation, and your salary is low for a principal owner, the IRS will become suspicious. “The concept of Reasonable Compensation is vague and ambiguous” says Thompson. “I think and practice that if your W-2 represents what you would pay someone to do your job, then it is reasonable.” The IRS has identified S Corporations as one of the causes of the “Tax Gap.” Thompson says “I look for Congress to alter the tax treatment of S Corporation profits and make them subject to Social Security and Medicare like all other forms of compensation. That will eliminate this issue entirely.”

 

Wrong Social Security Number

 

If your Social Security number is hard to read or you made a typo when typing in the number your return may be rejected. “We are working with a client that had a $40,000 refund from 2013 held up because the W-2 contained a typographical error” says Thompson. “I was surprised that the previous preparer either did not have it corrected or prepare and file a paper return and attach the W-2 with a letter of explanation. I think the taxpayer would have received his refund last year instead of having to pay us to clean up the affair this year.” Thompson went on to say “in a digital society, precision with numbers, especially identification numbers, will be of utmost importance. And, when you introduce the incidence of fraud and identity theft, if there are any questions, the IRS will simply freeze everything.”

 

Hobby activities

 

Certain activities with high losses such as horse racing will raise eyebrows. Thompson chuckled and said “this is nothing new yet taxpayers continue to want to deduct these expenses. I have to admit, if there is truly a business sense and motive, I think they should take the deduction.”

 

Alimony

 

If you claim a different amount for your alimony deduction or alimony income than your ex-spouse does for the corresponding item the IRS will notice. Also, make sure to report the Social Security number of your ex-spouse when reporting your alimony deduction.

 

Meals and Entertainment

 

If the type of your business and your meals and entertainment expenses are not in sync, it will trigger the IRS to look further. The IRS continues to beat up this deduction like a tropical storm beats the shore and would like to see this eliminated as a business expense. Entertaining it is an important part of business and an important part of our economy. Record-keeping remains the number one issue with this deduction during an examination. Document with WHOM you had dinner, WHY the meeting took place and WHAT business matters were discussed. Thompson says “in my examination experience, with good documentation, agents back off quickly. But like sharks in blood-infested waters, if they sense a weakness, they go in for the kill.”

 

Original Article

 

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kevin@kevinthompsoncpa.com  or call him @ (310) 450-4625 x102.

Obama Wants Mandatory Voting – Really?

President Obama tested the waters while speaking to a civic group in Cleveland. When he was asked about the corrosive influence of money in U.S. elections, Obama sidestepped to talk about voting rights and said the U.S should make voting easier than it is now.

 

He said that in Australia, people don’t have a choice. They have to vote. “If everybody voted, then it would completely change the political map in this country. Not only that, but universal voting would counteract money more than anything.” Kevin Thompson, CPA says “there aren’t many things that the sitting President and I agree upon with any kind of regularity. This is one area where we do see eye to eye.”

 

Younger, lower-income Americans who are minorities or immigrants tend to skip voting. Obama commented, “There’s a reason why some folks try to keep them away from the polls.” This was a thinly veiled reference to the fact that a number of Republican-led states make it hard for them to vote. “Although a veiled attempt to blame the other party” says Thompson, “the reality is they cannot vote because it is just too damned difficult. We need online voting and we can’t get it soon enough.”

 

Less than 37% of eligible voters went to the polls in the 2014 midterms, according to the United States Election Project.

 

Two dozen countries or more have compulsory voting include Belgium, Brazil and Argentina. In some countries, those who do not vote must provide an excuse or face a fine. A few countries actually impose prison sentences.

 

The problem, Obama says, is that those with money have more influence. A low turnout is an advantage for the party who appeals to the base of people who show up.  Obama opposes Citizens United and other court rulings that allow super PACs and unlimited spending on campaigns. However, he embraced those groups in his 2012 re-election for fear that his opponent would out spend him.

