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Tax Talk: Do I Need To Claim Plasma Donations On My Taxes?

Tax Talk - Do I Need To Claim Plasma Donations On My Taxes

Here in Cedar City, UT, there are plenty of people who donate plasma for a little extra income and think nothing about how it may impact their taxes. You may have even been told by tax preparer from one of the big box tax return companies that your plasma donation wasn’t considered taxable income. However, that may not be the case.

Rather than trusting a random tax preparer—who likely doesn’t have the education and experience to answer tough tax questions, your local Cedar City accountant is here to help with your plasma donation questions.

Your Plasma Donation May Be Taxable

First, we should address the reasons why many people believe that their plasma donation earnings are tax-exempt.

It’s a donation, and you don’t tax donations. Calling it a plasma donation is something of a misnomer, as you generally aren’t compensated monetarily when you donate. When goods or services are sold, and you earn income, what you call that process doesn’t matter as much—you need to still follow the law.

You can’t pay taxes on a bodily fluid or body part. This reason often floats into a discussion on whether or not plasma donations are taxable income. But let’s look at this a little differently. Say you donated your eggs or were a paid surrogate for someone.

While that was a very kind thing to do, both of these things come with compensation pay thousands of dollars, all of which are counted as taxable income. While plasma donation is on a smaller scale, it falls into the same category of bodily fluid/body part usage for monetary gain is taxable.

I didn’t receive a Form 1099-MISC, so I don’t have to pay taxes. Companies should send independent contractors 1099-MISC to assist with filing their tax returns. While not all plasma centers will send out a 1099-MISC, this lack on their part does not exempt you from paying your taxes. Instead, you will need to list your plasma donation earnings on Line 21 of your Schedule 1 Form 1040, or you can have our accountant help you with your tax preparations.

Also, the issue of paying taxes on plasma donation compensation has gone to trial before in the landmark case United States v. Garber. While the defendant Dorothy Garber was directly contracted and paid by companies for her plasma—due to the rare Rh antibodies in her plasma—the fact that she did not pay taxes and was found guilty of tax evasion can set a precedent.

With the precedent that plasma donation payments are taxable, you don’t want to be found on the wrong side of IRS tax law.

Pitfalls Of The Side Hustle Economy

Generally, most people make plasma donations to earn a little extra money each week to help supplement their main income. Having multiple side hustles is becoming more common, from providing freelance services, driving for rideshare companies, and donating plasma. Problem is, engaging in multiple side gigs can make your taxes far trickier.

When it comes to your plasma donation, you may be able to simply input your earnings on Line 21 and call it good. However, depending on how much you have earned, that may not be enough. As the United States allows for twice a week donations that can range from $30 to $50 a donation, you might rack up quite a bit if you are a regular plasma donator.

For an example of how your earnings can stack up, let’s say that your local plasma donation center pays $30 per donation, and you donate twice a week. So, that’s $60 a week. In one month, you can earn an extra $240. If you donate every week for all 52 weeks of the year, you can earn $3,120 from plasma donation alone.

These numbers are actually a little low for a regular plasma donator, as many plasma centers pay extra when you regularly donate, and sometimes have a special coupon rate for more money. However, that can leave you in a tough spot when it comes to your taxes.

When you make more than $400 from your side hustle, that income is considered self-employment income, and you will need to file a Schedule SE. There are also Medicare and Social Security taxes you will need to pay on self-employment income. So, if you are even a semi-regular plasma donator, you likely need to pay self-employment taxes.

Work With AA Tax & Accounting Services On Your 2019 Tax Return

As you can see, your plasma donations may make your tax return trickier to file properly. Rather than be audited by the IRS and have to pay penalties, you can have peace of mind when working with a trusted accountant who has the experience to help you navigate the complexities of taxes.

To work with our accountant on your 2019 tax return, feel free to contact us and set up your appointment. That way, this year, you can feel completely confident when it comes to your tax return.

Why Every Business Owner Needs To Think About Succession Planning


When business is booming, most business owners aren’t thinking about succession planning. Most owners are focused on the nearer future.

It is understandable, as engaging in succession planning is an admission of mortality and that one day, someone else will be running your business once you pass away.

Yet, if you want to ensure that your business continues on after you are no longer there to operate it, you will need to take care of your succession planning, which is best done by working with your trusted Cedar City accountant.

