Nicholas J. Pennewell, CPA-Where Every Penny Matters

2012-The tax breaks that are possibly going away, unless congress acts!

2012-01-18T06:54:00.002-05:00

You’ll face a higher tax bill next spring if Congress and the President can't agree to revive a series of tax breaks that expired Dec. 31, 2011. Among the breaks that Congress didn’t extend in all the payroll tax holiday are the following:

Here are some of the more popular tax breaks possibly going away-

1-Alternative minimum tax patch
The AMT is a tax system created to prevent excessive use of tax breaks by the very wealthy, ensuring they pay at least some tax. Taxpayers whose income exceeds the AMT exemption – in 2011, $48,450 for individuals and $74,450 for married couples filing jointly – must calculate both regular tax and AMT liability and pay the larger of the two amounts. But exemption levels have, at least tentatively, dropped to $33,750 for individuals and $45,000 for married couples filing jointly in 2012, which will expose 31 million taxpayers to the higher AMT this year, according to Tax Policy Center estimates.

2) Higher mass transportation benefit
A 2009 federal stimulus provision raised the maximum an employee could receive for transit, tax-free, from $120 to $230. That matched the tax-free limit for parking. With the expiration of this break, the maximum for 2012 dropped to $125. Employees who’ve asked to have an amount higher than that withheld from their paycheck to cover their total commuting costs will see their net pay come down, as the difference is now taxed.

3) Deduction for direct IRA payouts to charity
Retirees who are 70½ or older could direct up to $100,000 of their IRA distributions directly to charity and exclude the donated amounts from taxable income. Not anymore in 2012, unless Congress reinstates this deduction.

4) Write-offs for state sales taxes
This one hurts if you are in one of the states that uses sales tax instead of a state income tax (that means us Floridians, you Texans, and 5 other states!)
This particularly significant expired break allowed you to deduct either state income tax or state sales tax from your federal taxable income.

5)Teacher’s supplies deduction
My teacher clients are going to yell at me if this is not extended! Come on Congress & the President!
Teachers were able to take an additional deduction of up to $250 for classroom supplies they paid for out of their own pockets.

6) Tuition and fees deduction
Students beware! Taxpayers (up to certain income limits) who can't claim the more advantageous American Opportunity or Lifetime Learning credits can still reduce taxable income by up to $4,000 for tuition and other qualifying educational expenses, if it is extended.

7)Mortgage insurance premium deduction
Although I question the value of this entire program (it has done nothing to prevent the falling house prices of the past few years and subsequent effects on those homeowners). Homeowners who don’t exceed certain income limits had been able to deduct premiums they pay on mortgage insurance policies issued after 2006 on their primary residence.

8) Personal tax credits applied against the alternative minimum tax

Credits such as the tuition and dependent-care credits were allowed to offset your AMT liability.

9) Research and Development credit

Like the AMT patch and direct IRA payouts, this credit, which allowed high-tech companies and others to subsidize research in areas that might go unexplored, has broad support. But it still falls to Congress to reauthorize it periodically.

We think Congress and the President will manage to revive most of these breaks -- eventually.

Florida's minimum wage increases on Jan 1, 2012

2011-12-29T07:32:00.003-05:00

Florida's minimum wage for non-tipped employees will increase Jan. 1 to $7.67 an hour, a 4.9 percent increase from the $7.31 an hour minimum for 2011, according to the Florida Department of Economic Opportunity.

Wages for tipped employees will rise to $4.65 an hour, up from $4.29. The wage increase is based on the increase of the federal Consumer Price Index for wage workers in the southeastern United States.

Following a 2004 constitutional amendment, Florida is one of 10 states that automatically raise minimum wage rates. The federal rate, now $7.25 an hour, must be raised by an act of Congress.

Tax Advantages available to homeowners!

2011-12-22T11:32:00.013-05:00

Here are some potential tax savings for homeowners this tax season. If you are interested in learning how not to miss these on your upcoming tax returns, please call or email us to learn how to use each to its fullest potential.

1. 2010 is the last tax filing year to benefit from a refundable “first time homebuyers’ credit” of 10 percent of the purchase price of a new home—up to $8,000. The credit is available for homes purchased before October 1, 2010 and the purchasers must have entered into a binding agreement to buy the home before May 1, 2010.

2. A refundable “repeat homebuyers’ credit” is available for purchasers who entered a contract to buy a home by April 30, 2010 and closed on the sale of the home before October 1, 2010. The credit is 10 percent of the purchase price with a limit of $6,500.

3. Homeowners can exclude up to $250,000 of gain on the sale of their homes (up to $500,000 for joint filers) if they have owned and lived in the home as their principal residence for two out of the five years prior to the sale, although a partial exclusion may be available for sales due to change of employment, health or unforeseen circumstances.

4. Homeowners may also take the interest on their mortgage indebtedness of up to $1 million as an itemized deduction. The interest can be on their principal residence and a second home/house you are trying to sell.

5. For ordinary income purposes, up to $100,000 in home-equity loan interest can also be deducted.

6. Points paid on a home mortgage loan for the purchase or improvement of a principal residence are deductible in the year paid to the extent that the points represent a customary practice in the area. Points paid on a refinancing loan must be amortized over the term of the loan.

7. Through 2010, mortgage insurance premiums may also be deducted as mortgage interest. However, the mortgage insurance had to be originally acquired on or after Jan. 1, 2007. We question the value of PMI insurance when it did little to stop the destruction of housing values in the country.

8. Homeowners are also able to take their state and local property taxes as an itemized deduction.

9. If a residence of the taxpayer is rented for fewer than 15 days during the year, the rental income is excludable from gross income and no deductions attributable to such rental are allowable. This means that if you have property for rent but are unable to rent it, you can't take a deduction for expenses of the property.

10. If a homeowner’s mortgage debt of up to $2 million on their principal residence is forgiven, as in a write-down or foreclosure, it is not treated as “cancellation of debt income.” This special relief is temporary and is available for six years, retroactively for taxpayers filing amended returns, from January 1, 2007 through the end of 2011. This exclusion from income is necessary because without it any underwater homeowner would be liable for the "income" they received (debt forgiven) if they lost their home.

