Each month we will highlight one of our newest partners in the firm. This month, meet Quinn Hart:
What is your full name?
Lauren Quinn Hart
What is your area of specialty within the firm?
I specialize in tax and I am the partner in charge of our professional services industry niche. I assist attorneys, physicians and other professional service providers keep their financial records organized and lower their tax liabilities.
What did you do prior to coming to Strothman and Company?
I started as an intern at Strothman when I was still in school so this was my first "real job". Before Strothman I worked at a couple of music stores. I helped people track down that unnamed song that's been stuck in their head for a week, and encouraged them to buy all of the music I enjoy because it's obviously the best!
What is your educational background?
I went to Western Kentucky University for two years while I was living in the Glasgow/Cave City area. I moved to Louisville and finished my bachelor's in accounting at the University of Louisville in 2004.
What is your favorite book?
It would be a tie between
The Walrus was Paul
by R. Gary Patterson, a book that outlines the "clues" left by The Beatles surrounding the rumor that Beatle Paul McCartney died in 1966, and
11/22/63 by Stephen King about a man who travels back in time to attempt to prevent the assassination of JFK.
What is your favorite pastime outside of the office?
Definitely going to concerts, especially the ones by artists I have listened to for most or all of my life like Paul McCartney or Bruce Springsteen, the two best shows I've seen....so far.
If you could tour with any musical act, who would it be and why?
If I was touring with a musical act it would be because Natalie Maines is taking a little "vacation" and the other members of the Dixie Chicks desperately needed someone to take her spot. I would make that sacrifice for sure.
2016 Strothman and Company Seminar Series
Strothman and Company has been providing these complementary programs for over 30 years, demonstrating our commitment to education and continuous improvement. In addition to these seminars, others may be added during the year. Be sure to watch for our seminar invitations! Please invite friends and associates to attend these FREE seminars.
The Technology Savvy Way to Run Your Business
August 18, 2016
8 - 10 AM
Owl Creek Country Club
Learning from the Mistakes of Others
September 21, 2016
8 - 10 AM
University of Louisville -
Expanding Your Business Nationally & Internationally
Tax and Business Considerations
October 20, 2016
8 - 10 AM
Owl Creek Country Club
Preparing for a Changing Environment
November 10, 2016
8 - 10 AM
Owl Creek Country Club
21st Annual StroCo University
December 1, 2016
8 - 12 PM
University of Louisville -
Strothman and Company seminars are designed to qualify for Continuing Professional Education (CPE) for CPAs. If you have any questions, please call Leah at 502.585.1600 or email firstname.lastname@example.org
| Tip: IRS Aims to Boost Small Business Tax Compliance
The Internal Revenue Service believes the small business sector is a major source of under-reported income. For the past four years, the agency has run a special independent office charged with finding how to encourage small business owners to report their earnings more accurately. The IRS finds sole proprietors especially challenging. Many operate on a cash basis - at least in part - and report income on their personal tax returns, making it difficult for the taxman to correctly identify the sources of their cash flow.
The research that has been conducted to date has brought forth some interesting statistics:
- Estimates suggest that as much as 60 percent of small business revenue isn't tracked on tax information documents submitted by third parties, though this is likely to change as technology advances;
- Studies suggest that tax scofflaws are more likely to be found in certain areas of the United States such as California, Georgia, Texas and other Southern states;
- Reports suggested that intentional under-reporting was less of a problem than under-reporting due to confusion about the tax code and/or poor record keeping;
- Business owners who are caught by the IRS often become more compliant - but only for a few years -with many back-sliding into the bad habits that triggered an audit in the first place.
Small business owners would be well advised to pay attention to the IRS' focus on entrepreneurs. The majority of audit candidates are not picked by random selection. The IRS makes use of an algorithm to try to identify taxpayers most likely to have unreported income. This algorithm appears to be a very effective way to sniff out tax offenders. Once a taxpayer is flagged, almost 90 percent ultimately prove to owe more money than they reported. However, the agency's budget cuts have hit home, and it must be noted that only approximately 1.5 percent of self-employed taxpayers are audited each year.
Whether intentional or not, the IRS estimates unpaid tax revenue at more than $450 billion a year. Although audits are used more than any other tool to catch business owners who under-report their income, the discovery process is burdensome to the IRS. The amount of time, staff and money needed to conduct them makes audits a costly method of collecting taxes from scofflaws. It is seen as an increasingly inefficient way to close the tax gap.