Potential Consequences Of Neglecting Succession Planning

If you aren’t quite sure that leaving succession planning until later is much of an issue, here are some of the potential consequences of not taking your planning seriously.

The company is vulnerable to disaster – Businesses of all sizes can be significantly impacted with a lack of succession planning. As the owner, you are usually the only one privy to important company details, from your accountant’s contact details to banking information. Without this kind of vital information, businesses can end up shuttered.

Business’ brand identity can become compromised – Often, successful businesses develop their branding and identity along with the overall purpose of the business. Yet, without clear succession planning, your successor may take the company in a completely different direction than what you would have hoped.

Lack of management preparation – Often, small business owners take on the majority of management tasks, with maybe one or two supervisors who assist. However, these supervisors likely don’t have all the needed information.

Say that you were preparing an entity restructuring for your business to help your company grow and not be heavily impacted by taxes. If something were to happen to you, there is no way for your supervisors or inheritor to know your plans or the direction you were hoping to move.

The intended heir may be cut out of the business – You may have been planning for one of your children or a trusted partner to take over your business when you pass on. But without clear succession planning, that future can be contested and may end with your intended heir being completely cut out of the business you grew.

Rather than leave your company vulnerable to these potential consequences—and likely other problems—it is best to tackle your succession planning as soon as possible. You can always revise your plan later, but it is better to have it in place.

How AA Tax & Accounting Services Can Assist In Your Succession Planning

It is possible to take care of your business’ succession planning without the help of an experienced accountant. However, it is difficult to plan for every contingency and cover potential gaps without the help of an accountant. Luckily, you don’t have to take care of your succession planning on your own.

Here at AA Tax & Accounting Services, you can work with our accountant to set your business up for future success. He can help identify potential weaknesses and provide financial insights into how you can leave your company in the best shape possible.

If you are ready to take care of your succession planning with our accountant, feel free to contact us today to set up your consultation.

Tax Talk: Selling Property? Here’s What You Should Know About The Capital Gains Tax


As the price of real estate in Cedar City—and Southern Utah in general—have been going up, you may be thinking about selling your property to ride the housing market wave. But, as with all large sales and earning, you may be wondering if capital gains tax will be applied to your property sale.

Well, you are in luck since AA Tax & Accounting Services is here to tell you all about capital gains, how it applied to your real estate sales, and how to prevent paying capital gains tax.

What Is Capital Gains Tax

Capital gains are a form of income tax that is gained by profiting from the sale of an asset. These assets can vary from things like selling stocks, businesses, or in many instances, real estate.

  • Short-term capital gains – When you own an asset for under a year and make a profit from the sale of the asset, you will have short-term capital gains tax applied. The tax will be equal to your current income tax rate.
  • Long-term capital gains – When you own an asset for over a year and make a profit from the sale of the asset, long-term capital gains taxes are applied. However, the significant difference is that the tax rate can be set at 0%, 15%, or 20%. What rate you are taxed with will depend on your filing status and your current taxable income. As a rule, long-term capital gains are lower than short-term capital gains.

However, when it comes to selling houses, the capital gains rules can differ from what is listed above.

How To Exclude Taxable Capital Gains On Real Estate Sales

When it comes to selling real estate, capital gains tax can be applied a bit differently. At this time, the IRS allows a certain amount of capital gains tax exclusion, dependent on your filing status.

  • Single filers can exclude $250,000 of real estate capital gains tax.
  • Married, filing jointly couples can exclude $500,000 of real estate capital gains tax.

For an example of this exclusion, say a married couple bought a house 8 years ago for $210,000 and sold it for $750,000. The couple would have made $540,000 in profit, and $500,000 of that would be nontaxable. Only $40,000 would have capital gains tax applied.

When Capital Gains Exclusion Doesn’t Apply

While that sounds excellent, there are some things that can cause you to lose out on your capital gains real estate tax exclusion. These factors are:

  • The expatriate tax applies to your taxes.
  • Within the two years before the sale of this property, you have already claimed a real estate capital gains tax.
  • You obtained the home in a 1031 exchange within the last five years.
  • The home wasn’t your primary residence.
  • For at least two of the last five years, you did not live in the house.
  • You haven’t owned the home for more than two years.