11. If you own a home and installed qualifying energy-efficient fixtures and systems by Dec. 31, 2010, you may claim a 30-percent tax credit – up to a maximum of $1,500 for both the 2009 and 2010 tax years. Obama's American Recovery and Reinvestment Act of 2009 (ARRA) provides for energy tax credits applying to the installation of insulation and energy-efficient exterior windows and doors, heat pumps, furnaces, central air conditioners and water pumps. This is a tricky deduction because taxpayers often incorrectly assume that any item that saves energy is eligible for a tax deduction. The IRS guidelines are quite clear on what is deductible so you need to talk to a CPA or other tax preparer to be sure your energy efficient purchases are actually covered by the 30-percent energy credit. Did you get that? ;-)

12. A separate 30-percent credit is available to homeowners who installed alternative energy equipment such as fuel cells, solar water heaters, solar electric equipment, small wind energy property and geothermal heat pumps.

2011-12-20T08:58:00.002-05:00

Here comes tax time! Take time to gather your tax data as soon as possible. You should round up all receipts and gather canceled checks, such as those from charities; check your latest brokerage statements for year-to-date gains or losses; make a checklist of accounts to keep track of the 1099s, if any, when they arrive; and get medical receipts and insurance reimbursement forms in order as well as caluclate the total for health insurance premiums paid. If you start organizing your files now, it will be easier to avoid a last-minute rush to our office. It is much easier to have the originals or to request replacements when you have time, instead of discovering at the last minute that you are missing some item that prevents you from finishing your tax return by the due date.

Accounting Fraud in the movie Industry...

2011-12-16T11:22:00.005-05:00

A Film Director has been indicted in $4,700,000 Film Tax Credit Scheme.

A director who directed 2 movies has been indicted for fraudulently obtaining over $4.7 million in film tax credits from the state of Massachusetts.

Daniel Adams allegedly claimed inflated expenses for two films that resulted in the nearly $5 million overpayment.

Adams received the tax credits for the 2009 movie “The Lightkeepers,” starring Richard Dreyfuss and many others. One item inflated was payments of $2.5 million to Dreyfuss, when in fact the star only received $400,000.

A Grand Jury returned indictments Monday against the 50-year-old director and producer on charges of making a false claims, larceny over $250, procuring the presentation of a false claim to the Department of Revenue, filing a false document with the Department of Revenue, and procuring the preparation of a false tax return.

This investigation began in March 2010, when an investigator at the Department of Revenue spotted suspicious tax returns connected to the production. During the course of its review of the tax credit application, the department discovered that withholding tax had not been paid on the lead actors’ salaries. They required payment of that tax before issuing the tax credit certificate.

Prosecutors claim Adams participated in a scheme to defraud taxpayers that began in 2006. He allegedly submitted fraudulent tax credit applications that greatly inflated expenses for the pair of Cape Cod-based film projects and in turn received a tax credit overpayment of more than $4.7 million. The Massachusetts film tax credit statute allows a film production company to receive a 25 percent tax credit for various payroll and production expenses.

Earlier, Adams organized an LLC for the purpose of producing and distributing a motion picture. Through the LLC, he allegedly solicited independent investors and also sought financing based on the tax credits the film would generate.

Tax credit financers will often advance money to projects under an agreement to later purchase the tax credits at a discounted rate after they are issued. The tax credits are then issued at the conclusion of a film, when all expenses are reviewed by a CPA and then submitted to the Department of Revenue.

Once the production wrapped up, Adams allegedly supplied his expenses to an independent accountant and reported the eligible costs to the Department of Revenue of more than $6.7 million.

This resulted in a tax credit payment of more than $1.6 million. Investigators allege that multiple reported costs were fictitious or inflated, and that the eligible costs to produce the film were in fact only $2.3 million. As a result, prosecutors allege Adams received an overpayment in tax credits of $1.1 million.

In January 2009, Adams organized an LLC for the purpose of producing and distributing a motion picture. He then allegedly entered into an agreement with a tax credit financer to advance funding for the production in return for purchasing the anticipated film tax credits.

At the conclusion of the film, Adams next allegedly supplied the expenses to an independent accountant and reported eligible costs to the revenue department of over $17 million. Based on the accepted expense figure, the LLC was awarded more than $4.2million in tax credits.

According to investigators, the film accounts in reality showed that there was no other major funding for the film and that the only deposits of significance were those from the tax credit financer, totaling approximately $3 million. Numerous items listed as expenditures were allegedly fictitious or inflated. For example, prosecutors allege Adams reported that he had paid actor Richard Dreyfuss $2.5 million, when in fact he was paid only $400,000. As a result, prosecutors allege Adams received an overpayment in tax credits of more than $3.6 million.
A Grand Jury returned indictments against Adams on Monday and he was arraigned on Tuesday, where the judge set a bail of $100,000.

Florida Business Groups Fighting Unemployment (UCT-6) Tax Increase

2011-12-14T10:13:00.008-05:00

Unless Florida's Governor & Legislature act to prevent it, beginning in 2012, the Florida minimum unemployment tax will rise from a calculated $72 at companies with the best per employee rates to over $172 for the same employee. Companies with active job losses due to firings/layoffs can expect to see thier unemployment rate go from a current high of $378 per employee to an increase for 2012 of $459 for the same employee. The diffence between companies with the best rate of Unemployment tax and those with the worst rates is based on the company's employment history, ie. a company that hires and fires more regularily will have a higher rate than a company that has a history of not firing/laying off employees. Along with this rate increase the maximum payroll amount taxed will increase also from $7,000 per employee to a new $8,500 maximum.

Here is how the increase will occur:

The initial tax rate for new employers is .0270 (2.7%). Beginning January 1, 2012, the first $8,500 ($7,000 previous to 2012) in wages paid to each employee during a calendar year is taxable. Any amount over $8,500 for the year is excess wages and is not subject to tax. 

