We begin our Spotlight with Mihoda & Co., P.C., who is Avail’s longest standing and most loyal customer since 2004. I’m talking with Frank Mihoda, principal owner of:

Q: Robert indicated that your relationship with Avail Computer evolved in a rather peculiar way. Can you tell us about that?  

Frank Mihoda: We have security systems here at Mihoda. What had happened was our security systems were not kept up-to-date by our previous IT guy. As a result, we had some damage by a hacker who was erasing our files. None of the secure data was a problem; it was attacks going against MS Word, Excel, correspondence files. That is what they wanted to do is to cause us aggravation.

 Q: How were you referred to Avail Computer to resolve these problems? 

Frank Mihoda: Down the hall from us was a guy by the name of Brady. He knew Robert from other computer industry dealings. Brady said he knew someone who could probably help and he referred Robert to Mihoda.

 Q: How effective was Avail Computer in resolving these initial problems?  

Frank Mihoda: Robert came in to look at the problems we were having and quickly said Yeah, I can fix this.” And he did. We have not had a security problem since. It’s been 5 years! There have probably been other attacks on our system (Robert would be the guy to know) because every company has them. But, through the combination of software firewalls and mechanical firewalls, the attacks just don’t go anywhere.

I trust Robert. He is very aware of our situation and the setup we like to have going into December and tax season. I can tell you that in this particular situation it was not around tax season. For us, no changes in our system and everything kept on an even keel. Even if there are items I would like, new processes I might want, we don’t make any changes during tax season.  

“Availability” is a proactive preventative approach to IT systems management. At Avail, our focus is to keep your IT systems operational, available and secure so that you can focus on the everyday demands of expanding your business, managing costs and increasing revenues. 

Q: Mihoda made the decision to go to Avail Computer’s “Availability” Managed Services program.  How did you decide that Availability was the right option for Mihoda? 

Frank Mihoda: Actually, it was Robert who decided! Robert understands our situation and work environment. If Robert says it’s a good idea, he knows more about this than I do and I trust him. 

 Q: So, you went with Availability and it wasn’t necessarily on a trial basis. Robert just looked at your specific situation and decided what the best option was for Mihoda and he presented it. You went with it.   

Frank Mihoda: That is correct ~

 Q: We have certain clients who prefer going down the IT road of pay per visit and block hours approach. We are trying to explain to our customers the benefits from a cost standpoint on how Availability is a more cost effective and likely path for them. They look at the monthly cost of Availability and we look at the cost of visits on a per call basis. What we hope to get information we could share with our readers about your situation that might very well validate or encourage clients to subscribe to “Availability” Managed Services.  

Frank Mihoda: Well, I know I can explain this. I’ve talked to Robert frequently over the years and it’s been communicated to him that if we need it, let’s do it. And, let’s not wait for something to break before we fix it. Because what we need is routine maintenance on our system on a regular and on-going basis.  However often Robert comes in here. A lot of times I don’t see him. He’s in and out and sometimes says hello…sometimes I’m out. But, my goal is that when I touch this computer, it works.

 Q: And that’s how it should be! 

Frank Mihoda: Exactly. If Robert has to come in more often, so be it. The computer system is very important. It’s not like we can wait until it’s broken and call Robert to spend two, three or more hours to fix it. Whatever it costs for Robert to come in here routinely is substantially less that then cost of the system being down where I would have employees standing around chatting. In this situation, we’re not getting any of our work done!!

 At Avail, our goal is to serve as your technology partner with a focus on providing solutions. By using a consultative approach to evaluate your business and technology needs, we can advise on the best solutions for your current and future needs.  

Q: So, where do your see growth and expansion at Mihoda for 2010?  How can Avail Computer assist in this process?? 

Frank Mihoda: Well, we don’t know. And you never know that exactly. Of course everybody is subject to the whims of the economy. I think that the construction sector will come back in 2010 – that’s a fair amount of our business. And, new companies will be starting up again. That’s what we depend on!