If you aren’t sure if one of these exclusions will apply to your property sale, you can always work with your local Cedar City tax consultant.

Ways You Can Prevent Capital Gains Tax On Your Property Sale

There are legal ways you can prevent capital gains tax on your property sale, or at the very least, you can reduce how much you will need to pay.

Keep records on home improvement costs.

To help reduce the taxable income you made on the sale of your home, it is best if you keep good records of what you paid for home improvements.

For instance, say you paid $15,000 for a kitchen remodel. As long as you have the invoices and receipts to prove what you paid for, you should be able to subtract the cost of your improvements from your overall capital gain taxable earnings.

Spend two years in the house as a primary residence.

To prevent a large capital gains tax, you will need to live in your property for at least two years in a five-year period before selling the home. While you don’t need to live in your property for two years consecutively, it does need to be your primary residence for two of the five years prior to selling.

If you sell your property under one year of living in it can subject you to short-term capital gains tax, which is the more expensive form of capital gains tax.

Check if you can qualify for capital gains tax exclusion.

There are uncontrollable circumstances that come up in life, which may cause you to sell your property and lead you to have taxable capital gains. However, there are capital gains tax exclusions that may apply to your home’s sale.

You can check on the IRS website or consult with our tax accountant for advice tailored to your personal circumstances.

If you would like assistance preparing for your property sale and would like a personalized tax consultation with our accountant, feel free to contact us today to set up your appointment.

Does Your Small Business Need A CPA Or A Bookkeeper?


To maximize your business productivity, you may have started to look into outsourcing your accounting needs to a reputable Cedar City accounting firm. But it can be difficult to know if you need the assistance of a certified public accountant (CPA) or a bookkeeper.

To help you determine which of these accounting services your small business may need, below is an overview of what a CPA and a bookkeeper can offer your organization.

CPAs Often Work With Large And Complex Companies

In most cases, CPAs have received an undergraduate degree in accounting and generally require about 150 hours of study to even attempt to pass the licensing tests of a certified public accountant. After being licensed, CPAs need to complete annual continuing education requirements to remain licensed and to keep on top of new regulations and tax laws.

With this high degree of education, CPAs will often work with larger business in a number of capacities. Sometimes, CPAs will act as financial advisors to companies, assisting in entity restructuring when needed, performing income tax planning, verifying the work of company bookkeepers and accountants, and other tasks.

A small business owner can benefit from consulting with a CPA on occasion, especially before taking the next step with their business. However, retaining the services of a CPA may not be cost-effective for a small business that has simpler accounting needs.

Bookkeepers Are Effective With Most Small Businesses

There are no set certifications or degrees for a bookkeeper. However, if someone is offering bookkeeping services, often they will have at least an accounting degree.

Generally, a bookkeeper is focused more on the daily accounting needs of your business, which is often more applicable to the needs of a small, growing company. Whether you work with an in-house bookkeeper or outsource your accounting needs, a bookkeeper will maintain your general financial records.

From updating and reviewing the general ledger, performing bank reconciliations, creating balance sheets, and many other daily bookkeeping tasks, you can feel secure with an experienced bookkeeper managing your financial records.

Consult With AA Tax & Accounting Services, LLC

If you have been considering what kind of accounting service will best accommodate your small business, you can consult with our Cedar City accountant. He has over a decade of experience working as an accountant, and has both a bachelor’s and master’s degree in accounting, giving him a strong educational background to match his experience.

By consulting with our accountant concerning your company, goals, and current needs, you can receive tailored accounting services that make sense for your business. You won’t need to pay for bundled services that you don’t need, and as your company grows, our accountant can re-customize your services.

To consult with our accountant regarding your business’ accounting needs, contact us to set up your consultation today.

30 Accounting Terms All Business Owners Should Know


When you go in to meet with your local Cedar City accountant to discuss your business, there are many business-specific accounting terms that will be used. While our accountant is always happy to stop and explain an unknown term, you may feel more comfortable going into a business meeting with a firm understanding of accounting terms that apply to company operations.

While there are industry-specific terms, below are thirty accounting terms that all business owners should know.

General Accounting Terms

To start off, let’s lay the groundwork for other accounting terms by clarifying general accounting terms. Many of these terms are what business owners will encounter even before they start their company, so it is essential to understand what they mean.