The Breakdown:
2012 Tax Rates (effective January 1, 2012)
Minimum rate: .0202 or $171.70 per employee
Maximum rate: .0540 or $459.00 per employee
(The 2012 rate is based on annual salary up to $8,500 per employee)

The OLD 2011 UC tax rates are currently:

2011 Tax Rates
Minimum rate: .0103 or $72.10 per employee
Maximum rate: .0540 or $378.00 per employee
(The 2011 rate is based on annual salary up to $7,000 per employee)

2012 Standard Mileage Rates

2011-12-10T10:08:00.001-05:00

IRS Announces 2012 Standard Mileage Rates, Most Rates Are the Same as in July

The IRS has issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
•55.5 cents per mile for business miles driven
•23 cents per mile driven for medical or moving purposes
•14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

GASB to possibly require Cash Flow Projections

2011-12-08T08:55:00.002-05:00

The Governmental Accounting Standards Board (GASB)has proposed that state and local governments should include five-year projections of their cash inflows and outflows, and financial obligations, to supplement their financial statements.

The desire is to help interested parties (taxpayers, bond holders and other interested parties) better determine a government financial health.

The procedures would effect state and local government bodies. It would reequire the institutions to provide projections of their cash inflows and cash outflows, and explain the known causes of fluctuations. They would also be required to include projections of their financial obligations, including bonds, pensions, other post-employment benefits, and long-term contracts, in addition to explanations of the known causes of fluctuations. GASB also recommended that they include projections of their annual debt service payments.

Projections would be based on current policy, informed by historical information, and adjusted for known events and conditions that would affect the government’s finances during the projection periods. Governments would be required to present projections for at least the next five fiscal years. The projections would be reported as required supplementary information following the notes to the financial statements.

The proposals are outlined in the document, “Preliminary Views, Economic Condition Reporting: Financial Projections.”

FASB trying to help Nonprofits better explain themselves

2011-11-10T09:48:00.005-05:00

FASB is adding new projects to its agenda aimed at improving financial reporting by not-for-profit organizations.

The projects involve standard-setting and research. FASB believes the existing standards for financial statements of not-for-profit organizations can be updated and improved to provide better information. FASB members agree it is time to relook at the not-for-profit financial reporting model, which is nearly two decades old.”

The standard-setting project will focus on the financial statements and accompanying notes that are unique to not-for-profit organizations. It will re-examine the existing standards for financial statement presentation by not-for-profit organizations with a focus on improving the current net asset classification scheme and information provided in financial statements.

The research project will study the communication that nonprofit organizations currently use in describing thier financial position and operations. The will try to determine whether FASB, through its leadership or standard-setting efforts, can contribute to promoting such

IRS allows bonus deduction even if who finally gets the bonus isn't known when deduction declared...

2011-11-09T11:23:00.008-05:00

An IRS Ruling allows an employer using an accrual method of accounting to take a deduction in the current year for a fixed amount of bonuses payable to a group of employees even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year. In other words, the entire amount of the bonus pool will be paid to members of the group of employees in the following year, but at the end of the current year the employer doesn't yet know which particular employees will receive any bonus or how much.

Tax Saving Ideas

2011-11-03T21:46:00.006-04:00

As year end approaches, it's now time to consider making some moves that will lower this year's tax bill.

Some avenues for tax savings are as follows:

A key question is whether you will make as much or more money next year. The answer will determine your 2012 marginal federal income tax bracket, which you will need to know to do the best job of planning for the rest of this year.

-Sell Loser Stocks Held in Taxable Accounts
Selling loser investments (currently worth less than you paid for them) held in taxable brokerage firm accounts can lower your 2011 tax bill because you can deduct the resulting capital losses against any capital gains from earlier in the year. Plus you can deduct up to another $3,000 of net capital loss (or $1,500 if you are married and file separately) against ordinary income.

Any excess net capital loss is carried forward to future years and puts you in position for tax savings in 2012 and beyond.

-Set Up Loved Ones to Pay 0% Tax Rate on Investment Income

For 2011, the federal income tax rate on long-term capital gains and qualified dividends is 0% for gains and dividends that fall inside the 10% or 15% rate brackets.

While your tax bracket may be too high to take advantage of the 0% rate, you probably have loved ones or family members who are in the bottom two brackets. Consider giving these folks appreciated stock or mutual fund shares. They can sell the shares and 0% tax on the resulting long-term gains.

Giving away dividend-paying stocks that pay dividends is another tax-smart idea. As long as the dividends fall within the gift recipient's 10% or 15% rate bracket, they will qualify for the 0% federal income tax rate. However be aware that if you give away assets worth over $13,000 during 2011 to an individual gift recipient, it will cut into your $5 million unified federal gift and estate tax exemption ($5.12 million for 2012). However, you and your spouse can together give away up to $26,000 without any adverse effects on your respective exemptions.

-Convert Traditional IRA into Roth IRA

The best scenario for this strategy is when: (1) your traditional IRA is (or was) loaded with equities and got shellacked by the 2008 stock market meltdown and/or this year's stock market volatility and (2) you expect to be in the same or higher tax bracket during retirement.

If your traditional IRA is worth substantially less than it once was, the tax hit from converting it into a Roth account is also substantially less. That's because a Roth conversion is treated as a taxable liquidation of your traditional IRA followed by a non-deductible contribution to the new Roth account.

After the conversion, all the income and gains that accumulate in the Roth account, and all withdrawals, will be federal-income-tax-free, assuming you meet the requirements for tax-free withdrawals. So you avoid having pay high tax rates on withdrawals taken during your retirement years.

As was the case last year, there is no longer any income restriction on Roth conversions. Even billionaires can do them!

-Give to Charities

For those whose charitable instincts are stronger than the economy, here are two suggestions:

Donate Appreciated Stock to Charity; Sell Losers and Donate Cash

If by some miracle, you have appreciated stock shares (meaning they're currently worth more than you paid for them) that you've owned for more than a year, consider donating them to IRS-approved charities. You can generally claim an itemized charitable contribution deduction for the full market value at the time of the donation and avoid any capital gains tax hit. On the other hand, don't donate loser stocks. Sell them, book the resulting capital loss, and give away the cash sales proceeds. That way, you can generally write off the full amount of the cash donation while keeping the tax-saving capital loss for yourself.