  Q: How did Mihoda & Co. come to be? 

Frank Mihoda: Gosh, it’s been, I want to say, 25-30 years. I was working in private industry and I went back into the Public Accounting field. What I was doing was mostly tax work because that’s what I like to do. But, since I was trained as an auditor doing the accounting side of the business, it was relatively easy to fall into it (my own business). First it was just me, then me and a Secretary and a Partner.  Then, it was just me and a Secretary; the Partner left. Then, you know, I added a part time employee and a full time Employee, then I hired a CPA... Now, there are a total of 7 of us, which includes Paula Schaffer, my Partner in the business.

 Q: What is the ideal Mihoda & Co. client/?  (i.e., Individuals -Dr. Offices - Law Firms?)   

Frank Mihoda: We deal with small businesses.  And, our small business accounts run from $250,000 per year in sales to $25 million sales. We have other clients who’s sales are far beyond that but it’s about the type of business they’re in and their sales are not an indication of how big they are. There are clients that sell big things in a little margin and it doesn’t take a lot of labor and effort. And it makes it appear they are a big company with the sales very, very high, and there could only be 2-3 employees. On the other hand, we have clients with 50 employees. So, there’s our market. We deal with quite a few medical practices, construction companies, retail stores, and there are light manufacturers

Q: So, how do you attract your clients?

Frank Mihoda: Mostly thru referrals from our other clients.

 Q:  That’s exactly our position at Avail.  We do a little bit of advertising, be we feel it is about the quality of service you provide and word of mouth, all leading to referrals. 

Frank Mihoda: Right. We’ve tried advertising in the past and it doesn’t work. We haven’t gotten anything out of it, really.

 Q: So tell me Frank, what asset, process, skill or service in your business at Mihoda & Co. sets you apart from your competitors? 

Frank Mihoda: We tend to be very, very flexible to the needs of the client. For instance: payroll services. Folks can go to Paychex, for example, and get their payroll services done. Initially, we will always recommend that they use a payroll service that.  On the other hand, there a lot of folks that are very, very busy and they always seem to be behind.  You can’t call the payroll service the day before and get your payroll. But, our clients can. If our clients need something and they need it on Monday and they tell us about it the Friday before if it’s possible to get it done.  Then we just work the weekend to get it done.  So, we are very, very responsive to client needs. They get that CPA’s are, in general, a pretty good profession for quality. This is how you react. You can provide the quality but how well and how fast you react to it.  Our CPA’s react very quickly. Now, the routine things, well if it’s routine, it’s routine. No need to get it done tomorrow, if it has to be done two weeks from now.  However, if you need it tomorrow then we do our best to get it done.

  Q: So, I am understanding that you have a scheduled process, yet you also have the flexibility of handling those last minute demands? 

Frank Mihoda: Right.  We’re small enough and very, very flexible yet big enough to get it done.

 Q: I’ve taken the time to read thru your Annual Tax Planning Letter for 2009, which highlights current tax year preparation and strategies for years going forward. It was written that cutting taxes has never been more important.  What tax planning problems do you see across the board in your small business client base? 

Frank Mihoda: The biggest planning problem is the failure to plan.  If someone calls to say that they are considering a specific transaction, we can structure it in a manner that will be most advantageous from the tax point of view. If the transaction is already done, that’s a salvage job and there isn’t a whole lot we can do about it then.

 Q: Of course, every personal and business tax situation/strategy is unique. With only days left in 2009 tax reporting year, what are some general tax priorities for small business (i.e., “C” Corp, “S” Corp. LLC and Flow Thru Entities)? 

Frank Mihoda: If you need equipment, say in the 6 months or so, try and buy it before the end of the year. That gets you a Section 179 direct write off. 

 Q: I intended to ask you about Section 179, so please tell me more about that and how it affects small business. 