1. Accountant

The term accountant often gets thrown around to describe anyone who deals with numbers. However, this loose definition isn’t quite sufficient.

While the exact requirements can vary to state-to-state, an accountant should have a four-year accounting degree from a higher education institute. They can act as bookkeepers, and with the right certifications, certified public accountants.

2. Accounting Period

An accounting period is a defined time span where all of a company’s financial statements—i.e., balance sheet, income statement, statement of cash flow—are included. By having accounting periods to reference, business owners can quickly find information on how the company financially performed during any set time.

3. Cash Flow

To describe the flow of cash in and out of a business, accountants use the term cash flow. The cash flow is tracked from the beginning of an accounting period and ends with the conclusion of the accounting period. A negative cash flow indicates a business had less money comes in than went out, while a positive cash flow shows the opposite.

4. Allocation

Allocation describes how businesses assign funds to different accounting periods or departments within the business.

5. General Ledger

A whole and complete financial record that keeps track of a business’ financial accounts. This ledger should be maintained on a daily basis, and it is used to help create financial statements.

6. Business Entity

The term business entity refers to the legal structure of your company. For most small business owners, these company formations are usually sole proprietor, limited liability corporation (LLC), or partnership. There are also s-corporations and corporations. Depending on what business entity applies to your company, there are different laws, compliance requirements, and tax ramifications.

7. GAAP

Generally Accepted Accounting Principles (GAAP) refers to the basic rules that all accountants follow as they perform their duties. These principals guide accountants so that it is easier for other financial experts to review a business’ financial records.

8. Fixed Cost

Businesses have fixed costs, which are costs which do not change no matter how many sales are made. An example of this would be the rent of a business’ location, which would be a recurring fixed cost. While the rent could be raised over time, it will remain fixed throughout the length of the rental contract.

9. Variable Cost

Opposite of fixed costs are variable costs, which are business operation costs that change with how many sales are made. An example of this would be something like the cost of deliveries. With fewer sales, the amount of business funds dedicated to delivering goods is lower, though costs will go up as more sales are made.

10. Overhead

A business’ overhead refers to the expense of operating a business and is often a fixed cost. That means that overhead often refers to things like business rent, employee salaries, inventory storage costs, and fixed costs.

11. Liquidity

For businesses, when it comes to liquidity, it is a measure of how quickly a business can absorb short-term and immediate financial obligations and debts.

12. Return On Investment

The strict definition of this term refers to the overall profit that a business makes—the return—which is divided by the business’ investment. However, ROI can also be used a bit more loosely to describe how successful short-term projects and objectives have been.

Profit And Loss Statement Terms

When it comes to your company’s profit and loss statement terms—also called income statement terms—you will likely encounter more of these words when using accounting services. To help you stay in the loop when discussing your business’ financial status, here are some of the most common profit and loss statement terms.

13. Income Statement

Let’s start by defining what an income statement is when applied to your business. This financial statement will cover the expenses, revenue, and business profits for a set period of time.

It starts by displaying the company revenue at the top of the statement, then the expenses are displayed to show how much was subtracted. That way, you have a clear idea of where the money was spent. Finally, the income statement displays the net income at the bottom of the report.

14. COGS

COGS—costs of goods sold—is used to refer to the expenses that relate to the creation of your business’ service or product. This term does not describe operating costs; rather, the labor involved in your business’ provided service or the cost of the materials used to make your product.

15. Gross Profit

The profitability of your business in terms of dollars is described by gross profit. This number is reached without taking into account the overhead costs but is subtracted the COGS from the revenue.

16. Gross Margin

After the gross profit has been assessed, the gross margin is next. The gross margin is a percentage of the gross profit. You find this percentage by taking the gross profit and dividing it by the revenue to find the gross margin.

17. Depreciation

This term describes the loss of asset value over time. It does not describe low-dollar value items. An example of a depreciable business asset would be a company van. A depreciating asset is often shown on an income statement as a non-cash expense as it doesn’t directly affect your business’ cash.

18. Net Income

The net income (NI) is the actual dollar amount of profit your business earned. You can find the net income by subtracting the expenses from the revenue for a set period. These expenses should include your taxes, overhead, depreciation, and COGS for that given period.