Warning: You must itemize deductions to gain any tax-saving benefit from charitable donations, unless you make them out of IRAs.

Make Charitable Donations Out of Your IRA

Congress restored a provision that allows you to make up to $100,000 in charitable cash donations directly out of your IRA for 2011 — if you'll be age 70 or older by year-end. Such direct-from-IRA donations are called qualified charitable distributions, or QCDs. Donations made in this fashion don't directly affect your tax bill, because QCDs are tax-free and no deductions are allowed for them. However, QCDs count as withdrawals for purposes of meeting the required minimum distribution (RMD) rules that apply to traditional IRAs. Therefore, taxes can be avoided by arranging for tax-free QCDs in place of taxable RMDs, and this advantage is available whether you itemize deductions or not. If your spouse owns IRAs and is over age 70 , he or she is entitled to a separate $100,000 QCD for 2011.

Slight Increase in many tax benefits!

2011-10-24T13:28:00.002-04:00

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

For tax year 2012, personal exemptions and standard deductions will increase and tax brackets will rise because of inflation, the IRS announced today.

The dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation.
New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

1)The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
2)The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200.
3)Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

4)For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
5)The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
6)The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
7)For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.

8)Medical Savings Accounts (MSAs)
Self-only coverage
Family coverage

Minimum annual deductible
$2,100
$4,200

Maximum annual deductible
$3,150
$6,300

Maximum annual out-of-pocket expenses
$4,200
$7,650

9)The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

10)Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

11)The annual exclusion for gifts remains at $13,000.

Other Items

13)The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
14)Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

Florida's sales tax holiday is Aug 12-14th!

2011-08-03T14:48:00.003-04:00

Back-to-school tax holiday returns Aug 12 - Aug 14.!

Florida's back-to-school sales tax holiday returns for the 11th time from Aug. 12 through 14, with some modified rules.
Changes in what's exempt this time include:
-The price of eligible clothing and shoe items has been increased to $75 apiece, up from $50 last year.
-The price tag for each qualifying school supply item has been lifted to $15, up from $10.
-Books were dropped from the tax exemption list this year, but sales of the Bible, as always, remains exempt from Florida sales tax.

The basic ground rules have not changed:
-The exemption applies to the price of the exempt item, not the value of the total sale, and there is no limit on the quantity purchased.
-The tax exemption is available to any shopper and not limited to back-to-school purchases.
-Tax exemptions apply at mail order houses like online retailers, gift cards and layaway sales as long as the final payment is made during the tax holiday.
-Exchanges remain tax exempt after the holiday only if an item is returned for a different size or color.

Some "footnotes" will alter some items sales tax collection thanks to tax law writers aiming to narrow purchases to school-related purchases:
-Notebook paper is exempt from sales tax but not computer paper
-Backpacks and fanny packs are exempt, but not luggage like briefcases or garment bags.
-Gloves are exempt unless they are batting gloves, rubber or for bicycling.
-Hunting vests, sports uniforms and bowling shoes are exempt because kids might wear them to school. But football pads, water ski vests and skates are taxable.
-Handbags and hair accessories are exempt, but not handkerchiefs, jewelry or watches.

Entities lose Non Profit Status

2011-07-26T08:10:00.004-04:00

275,000 orgs lose tax-exempt status

Approximately 275,000 organizations have automatically lost their tax-exempt status under the law because they did not file legally required annual reports for three consecutive years.
-The IRS announced special steps to help any existing organizations to apply for reinstatement of their tax-exempt status.
-The IRS issued guidance in mid-June on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement. In addition, the IRS announced transition relief for certain small organizations - those with annual gross receipts of $50,000 or less for 2010 - that are subject to the new "postcard" filing. The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100, rather than the typical $400 or $850 fee. Full details are available in Notice 2011-43, Notice 2011-44 and Revenue Procedure 2011-36.
-If an organization appears on the list of organizations whose tax-exempt status has been automatically revoked, it is because IRS records indicate the organization had a filing requirement and did not file the required returns or notices for 2007, 2008 and 2009. The list, which will be available on the IRS Web site at www.irs.gov, includes each organization's name, Employer Identification Number and last known address. It is searchable by state. The IRS will update the list monthly.
-This listing should have little impact on donors who previously made deductible contributions to auto-revoked organizations, because donations made prior to an organization's appearance on the list remain tax-deductible. Going forward, however, organizations that are on the list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions, and any income they receive may be taxable.
-Publication on the list of organizations whose tax-exempt status has been revoked serves as notice to donors and others that they may no longer rely on a prior listing in IRS Publication 78, Cumulative List of Organizations, as an indication of an organization's tax-exempt status or its eligibility to receive tax-deductible contribution

Tax Advantages for the Military

2011-07-20T11:09:00.003-04:00

Tips to Ease Tax Time for Military

Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit “at ease” when it comes to their taxes.

-Moving Expenses, If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.
-Combat Pay, If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
-Extension of Deadlines, The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
-Uniform Cost and Upkeep, If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
-Joint Returns, Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.
-Travel to Reserve Duty, If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
-ROTC Students, Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
-Transitioning Back to Civilian Life, You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

Additional Childcare Tax Credit Opportunity

2011-07-07T08:42:00.002-04:00

IRS Says Summer Day Camps May Qualify for Tax Credit

The Internal Revenue Service said Wednesday that parents may be able to qualify for a tax credit to help defray the added expenses of summer day camp for their children.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation, the IRS noted.

The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year. However, the IRS noted that the cost of day camp may count as an expense towards the child and dependent care credit. Expenses for overnight camps do not qualify. Whether the child care provider is a sitter at the family’s home or a daycare facility outside the home, parents will get some tax benefit if they qualify for the credit.

The credit can be for up to 35 percent of the qualifying expenses, depending on the parents’ income. Parents may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

IRS Standard Mileage Rates goes up July 1...

2011-06-24T08:14:00.002-04:00

We have been waiting for this! The high cost at the gas pump prompted the Internal Revenue Service to adjust the standard mileage rate for the second half of the year.