Frank Mihoda: What that (Section 179) allows the taxpayer to do, instead of depreciating a piece of equipment over 5 or 7 years, they deduct all of it in the year of purchase.  In a growing business, there is always a need for working capital. That is one of the facts of life.  If you can buy a piece of equipment for $100,000 and reduce your income $100,000., it can save you as much as $25, 000 in taxes. Depending on your tax bracket it could save you more. But, you know it would be in the ballpark of, well, $25,000 in a business of savings of a tax in a taken year is really like borrowing your tax dollars back in 5 years.

 Q: Wow! So, let me get this right. You take the entire deduction in this tax year and you do not have to schedule out over multiple years.   

Frank Mihoda: That is correct. Now, the problem with that is that you’ll be paying it, maybe, over multiple years. That’s a cash management problem that folks need to aware of.  So, if you need equipment buy it now.

If you are a cash basis taxpayer, and you have bills sitting there, that you owe money on and that you plan to pay in January, do your best to pay them now in December.

 Q: So, under Section 179, are purchases limited to equipment or are there other areas that can be bundled under this? 

Frank Mihoda: Fixed Assets or Personal Property. Computers count as well as copiers, trucks, certain types of vehicles, heavy equipment, machines, etc. As a general rule, it’s personal property if it’s moveable.

 Q: So this Section 179 was something that came about for the tax year 2008 and now it continues in 2009. Do you expect that benefits under Section 179 will be available in 2010 and going forward? 

Frank Mihoda: Section 179 has been around for a long time, essentially about 15 years. It started out at one point at $25,000 and I believe we are up to $250,000. Most clients do not use it up, unless you are acquiring big machines or heavy equipment. Anyway, Section 179 was designed for small business to give them that break.

 Q: I’m hoping that small business takes advantage of this. We wrote about Section 179 to our clients last month and last year because we wanted to encourage them to consider making the computer, printer, server and equipment purchases before year end.  We felt this would also position them with necessary improvements for this current tax year and beyond. Unfortunately, 2009 was an incredible year that many were not able to understand or prepare for. Our hope is that with current upward trends, small business are better strategizing and are now ready to put into place the equipment acquisitions they need to better grow their business.  On the other side, tell more about similar tax planning problems do you see across the board in your small business client base.   

Frank Mihoda: There aren’t really problems.  There are situations that come up.  For instance, virtually every employer should have some sort of retirement plan. A small one is better than none. Fully funding a retirement plan such as a 401(k) and it is certainly wise to do that every year. We don’t have to worry about their retirement. It will be secure. If funding availability is less, then having a small retirement plan, (a SIMPLE) is better. It amounts to a small amount of paper work, once it’s set up, and you just make payments into it.  A 401(k) certainly would be the choice; it just depends on how much people want to be involved in a retirement fund.

 Q: What about the IRA?  Is it going away? 

Frank Mihoda: No, The IRA- I can’t imagine that it would ever go away.  Now the limit is up to $5,000 this year.  However, you can’t use an IRA if you have another retirement plan.  All of these vehicles are there, and available. Most people know about them. It’s just planning to use them -getting the money in there to get it funded. 

 Q: The next question we have, as we go away from the IRA and tax savings/planning strategies involves the current economic situation. With those individuals that find themselves unemployed and who have the desire and are contemplating the start of their own business, what would their best course of action, or steps, be in the start up of a new business?  

Frank Mihoda: Well, if someone is contemplating that, the first thing they should do is study the market they want to enter and the skills they have.  While they are doing this, people need to decide if they are going into business just to make money. That’s going to be a failure. You go into business to provide product or service to a market that is there. That’s why you are in business.

 You make a profit because you have to, in order stay in business.  If you are providing proper product and proper service to your customer base you will stay in business and you’ll make money. That is the most important thing.  Folks tend to get wrapped up in setting up a business and that you have to do this and have to that. What you have to do is sell. Sales … that seems seem to solve all the problems.