19. Net Margin

Another term for the profit of your business, the net margin is the percentage of profit as it relates to the revenue. The net margin is found by having the net income divided by the revenue for a set earning period.

20. Expense

When your company incurs a cost, the term for this is an expense.

21. Revenue

Simply put, any money that is earned by your company is considered revenue.

Bookkeeping Terms

Some of the accounting terms that you will run into regularly as a business owner are bookkeeping terms. Many of these terms describe financial matters that concern the day-to-day operations of your company, so it is critical that you understand them.

22. Balance Sheet

A balance sheet is a term that encompasses your business’ financial report that shows all the liabilities, equity, and assets your business has currently. This report shows the balance of this equation: Assets = (Liabilities + Equity).

23. Accounts Payable

This term describes all of the business’ expenses that have not been paid yet. On a balance sheet, account payable is listed as a liability, since the business owes others.

24. Accounts Receivable

To describe the revenue of a business has but hasn’t received the payment, you would use the term accounts receivable. On a balance sheet, accounts receivable is listed as an asset that should become cash soon.

25. Payroll

Considered a standard business liability, payroll is an account that displays the payment of employee wages, salaries, deductions, and bonuses. On the balance sheet, you may see if there are any unpaid wages or accrued paid vacation time.

26. Inventory

A business asset that is meant to be sold to customers is considered inventory. Once inventory items are sold, the account tracking the inventory assets will lower so that businesses can track when they need to restock.

27. Asset

An asset is a term used to define the things owned by the company which hold monetary value. When you see your assets listed, they will be in order of liquidity, with assets like cash as the most liquid, to difficult to dispose of assets like a building being one of the least liquid.

28. Book Value

While you may have depreciating assets—like the example company van—there is a term to describe the original value of that asset, which is when the term book value is used.

29. Liability

A business financial liability refers to the unpaid debts that a company has accrued. Often, your business liabilities will be things like business loans, accounts payable, and payroll.

30. Equity

After the liabilities have been subtracted from the assets of your business, the leftover value is called the equity.

To start working with our accountant concerning your business accounting needs, contact us today to set up a consultation. He will provide you with a tailored accounting plan that will suit the unique needs of your business.

What Exactly Does a Bookkeeper Do?

What Exactly Does a Bookkeeper Do

Business owners are often faced with the decision of whether or not to hire a bookkeeper. Regardless of whether they bring the bookkeeper in-house or outsource their company bookkeeping, it can be difficult to determine the necessity of a bookkeeper when the business owners aren’t sure what a bookkeeper exactly does.

While the exact responsibilities of a bookkeeper can vary depending on the company needs, there are some basic bookkeeping duties that our accountant here at AA Tax & Accounting Service often performs for our local Cedar City business owners.

Daily Duties Of A Bookkeeper

While different organizations will have various requirements for their bookkeepers, there are some standard daily tasks that most bookkeepers perform for businesses.

Accurate Financial Communication

One of the parts of a bookkeeper’s daily duties is providing accurate communication on the various financial matters of the company. Bookkeepers often field questions from employees regarding payroll, update bosses on financial matters, and record transactions with information from coworkers, such as submitted receipts for reimbursement and other issues.

Without a bookkeeper, keeping track of various sizes of expenditure, reimbursement, petty cash dispersal, receipt recording, and other daily financial matters can become lost in the crush of other business matters. When these kinds of financial details slip through the cracks, it can lead to inaccurate reports and issues when it comes to itemized business tax returns.

Manage Financial Accounts And Records

Bookkeepers spend a significant amount of time on managing and maintaining company financial records and accounts. Performing continual financial maintenance by doing things like bank reconciliation and general ledger management can take up a good deal of time.

As well as performing regular tasks, there are various financial duties to take care of daily, such as receiving payments from clients and vendors, creating reports for the appropriate people, and other matters.

Maintain Budget And Inventory

Often, bookkeepers are involved in helping maintain a business’ inventory, as they understand where the current budget and finances stand. Bookkeepers will track what inventory is available, what has become damaged and unsellable, and what inventory sales are made. That way, the revenue is accurately tracked.

Also, with a bookkeeper to track expenditure, projects are able to be kept more on track and within the budgetary constraints. Often, even if your bookkeeper isn’t part of the project committee, they stay in communication with the project lead to ensure costs are accurately tracked and reported.