This doesn't mean that audits are going away, but it does mean that the IRS is actively trying to find new ways to encourage business owners to report earnings more accurately. Tax experts urge their small business clients to recognize that increasingly complicated reporting requirements make it crucial for entrepreneurs to seek professional tax help. The interconnectivity of technology in the finance and banking world means more transparency and less privacy for taxpayers. The odds might be slim, but business owners should be prepared for the possibility of an audit and be scrupulous in their documentation. Without a paper trail, even the most honest business owners are subject to a time-consuming and worrisome review. It's simply not worth the risk.
Technology: Security Reminders Courtesy of Zuckerberg
Being an acknowledged leader and innovator in social media doesn't provide immunity from cyber attacks. It has been reported that Mark Zuckerberg, head of Facebook, recently experienced hacking of both his Twitter and LinkedIn accounts. Cyber thieves continue to up their game, and regardless of whether you are a high-profile billionaire or an ordinary citizen, you need to be mindful of the same security basics.
Speculation abounds on how hackers got into Zuckerberg's account, but a common reason people are hacked is user complacency. We all know what we should be doing, but sometimes it is easy to get a little lax or lazy. In Zuckerberg's case, it appears he may have overlooked some basic privacy safeguards - namely not using a two-step authentication process and possibly failing to use different passwords for different websites.
Interestingly, a recent Instagram posting (Facebook owns Instagram) by Zuckerberg provided sharp-eyed viewers with clues to some steps he might have taken to thwart a certain type of Peeping Tom cybercrime. The photo showed Zuckerberg sitting a desk with a laptop in the background. The webcam and the microphone on that laptop appeared to have been covered by tape.
What's the point of putting tape over webcams and mics? Odd though it may seem, several prominent public figures have said they do this, too. Hackers have been known to install malware that allows them to switch on the computer's camera and microphone. In other words malware known as a Trojan can turn the user's laptop into a bugging device with a camera, allowing a hacker to gain access to sensitive business information and intellectual property. Some users have had their privacy violated by hackers stealing personal photos, which crooks and extortionists post on the Internet. This type of voyeurism activity usually targets young women.
What to Do
- Follow basic security steps - buy quality antivirus software and keep it current; use a firewall; don't click on dubious links in emails.
- Unplug the webcam on your desktop.
- On a laptop, covering the camera is your best option. Covering a mic will be less effective.
- Mac users see a green light when the webcam is recording. However, this can be bypassed by a Trojan interloper so blocking with tape may be a better solution.
- Ironically, there are rumors that Facebook has the ability to listen in on conversations and view videos made by users. This alleged privacy breech is purportedly used to gather data useful to advertisers. Facebook has strenuously denied this. If you are determined to block Facebook's access to your mic, go to Settings in iOS to de-select Facebook. On an Android device, go through Settings to Personal to Privacy to App Permissions to Mic, where you can de-select Facebook.
We might not all have the high profile of a Zuckerberg, but we are liable to the same risks. If a few simple bits of tape will help protect you from a virulent type of Trojan, why not do a little DIY to protect your personal privacy.
How Morningstar Rates Mutual Funds
Mutual funds started to become popular back in the 1980s. However, there was one problem. Lack of information. While stock investors could get information on individual companies, mutual funds were comprised of up to hundreds of companies in different allocations, so individual holding research was futile.
Then along came Morningstar founder Joe Mansueto, who formed the company in order to provide readily available information about mutual fund performance, along with analysis and commentary. Established in 1984, Morningstar is now well-reputed as an i
ndependent investment research firm that offers assessments for all types of investments, including stocks, mutual funds and exchange traded funds.
Morningstar's publication, The Mutual Fund Sourcebook, is a quarterly guide that provides performance data, portfolio holdings and other information on the majority of mutual funds currently available. The company also boasts Morningstar data and proprietary analytical tools, including the Morningstar Rating system for investments and the Morningstar Style Box that depicts each fund's overarching investment style.
Morningstar is probably best known for its mutual fund ratings, ranging from one to five stars. These ratings gauge the performance of each mutual fund within the context of its risk profile as compared to similar funds. Ratings also adjust for the individual sales charges for each fund. The ratings system covers more than 100 different fund categories by different share classes, which are subject to various fee structures and therefore yield total return deviations.
Within each mutual fund category, Morningstar assigns five stars to the top 10 percent of funds and only one star to the bottom 10 percent. Funds with at least three years of performance are rated by separate time periods (three, five and 10 years); the company doesn't rate funds with less than a three-year history.