If you sell one job—just one extra job, it will more than compensate you for beating your head against the wall trying to cut expenses. And, that’s what I tell people to do. And they say, “Well, you know I’ve called everybody.” Well, then you’ve got to lay people off. Then, you have to take a cut in salary.  So you have to look right there at those two main areas.  A $2 million dollar a year company is very happy they cut their phone bill by $1250 per year? How did they do it? They got rid of some lines, right? Tell me, how does that work for the efficiency of the company? And, maybe getting rid of one line; that might mean a savings of $60 per month which is $720 per year. But still it’s not enough based upon the effort that is required. You see, a certain number of telephone lines, that’s what you have and you operate within that. If your business cuts back so far that you can get rid of half your lines, then you do it. But it is sales that really drives a small business, and you have to go out and get the sales that you need.

 Q: What tax tips can you offer to our readers for their general use and consideration in preparing for year end 2009? 

Frank Mihoda: Well for individuals there are not a lot of things they can do if they just have W-2’s, money in savings, stocks and bonds. Things that people don’t do and they should is when they take those bags of clothing to Goodwill, they have to get receipts. They have to keep good records. Good records mean good deductions. Where folks really need to keep putting their focus and what keeps me in business are the unusual transactions that folks are going to go into. When it starts to get complicated—like when you own a rental house. There is a lot you can do there. You have to make sure your allocation is correct and you should allocate it between the building and the land. And, in your situation you might want to expand into the rental house business. Do you want to keep getting into bigger properties?  Well, we can do tax deferred exchanges. Do you want to liquidate? Do you have an exit strategy on how to get rid of these things? I have folks with as many as 8 or 10 rental houses. In some cases, we’ve been on a program to trade up to get into one bigger, nicer rental house. Sometimes the thought process is to eventually convert all those rental properties into their own home. If you have a series of rental properties and you like them, there are ways over a period of years to convert some of those to personal residences, although those opportunities become limited, but it can be done. So it depends on the transaction.

  I read those general tax tips you see in the newspaper and all that. These are all relatively routine and our tax world has really changed since I started my practice. When I started in practice, there was a 70% tax bracket.  In 1960, there was a 91% tax bracket. You had to make a lot of money to get into that bracket. But now, the highest tax bracket is 35%. When I started in the business, our goal (and we would do these incredible deals that we would put clients into to bring their tax brackets to the point where they were paying 1/3 of their income in taxes. You don’t have to do anything now. So it’s those things folks have to watch for. I still continue to hear the term “Well, it’s a tax loss.” In reality, it’s a loss. There is no such thing as a tax loss that is not an economic loss. Essentially, a loss, is a loss, is a loss. And if you planned and that’s what you want, it’s not a good plan because eventually, those losses catch up with you. 

  In small business, paying taxes is not the worst thing that could happen. I run into this all the time, folks saying “I’m just not paying taxes.” “Do what you can, Frank, and make sure my corporation doesn’t pay taxes.” Well, I can do that and then you have a loss and no money. And, when you go to the bank, the bank wants to see the last 3 years tax returns. You hand them to them and you ask to borrow money. The bank doesn’t want to lend money to a unprofitable business.

  So, I would tell folks to manage their income and if you have a small corporation, make sure that it has income every year. Then when you go to borrow money from the bank, they will look at it and say “This is a well run business--they make money every year,” And the bank is going to loan you the money.

 Q: Overall, tax planning throughout the year is critical to the health and success of your business.  Avail Computer has placed its confidence in Mihoda & Company for its professional tax and accounting needs. We enjoy a beneficial relationship and we highly recommend Mihoda & Company to our readers, clients and business associates for their personal and professional tax accounting needs. Avail Computer is proud of our long standing relationship with  Mihoda & Co. We would like to thank you, too, for taking time out today to read this valuable interview.    

Contact Information:

Mihoda & Co., P.C.

770 W. Hampden Avenue, Suite #325

Englewood, CO  80110

Telephone:  (303) 789-1933

http://www.mihoda.com