Other Bookkeeper Responsibilities

The size of your business may also leave your bookkeeper with other responsibilities. These tasks may not occur on a daily or even weekly basis, but they are critical to the operation of your business. Some of the other responsibilities you may turn over to a bookkeeper are:

  • Payroll processing – Ensuring that your employees are paid accurately and on-time is essential to keep up morale and trust. Bookkeepers make sure that the payroll is correct before processing it and ensuring that your workers are paid.
  • Tax preparation and file – With quarterly taxes to pay, it is essential that you have a bookkeeper to keep your taxes on track, as well as ensuring your business taxes are properly prepared and filed.
  • Account reconciliation – Usually a monthly task, a bookkeeper will carefully go over all your accounts to make sure that they all accurately reflect the correct financial statements. If there are any issues, a bookkeeper will research and resolve them to reconcile your accounts.
  • Develop financial reports – Depending on how often you request them, your bookkeeper can draw up financial reports for you. That way, you can receive an overview of your business’ financial status.

Depending on the experience of your bookkeeper, you may have access to more services. So, if you need further accounting services along with your bookkeeping, our accountant can help.

Bring Your Bookkeeping To AA Tax & Accounting Service, LLC

By outsourcing your bookkeeping needs, you can avoid needing to find, train, and motivate an in-house bookkeeper who may not have the experience you need. Instead, working with our accountant provides you with an experienced bookkeeper and accountant who can help keep your financial matters on track.

To set up your bookkeeping consultation with our accountant, feel free to contact us. We look forward to helping you navigate your bookkeeping and support you in your financial endeavors.

Are Tax Consultants Accountants?

To maximize your tax return and lower your overall tax liability, having a tax consultant is a critical part of your financial team. By working with a tax consultant, you can enjoy having an expert guide you through the ever-changing tax laws, advise you on investments that minimize your tax liability, and assist you in making financial decisions which can have far-reaching impacts on your finances.

While all this sounds good, not all tax consultants are equally qualified to help you, as not all tax consultants are accountants. If you are on the fence about whether you really need a tax consultant accountant, AA Tax & Accounting Services is here to help you determine your needs.

Why Choose A Tax Consultant That Is An Accountant

First, you should understand that there are actually no strict educational requirements associated with the job of a tax consultant. Some people approach tax consultancy from a work experience angle, and while this isn’t necessarily a bad thing, as these individuals lack the formal education in tax law, finances, and other matters, their advice may not be as encompassing as you would hope.

In many cases, tax consultants are college-educated, with at least a 4-year degree under their belt. Some of the educational paths that some tax consultants take are business, finance, pre-law, and of course, accounting. Depending on your consulting needs, one of these educational emphasizes may be more useful to you.

However, a well-rounded accountant who also has a master’s degree in accounting—such as our accountant here at AA Tax & Accounting Services—can provide more comprehensive services. With our accountant’s greater educational background paired with his experience helping others reach their financial goals allows our accounting firm to provide excellent accounting services here in Cedar City, UT.

What To Look For In Your Tax Consultant

When you are ready to find a tax consultant to help you with your tax liability and future financial decisions, it’s time to be picky. Some of the things you should look for in your tax consultant are:

  • Ensure education and experience – As there are no stringent requirements for claiming the title of a tax consultant, you will want to be sure that your tax consultant has their accounting degree or other educational and work experience you are looking for before committing to working with them.
  • Maximized services – Along with using their tax consultant services, it can be incredibly helpful to have a tax consultant that can work with you on other matters. From financial planning, business entity restructuring, tax filing, and more, working with a tax consultant accountant for all your financial needs can ensure that your financial needs are appropriately taken care of.
  • Clarified fee structure – There are multiple fee structures when it comes to tax consultant work. To ensure that you aren’t surprised by the bill later, be sure you know if your consultant accountant will be charging by the hour, lump sum, completed tax return, or other variations.
  • Check reviews – No matter how flashy the website, what will really tell you the most about an accountant are the reviews from former and current clients. Check to see what people are saying about working with your prospective tax consultant to help you see if they are the professional for you.

Whether you are looking for an ongoing partnership with a tax consultant or have a one-time need to consult, it is critical that you choose a tax consultant who is also an accountant. If you would like to work with our tax accounting consultant, contact us today to set up your appointment.

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