The following factors are combined to create an overall rating for each mutual fund:
- If a fund is three to five years old, its overall star rating will be the three-year rating;
- If a fund is five to 10 years old, its overall rating will be 60 percent of the five-year rating and 40 percent of the three-year rating;
- If a fund is more than 10 years old, its overall rating will be 50 percent of the 10-year rating, 30 percent of the five-year rating and 20 percent of the three-year rating.
The Morningstar Style Box is a visual graphic consisting of a nine-square grid. The Style Box for equity funds features a horizontal axis depicting value, growth and blend investment management styles, which is cross-sectioned against a vertical axis for large-, mid- or small-cap equities. To demonstrate a mutual fund's style, for example, a filled-in box that meets at growth and large-cap would indicate that the majority of the fund's holdings are large-cap and the fund manager uses a growth style of investment management.
The Fixed-Income Style Box depicts a horizontal axis for duration (short/limited, intermediate/moderate, long-term/extensive), which is an indicator of a fund's interest rate sensitivity. The vertical axis depicts a fund's credit quality as either low, medium or high.
The Morningstar Rating system for investments and the Morningstar Style Box combine to provide both investors and money managers a convenient way to evaluate mutual funds, particularly in comparison with similar types of investment options.
401(k) Plans As Your Personal Piggy Bank
Short-sighted. Impulsive. Terrible idea. Robbing your own retirement. These are just some of the things you will hear in the financial media when it comes to borrowing money from your 401(k) plan. How much of this is reality and how much is myth? We are going to explore how 401(k) loans really work and when they could be a good idea - or the worst plan ever.
How 401(k) Loans Work
Unlike traditional loans, borrowing from your 401(k) is not a true loan
in the sense that there is no
lender involved and your credit score is not a consideration. More accurately, they represent the ability to access part of your own retirement plan money, which must then be repaid to restore your 401(k) plan to approximately its original state.
You pay the interest on the balance of a 401(k) loan is back into the account. As a result, the impact on your retirement savings can be minimal - and in many cases it will be less than the cost of paying interest on a bank or consumer loan.
- Quick & Easy: Typically, requesting a loan inside most plans is simple. Most plans do not require long applications or credit checks, which means there is no credit inquiry impacting your credit score. A growing number also allow participants to make their request online.
- Flexible Repayment Options: The majority of plans allow accelerated repayment or prepayment with no penalty. Often you can set up the repayment to happen directly through your company's payroll withholding.
- Low Fees: While there can be loan origination costs or maintenance fees, these fees are relatively nominal compared to most conventional lending sources, which can come with big application fees or origination fees.
- Help (or at Least Don't Hinder) Your Retirement: Payments are usually allocated back to the investments you borrowed from or chose to apply them to. This means the interest you are paying yourself will be added to your investments. There is no definitive loss of investment earnings either. If the investments would have increased in value, then yes, you miss out on those investment gains; but the flip side is also true. If the market goes down, then you miss out on any losses as well. Most of the strongest critics of 401(k) loans tend to assume that the market only goes up when they make their arguments, and we all know this isn't true.
- Pay Yourself Not the Bank: Yes, you are paying interest on the loan; however, you are paying yourself the interest. Interest paid on consumer debt such as credit cards comes at much higher interest rates and goes in someone else's pocket.
401(k) loans are not all peaches and cream. There are some serious disadvantages, including:
- If you are terminated or quit, you have to pay back the full loan in a lump sum or it is a deemed distribution. This means you'll have to pay taxes and likely a 10 percent penalty on the remaining loan balance. This can be negated by qualifying for a hardship withdrawal or paying the loan back within the grace period, typically 60 to 90 days.
- If you are borrowing the money because you are in financial trouble, you need to make sure you budget for a lower future paycheck as it is paid back.
- If the investments you borrowed against do produce stellar returns, you will have forever missed out on those gains and the potential compounding.
401(k) loans are not always a bad idea. Under the right circumstances, they can provide a simple, convenient and lowest-cost borrowing option. Yes, they have potential disadvantages, but so do all loans if they are taken irresponsibly or at inopportune times.
Stock Market: Brexit Roils the Markets
The biggest news in markets across the world was the British vote to pull out of the European Union after some 43 years as a participant in the EU (and the former Common Market). It's estimated that global markets lost the equivalent of $2 trillion in value on June 24, when the results of the Brexit poll became clear. In the United States, the Standard & Poor 500 Index took a dive, plunging 76 points or 3.6 percent. The Dow Jones Industrial Average did the same, falling 611 points or 3.4 percent, and the Nasdaq Composite dropped 202 points or 4.12 percent. Here's an overview on what Brexit means for the United States.
How will this affect the United States?