 

Obama thinks it may be worth it for people in the U.S. to consider compulsory voting to control excessive campaign spending but isn’t really taking it seriously. The requirements of the process alone to change the law would be a Herculean undertaking at best. “Compulsory voting is inherently unconstitutional. By not voting, aren’t I shouting loud and clear? I am not in favor of forcing people to vote, I am in favor of making it easier to vote.” Thompson goes on to say “of course, we’ll need all of the safeguards to protect the sanctity of the process. I am sure our friends in ISIS or North Korea will try hard to corrupt the system through hacking or identity theft. “

 

Original Article

 

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High Marks for Accountants as Small Business Leaders

A new survey revealed that leaders in small business consider their accountants to be the most important professional for their organization. 393 small business leaders took part in the survey that was conducted by Wasp Barcode Technologies. They make asset, inventory, time and attendance hardware and software. 99% of the business leaders surveyed were based in North America.

 

Accountants led the pack and were ranked higher than attorneys, bankers, insurance agents, technology firms and staffing services. 67% were very satisfied with their accountants’ services with 21% somewhat satisfied. 37% complained that they pay too much in taxes and only 14% believed their accountants could reduce their taxes more. Kevin Thompson, CPA says “I take that as a challenge. It is seldom that we cannot find something that lessens the tax burden for business.” Thompson went on to say “personally, I believe business should pay its fair share of the tax burden in this country. But, not one penny more.”

 

71% of the business leaders surveyed outsource their tax preparation and ½ outsource their employee payroll. “It is almost impossible for small business to handle tax preparation” says Thompson. “And payroll is such a penalty ridden process that it is expensive for businesses to make a mistake. Even the smallest of errors can cost thousands in penalties.”

 

Top accounting challenges include:

  • Accounts receivable/collections
  • Cash flow
  • Managing paperwork
  • Closing the books each month
  • Managing payroll

 

The survey noted that accountants could improve services and 4 in 10 respondents found their accountants to be more reactive than proactive. “So much of our business model is compliance oriented and deadline driven and therefore we are reactive. These other services require us to help our clients with the planning aspects of the business. And that is not always easy for most accountant’s to find the time” says Thompson. “The most valuable service I can provide is in these other areas that my clients need the help.”

 

Original Article

 

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kevin@kevinthompsoncpa.com  or call him @ (310) 450-4625 x102.

Americans Not Spending Even With More Jobs Available

There is good news for America. More jobs are being produced and the unemployment rate is down. But even still, many companies report that it’s hard to find workers because wages are too low. Workers paychecks are low and they aren’t reaping the benefits that an improved economy should bring.  Wages are rising at 2% rather than at the annual pace of 3% to 4 %.

 

Economists are saying that increases in wages will come when the jobless rate drops to 5% but it still hasn’t happened yet.

 

The housing market is still weak from the downturn and is recovering slowly but steadily. “In addition“ says Kevin Thompson, CPA, “the pursuit of the American dream is not as much a driver for this generation as in the past. Millennials saw firsthand the impact the housing crash of 2008 had on their families. They are much more cautious as a result of that experience.” Thompson goes on to say “in addition, the postponement of marriage and children results in fewer houses being in demand.” 

 

Exporters are finding it harder to do business abroad because of the rising dollar and slow growth. “This has to be a concern in Washington. We have to find a way to export more products” says Thompson. There is a movement afoot to bring manufacturing back to the U.S. Rising labor costs in China, delays in production together with the rise in transportation costs are making it more reasonable to manufacture and sell domestically.

 

The economy is moving along in a positive direction but not as quickly as many have hoped.

 

The reason is that there is nearly invisible inflation. The plunge in gas prices between July 2014 and January 2015 has brought inflation to its lowest level in many years. This is giving Americans more buying power and spending rose at its fastest pace since 2010.

 

Americans are more hopeful in years partly due to the fact that gas is cheaper and there is a surge in hiring. However, the question is; will consumers begin spending more consistently?

 

U.S. retail sales have been soft. They account for 1/3 of all consumer spending. Instead of spending the money they saved from lower gas prices, consumers are pocketing it instead to save for a rainy day.

 

In February, economists are looking the result of gas prices rising in the last couple months. Only a 0.3% gain is expected after auto sales dropped to its slowest rate in 10 months.

 

Conclusion: Consumer spending at the rate it is going is not going to spark the economy any time soon.

 

Original Article

 

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kevin@kevinthompsoncpa.com  or call him @ (310) 450-4625 x102.