The standard mileage rate is used by taxpayers to determine the tax deduction without tracking actual costs to operate a vehicle. It also is used by the federal government and many businesses to determine the reimbursement rate for employee mileage.

The IRS announced Thursday the rate for business miles will increase by 4.5 cents. Taxpayers will calculate mileage driven from January through June at 51 cents a mile and miles driven July through December at 55.5 cents.

The IRS announced Thursday that the standard business mileage rate is increasing for the second half of the year. The Obama administration said the U.S. will tap into strategic gas reserves in an effort to lower the price at the pump. Considering the next presidential election is roughly a year away, this move was not unexpected!

The mileage rate for moving and medical travel will increase by 4.5 cents to 23.5 cents a mile. Mileage for charitable work will remain at 14 cents a mile.

IRS ends non profit status for many nonprofit orgs

2011-06-10T14:34:00.002-04:00

IRS identifies revoked tax-exempts, provides fix

June 10, 2011

The IRS has published a list of tax-exempt organizations that have lost their tax exemption for failure to file information returns with the IRS for three straight years. The IRS has also published an automatic procedure (Rev. Proc. 2011-33) for such organizations to regain their exempt status. The list can be seen at the following website: http://www.irs.gov/charities/article/0,,id=240099,00.html

Hurricanes and taxes!

2011-06-02T09:47:00.001-04:00

With the hurricane season now here, we thought some items should be discussed!

Create a Backup Set of Records Electronically.Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set. Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.

Document Valuables
Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.
A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

IRS relief for Corrosive Drywall

2011-04-25T09:27:00.003-04:00

So many houses in the Tampa Bay area have been aflicted with Corrosive Drywall that I felt compelled to research the topic!
New legislation allows taxpayers to seek relief under IRS Revenue Procedure 2010-36, which addresses tax implications of corrosive drywall and the resulting economic loss. The procedure addresses what constitutes a deductible casualty loss, the tax year in which the loss is deductible, and how to compute the amount of the loss. It provides a safe harbor method for determining the amount of the loss.

Under the safe harbor, a taxpayer who does not have a pending claim for reimbursement of damages and does not intend to pursue reimbursement may claim a loss of all unreimbursed amounts paid during the tax year to repair damage from corrosive drywall to the taxpayer’s personal residence and household appliances. If there is a pending claim for reimbursement or an intention to pursue reimbursement, a taxpayer may claim only 75% of the unreimbursed amounts paid to repair the damages. Income or an additional deduction may arise in a subsequent tax year, depending on the amount of any reimbursement actually received.

The revenue procedure carries a drawback of basing the amount of the deduction on payment for repairs rather than a calculation of decrease in fair market value as a result of the casualty (limited to the taxpayer’s basis in the property), that is otherwise allowed as a method under Treas. Reg. § 1.165-7(b).

However, the revenue procedure gives taxpayers certainty that the IRS will not challenge treatment of the repairs as a casualty loss under the requirement that a casualty is the result of an “identifiable event” that is “sudden, unexpected, and unusual” rather than the result of “progressive deterioration.”

They got it right!

2011-04-20T16:31:00.002-04:00

1. President signs bill repealing 2012 1099 requirements
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Recent legislation repeals the requirement that businesses and rental property owners file Form 1099 if they paid more than $600 per annum to any single vendor for goods and services.

Note-most companies that would have been required to make this paperwork change already have other requirement in place that makes this requirement redudent. What you ask? Say you are a growing S corp and you seek bank financing for a loan based on growth. The company would want to show every penny it earned, not just the payments from customers over $600.

Reporting Income threshold of Not-for-profits doubled!

2011-01-15T08:35:00.002-05:00

The Internal Revenue Service today announced that small tax-exempt organizations may be able to shift to the simpler Form 990-N (e-Postcard) for their 2010 annual information reporting. The IRS today issued guidance (Revenue Procedure 2011-15) that will allow more tax-exempt organizations to file the e-Postcard rather than the Form 990-EZ or the standard Form 990.

For tax years beginning on or after January 1, 2010, most tax-exempt organizations whose gross annual receipts are normally $50,000 or less can file the e-Postcard. The threshold was previously set at $25,000 or less.

Incremental Savings due to Social Security Adjustment

2010-12-31T13:38:00.007-05:00

Putting That Tax Holiday to Work in 2011

Incremental savings, not thrilling by any measure, are better than a tax increase...I am just not sure the federal government has this idea right? Last year, the withholding rates were adjusted and the sluggish economy remained. I, personally, am not sure that such a small adjustment will have the effects that are desired.

Thanks to the tax bill that President Obama signed a week ago, a large number of Americans will get a year-long discount on their payroll taxes in 2011. Normally, employees pay 6.2 percent of their salaries, up to a $106,800 limit, toward Social Security. In 2011, that number will fall to 4.2 percent.

As a result, individuals could end up with a payroll tax savings of up to $2,136 in 2011. Downside is that the most an individual can recover ($2,136 for an individual earning over $100,000) is $41 a week. Households with two wage earners who both make more than $106,800 will get $4,272 (or $82 a week), double the amount for individuals. If you make under $100,000 a year, the tax savings reduces proportionately. $75,000 turns into $1,500 or $28.85 a week and $50,000 equates to $900 a month or $17.31 more a week.

The self-employed will share in the year-long tax holiday as well, though they will still be on the hook for the full 6.2 percent of the employer contribution to Social Security. As a result, they’ll pay 10.4 percent in payroll taxes instead of the usual 12.4 percent.

The payroll tax break is a handout worth about $120 billion, according to the White House. And the administration hopes that you will spend every cent to help get the economy going again. In fact, the tax break was designed with just that in mind. When money dribbles into a paycheck, as this tax break will for many millions of workers, they tend not to save it in the same way that they might if it came in the form of a lump-sum check.

Standard Mileage Rates CREEPING up

2010-12-03T16:17:00.001-05:00

The basic business standard mileage rate is going from $.50 in 2010 to $.51 in 2011. See more below:
The IRS today issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

51 cents per mile for business miles driven
19 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

Tax credits for the Holidays!