The U.S. markets' losses represent some $675 billion in market value, which erased all the year's gains to date. On the other hand, U.S. currency and bond markets saw a surge as investors fleeing the Brexit-induced turmoil turned to alternatives outside Europe. The U.K is not the most important U.S. trade partner - ranking 5th or 6th behind other nations. However, in an age of global connectivity, U.S. markets, the financial industry and various corporations will be affected to some degree by what plays out in the U.K and in Europe as a whole. Some thoughts to consider:
- The immediate dramatic response to the Brexit poll was generated by two main catalysts - uncertainty and surprise. The markets hate uncertainty, and right now everyone is in unchartered territory. To a large extent, the sell-off in the markets resulted from the shock when investors, who expected U.K. voters to vote to stay put, realized they were wrong.
- No one knows how long the sell-off and other market shocks will last. We are dealing with situations that have no precedent. Volatility in U.S. markets might continue, but Wall Street gurus are urging investors to be patient and stay the course.
- Many investment experts hope the initial reaction on the exchanges will be short lived. Many expect this to be more of a shock to the U.S. exchanges than a factor that could precipitate a full-blown crisis. That being said, some economists believe the U.S. economy might see gross domestic product decline somewhat, possibly losing as much as 0.6 percentage points over the next 12 months.
- Some analysts believe a dismal outlook for European stocks in the medium term could help U.S. stocks to rebound - but not immediately.
- Economists predict tighter financial conditions amongst industrialized nations. In the United States, that suggests the Federal Reserve won't hike interest rates anytime soon. Some analysts think there might be a chance of a hike in December; others believe it won't happen until 2017.
- London's role as a major hub of world finance is expected to be diminished by the pull-out from the EU. Other major financial centers - including New York - could benefit from London's shrinking role in the international capital markets.
The U.K.'s exit from the EU will be a complicated and lengthy process. It will be some time before the full ramifications for the British, Europe and the global economy can be understood and measured.
The discussion points above are general in nature and are not intended to replace advice from professional tax and investment specialists.
Making Sense of Structured and Unstructured Data
For individuals and business owners alike, the way data has been dealt with, especially with the advent of computers, is through two forms - structured and unstructured data. Structured data can take the form of databases and spreadsheets delineating names and figures in columns with headers. Unstructured data, as the name implies, holds data in undefined structures including emails, social media posts, PowerPoint presentations and text messages.
With artificial intelligence's capabilities increasing and the amount of data created every day growing, how can businesses analyze both types of data and use it to their advantage?
Considerations for Structured and Unstructured Data
While structured data is readily available to be manipulated by humans, increasing amounts of unstructured data is not. Projected to keep growing, it's unrealistic for humans to comb through the 2.5 quintillion bytes of computer data generated every day on the Internet, according to IBM. A quintillion, for comparison against a million or billion, is 1 followed by 18 zeros.
Whether it's weather data, videos, photos or text generated on social media, websites or forums, digital invoices or mobile data points, the amount of information on the Internet needs a way to be collected and organized for organizations and individuals to process, analyze and act upon it for their business decisions.
How Unstructured Data is Analyzed
With artificial intelligence, unstructured data can be analyzed with algorithms. An email is a good example of how structured and unstructured data is created. It can start off with the top of the message and include the text inside the email. The structured data takes the form of the "To," "From" and "Subject" lines. The unstructured data takes the form of the unique message written in the body of the email.
With the help of algorithms, language can be analyzed to determine what adjectives are contained and what they mean. If words such as "poor" and "service" are found, it may be able to determine how many customers are not satisfied with their service experience.
Potential Uses of Big Data for Business Purposes
Artificial intelligence has the ability to look at photos, sense location through GPS and compile social media data, which could include existing or potential customers. This offers the potential to compile demographics on where marketing efforts should be increased or decreased depending on the data results. Businesses could also use big data to analyze delivery efficiency whether they are shipping manufactured goods or a delivery service. By gauging weather, traffic, accidents, price and on-time performance data from multiple data sources, companies can analyze the most efficient shipping options.
Considerations to Make Before Aggregating and Using Big Data
While the risk of a data breach already exists, the increase of data creation and aggregation only increases the risk of data violations and misuse. Moreover, data should be anonymized by removing identifying markers such as age, gender or race, so that employees do not intentionally or even unintentionally make unethical or illegal decisions when it comes to hiring or lending. It's also important to evaluate data integrity and the accuracy of the algorithms performing the analysis.
As more and more data is created, the ability for businesses to analyze and act upon it for future decisions increases. However, only the future will tell how extensively businesses can make sense of their structured and unstructured data.