2010-11-13T08:34:00.002-05:00

People can update their homes by "weatherizeing" their homes and get a tax credit for their efforts. Homeowners making energy-saving improvements this fall can cut their winter heating bills and lower their 2010 tax bill as well.
Last year’s Recovery Act expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.

Nonbusiness Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return.

Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available.

Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification.

The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Eligible homeowners can claim both of these credits when they file their 2010 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax owed. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits.

Gain from the Sale of Qualified Small Business Stock

2010-11-12T12:04:00.015-05:00

To encourage new investment in small businesses, the Small Business Jobs Act of 2010 provides a temporary provision to exclude from taxation 100 percent of the gain from the sale of small business stock by an individual who has held the stock for five years and to exclude the gain as a preference item under the alternative tax. To qualify, the taxpayer must acquire the small business stock after the date of the enactment of the Act, September 27, 2010 and prior to January 1, 2011.

Background
The exclusion of gain from the sale of stock of a qualified small business in various percentages has been in existence since 1993. The Small Business Jobs Act temporarily increased the exclusion percentage to 100 percent for qualified small business stock acquired after September 27, 2010 and before the end of 2010 and held for more than five years. The act also excludes the gain from treatment as an alternative minimum tax preference item. The 50 percent exclusion is scheduled to return for qualified small business stock acquired after December 31, 2010. All gain from the sale of qualified small business stock not excluded is subject to a capital gains tax of 28 percent and included as a preference item for the alternative minimum tax.

Eligible Taxpayers for Small Business Stock Gain Exclusion
The exclusion of gain from the sale of qualified small business stock is available to a taxpayer, other than a C corporation. Also, qualified small business stock gain received by a non-corporate taxpayer through a pass through entity, such as a partnership, S corporation or trust, is eligible for exclusion, as long as the entity owned the stock for more than five years and the non-corporate taxpayer owned continuously an interest in the entity from the date of acquisition of the stock to the date of disposition.

Qualified Small Business Stock
To qualify as qualified small business stock, the stock must have been acquired upon its original issuance from the issuing corporation, which, at the time, was a “qualified small business”, in exchange for cash or property or as compensation for services rendered to the issuing corporation. The issuing corporation must be a domestic C corporation that satisfies the active business requirements and is engaged in a qualified trade or business during substantially all of the time the stock is held by the taxpayer. At the time of issuance of the stock, the business must not have more than $50 million in assets, including the assets received for the stock being issued. However, during the term that the stock is held, the qualified small business may have in excess of $50 million in assets.

Active Business Requirement
Stock is qualified small business stock only if the corporation meets the active business requirement during substantially all of the time that the stock is held. A corporation meets the active business requirement if at least 80 percent of its assets by value are used in the active conduct of one or more qualified trade or business. A qualified trade or business is any trade or business other than:
•A professional service business;
•A business where the principal asset is the reputation or skill of one or more employees;
•Any banking, financing, insurance, leasing, investing or similar business;
•Any farming or production or extraction of minerals business; or
•Any business operating a hotel, restaurant or similar business or a real estate business.
Special Note-
The ownership of real estate not used in the qualified trade or business can automatically cause the corporation to fail the qualified trade or business test.
Working capital is considered used in a qualified trade or business, even if temporarily invested in assets unrelated to the business. For a business that has been in existence for two years or more, the business will be disqualified if it holds more than 50 percent of its assets as working capital.

Assets used in start up and research activities in connection with a “future qualified trade or business” will be deemed to be used in a qualified trade or business.

Transfers, Conversions and Exchanges of Qualified Small Business StockThere are certain rules with respect to the transfer of qualified small business stock. If qualified small business stock is transferred by gift or at death, the donee or heir is considered to have stepped into the shoes of the donor or decedent and the stock retains its character as qualified small business stock in the hands of the donee or decedent.

The conversion of qualified stock by the issuing corporation into a new class of stock will not result in disqualification and the new stock will be treated as qualified. The holding period of the converted stock will be tacked onto the holding period of the new stock. A partner receiving a distribution of qualified small business stock from the partnership will step into the shoes of the partnership, as long as the partner could have excluded the gain allocated to the partner were the partnership to have sold rather than distributed the stock.

Stock received as stock dividends or in a tax free recapitalization or reorganization will qualify for the exclusion if received in reference to the already qualifying stock and if the issuing corporation is a qualified small business at the time of the exchange.

Stock received in the tax free reorganization from a corporation that is not a qualified small business will continue to be treated as qualified with respect to so much of the gain as would have been recognized if the exchange were taxable. For example, an investor subscribes for $1 million of qualified small business stock. Three years later the stock is acquired by a public corporation in a tax-free exchange for stock of the public corporation. At the time, the qualified stock was valued at $3 million. The gain of $2 million will qualify for the exclusion as long as the investor holds the new stock for the balance of the five year holding period. Consequently, tax-free exchanges under a recapitalization or reorganization will not result in a disqualification of the existing gain at the time.

Limitations on Exclusion

There is a limit on the amount of gain from the sale of qualified small business stock that is eligible for exclusion. The aggregate gain subject to exclusion is limited to the greater of $10 million or 10 times the basis in the stock disposed of during the year. Any amount of qualified small business stock gain that is not excluded is subject to a capital gain tax of 28 percent.

Rollover of Qualified Small Business Stock Gain

A seller of qualified small business stock that has been held for more than six months may elect not to recognize the gain to the extent of the cost of other qualified small business stock purchased during the 60 days following the sale. The gain that is not recognized is applied to reduce the basis of the purchased qualified small business stock and the holding period of the stock sold is tacked onto the stock purchased.

The potential tax benefits from the exclusion of gain on the sale of qualified small business stock are significant, please give me a call to discuss this matter in more detail.

Drywall Tax Relief!

2010-10-01T10:43:00.004-04:00

TampaBay's explosive growth in the real estate market in recent years led to inferior products being purchased to keep up with the fast pace of housing. Drywall produced in China was especially suspect in this regards.

The Internal Revenue Service today issued guidance providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.

Rev Proc 2010-36 enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.

In numerous instances, homeowners with certain imported drywall have reported blackening or corrosion of copper electrical wiring and copper components of household appliances, as well as the presence of sulfur gas odors. In November 2009, the Consumer Product Safety Commission (CPSC) reported that an indoor air study of a sample of 51 homes found a strong association between the problem drywall, levels of hydrogen sulfide in those homes and corrosion of metals in those homes.

Rev Proc 2010-36 provides the following relief:

Individuals who pay to repair damage to their personal residences or household appliances resulting from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.
Taxpayers who have already filed their income tax return for the year of payment generally have three years to file an amended return and claim the deduction.The amount of a loss that may be claimed depends on whether the taxpayer has a pending claim for reimbursement (or intends to pursue reimbursement) of the loss through property insurance, litigation or otherwise.
In cases where a taxpayer does not have a pending claim for reimbursement, the taxpayer may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances resulting from corrosive drywall.
If a taxpayer does have a pending claim (or intends to pursue reimbursement), a taxpayer may claim a loss for 75 percent of the unreimbursed amount paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall.

A taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received.

New Hire Act Details and Depreciation incentives

2010-08-05T12:50:00.003-04:00

President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act. This new $17.5 billion legislation is of particular interest to businesses as it includes new tax benefits directly related to hiring employees and writing off investments in equipment.

The new tax incentives for businesses to hire unemployed workers are:

■payroll tax exemption of the employers share of Social Security taxes on wages paid to these workers after March 18, 2010.
■employer tax credit of up to $1,000 per worker
The new employees must meet these criteria in order to qualify for the business tax credits.
■hired between Feb 3, 2010 & Jan 1, 2011
■newly-hired employee was unemployed during the 60 days prior to starting work, or worked fewer than 40 hours for someone else during the 60 day period
Household employers are not eligible for the new tax benefits.

Business owners that hire qualifying workers sooner rather than later will get the most out of the tax credits, as the tax credits diminish over time, disappearing completely by January 1, 2011.

Sec 179-
Another item of interest in this federal jobs bill is to permit small business owners to write off equipment investments of up to $250,00 this year, instead of taking years to depreciate. This in a doubling of the previous amount of $125,000. This will provide tax incentives for small businesses to grow while stimulating the economy with their investment spend.

2010-07-08T10:40:00.003-04:00

Article for American Express Open Forum-The Economics of the Company Car (or Truck)
By John Morrell

Dec 22, 2009 -

If you’ve been borrowing the family minivan to move supplies and make deliveries or if you’ve been racking up the highway miles on sales calls, you’ve probably thought about getting a business vehicle. But besides the choices: van, truck, SUV, sedan, you’ve got to decide how handle the transaction: buy, lease, new or used? Here are some tips to get you rolling in company wheels:

Do the Numbers

The first thing to figure out is whether you need a company vehicle. “If you’re using your personal car for business 50 percent or more of the time, you may be better off with leasing a car for the business,” says Nick Pennewell, a CPA in Brandon, Florida. “Leasing is great for businesses because it gives you more deductions.”

Generally any capital reduction cost and other fees associated with acquiring the vehicle as well as the lease payments are fully deductible. Before signing a lease agreement though you’ll want to check out a purchase, especially if you’re buying something big.

“Saying you’re interested in a luxury automobile to drive clients around in,“ says Patricia Walker, a CPA with Brotemarkle Davis & Co. in St. Helena, California. “Buying it will give you bonus depreciation of $10,000 the first year of use, then the depreciation is limited to around $2,000 each year after that. You can also deduct the interest you’re paying on your loan and the standard mileage [50 center per mile in 2010].”

If you lease a vehicle for three or four years, you don’t get that big deduction right away but you may get more over time. “Leasing typically works best for higher priced vehicles. If you’re getting a car that’s more than $60,000, it’s generally better to lease,” says Walker.

Watch Your Weight

If your business calls for operating a good-sized truck, van or SUV, you need to be aware of the 179 deduction. This is the IRS code section that specifies how business equipment, including vehicles, can be depreciated. And if that interests you, you’re looking at something else besides the navigation system and heated seats: gross weight.

“If the vehicle is more than 6,000 pounds, you can take up to $25,000 off in depreciation for the first year,” says Pennewell. “This is ideal for a business that may be growing and has a lot of net income they’d like to shield from taxes. The downside is you only get that big depreciation for the first year and if you purchased a more expensive truck to get that deduction, you’re stuck with those payments.”

An important note: If you won’t be showing a net income for the year, it’s probably best to shelve those plans for a 179 deduction. “The IRS doesn’t allow you take the deduction if you have no net income, which is why it works so well if you’re having a good year,” says Walker.

Good and Used

If you’ve considered your options and don’t think you can afford a purchase or lease payment on a new vehicle, don’t feel embarrassed shopping for something used. “In this economy I’ve seen many successful small businesses shop for used vans and trucks,” says Pennewell. “Don’t be fooled into thinking that just because your competition has shiny new trucks, you have to do the same thing. Buy or lease what you can afford. You won’t worry as much and your business will be better for it.”

If Congress succeeds in passing 4213, the S Corp, will no longer be avaliable to many businesses!!!

2010-06-10T09:58:00.007-04:00

The Big Tax Increase Facing Small Business
From an article by Dean Zerbe,
Hedge fund taxes get all the attention. Congress is about to raise billions in taxes on some doctors, accountants and architects.

While a possible increase in taxes on the "carried interest" of hedge fund and private equity money managers is getting all the attention, in the same bill Congress is also creating a tax mess for small-business owners in the form of an $11 billion tax hike over the next 10 years.

The tax increase was included in H.R. 4213, a peddler's wagon of legislation (new spending, physicians' reimbursement, extensions of expired tax breaks, etc.) that was passed by the House in a narrow vote just before Memorial Day and is now being considered by the Senate. The Democratic-backed Senate version of the bill includes the same tax on small business.

tax hit affects the owners of small S corporations (a common way many small businesses are organized) in "professional service businesses"--doctors, lawyers, accountants, engineers, architects and so on. An S corp pays no taxes but passes through all its profits to its owners' tax returns, even when those profits or "distributions" are reinvested in the business.

Professionals have long been able to reduce their tax bills by incorporating as S corps and then receiving part of their earnings in the form of distributions or profits, rather than taking it all as ordinary compensation or wages. Unlike wages, profits aren't subject to payroll taxes--that is, Social Security and Medicare taxes. It is this longstanding tax benefit that the House has eliminated for certain small S corporations.

Here's why this is a big deal: The Social Security tax is now 12.4% of the first $106,800 of wages, with half paid by the employer and half by the employee. A self-employed person pays the whole 12.4%. The Medicare tax is 2.9%, with no cap on the amount of pay taxed. This too is split between employer and employee, with the self-employed paying the whole 2.9%.

Moreover, under the recently passed health care legislation, beginning in 2013, couples with compensation exceeding $250,000 (and singles with more than $200,000 in compensation) will have to pay an additional 0.9% Medicare surtax on their pay above that amount. (For more on how this tax works, click here.) The upshot is that many small business owners will view this provision (especially when they are writing checks to the U.S. Treasury) as a new 15% tax.

Advantages of an S corp over an LLC, Sole-Proprietorship, C Corporation, or Partnership

2010-05-28T15:38:00.005-04:00

The "S corp" is simply an election with the IRS, and you can make the S corp election on an LLC.

The S corp. election is a common election for regular corporations and LLC’s. If you declare your company as an S corp., you will have to pay yourself a regular W2 wage. This means establishing payroll and withholding for yourself with the IRS and the State you’re a resident in.

The advantage to this is the capability to divide up your profits between payroll and dividends.
What this means is, you will pay yourself a “regular” wage for someone in your role. (The IRS says the wage must be reasonable) Obviously, if it's a new company, the wage doesn't have to be that high and if you have left over profit, you can pull that down to yourself as personal income as a dividend. Dividends avoid the self employment tax (15%) and/or payroll taxes, such as Social Security and Medicare withholding. This adds up to 15% because as the employer, you match the Medicare and Social Security withholding you take out of your employees' checks. In your personal case, you will be the employee anyway, so that is why you're paying it twice. The current Social Security tax rate is 6.2% and the current Medicare tax rate is 1.45%. So as an employee, you get 7.65% of your check withheld, and as the employer, you match that to the IRS Federal Insurance Contributions Act (FICA), making your total 15.3%. That means whatever profit you can take as a dividend, you can avoid the 15.3%tax on that dividend dollar amount.

You see if you are a sole proprietor, you will pay the 15% self employment tax for Medicare and Social Security anyway, so there’s no special treatment on a sole proprietor, except that it’s less paperwork to keep track of your books.

If you pay yourself a wage, you will have to pay the Social Security and Medicare. So if you end up with $10,000 net taxable income at the end of the year, and you divvy it up by paying yourself $5,000 for the year, you’ll take a $5,000 dividend, and thus save the 15% of $5,000 dollars.

Or if you're a C corporation:

The corporate income tax rate is usually higher than the personal tax rate. If you have a regular C corporation, you’ll keep the profits of the company at the corporate level. You don’t have to pull it down to you personally. If you ever decide to take a dividend, you’ll be paying tax twice though.

If you declare your C Corporation an S corp., you’ll have to pull the net taxable income down to the shareholder’s personal tax returns, and pay the profits at whatever taxable income bracket you’re in. This usually will save you a lot of taxes unless you plan on keeping a lot of cash in the company, and ultimately re-investing it back in the company.

If you would like to make the S corp. election with the IRS, we would be glad to help you make this step.

Capital Gains rates about to Jump

2010-05-03T09:30:00.002-04:00
I guess it is not a surprise that the top tax rate on dividends may surge...

The Senate Budget Committee recently passed a budget resolution that would nearly triple the top tax rate on dividends from 15% to 39.6%. President Barack Obama had proposed a 20% tax rate on dividends in his 2011 budget. Additionally, the health care legislation includes a 3.8% surcharge on dividends and other investment income.

Section 179

2010-03-27T17:43:00.001-04:00
This usually favorable tax incentive will remain at $250,000 for the 2010.

New Hire Credit

2010-03-27T17:35:00.002-04:00
Reduction for half of the Social Security Tax:
Social Security Taxes: Employers will not have to pay this tax — which amounts to 6.2% of wages up to $106,800 — for hiring someone after February 3, 2010 and before January 1, 2011. To qualify, the employer will have to certify that each employee they hired was employed for no more than 40 hours in the 60-day period ending on the date that employment begins. This must be verified with a signed affidavit (pending further detail from the IRS). However, there will still need to be withholding for the employee's share of the Social Security tax (which is also 6.2%). The law change will have no impact on an employee's benefits.

Business Tax Credit: For employees that qualify for the HIRE Act, there is an additional $1,000 income tax credit for new-hires that are retained for a minimum of 52 weeks. This credit applies if the wages paid in the last 26 weeks are at least 80% of what they were for the first 26 weeks.

Tax time, right around the corner!

2009-12-05T09:06:00.001-05:00
Time to get serious about 2009 year-end tax planning!

We're more than 90% done with 2009. What you do with the remaining 10% can have a lot to do with how happy you will be when taxes come due in April. Some items for your game plan:

Look at the scoreboard. You need to see what your taxable income is so far. Make special note of your business income and your capital gains. You can't know where you are going unless you know where you are.

What will happen between now and year end? Will you get a bonus? Will there be a big customer order paid before the end of the year? Do you have a big expense coming due?

What income and expense items can I switch between 2009 and 2010? These are key tax planning tools. Do you have a pending equipment purchase? Can you accelerate a bill collection to move income up if you want to? Can you sit on an invoice to defer collection? Do you have capital losses that you can take between now and the end of the year?

Have you done your gifting for the year? If you are charitably-minded, you might be able to do some year-end gifts to reduce your income. If you've had a bad year in your business, maybe 2010 is a better year to give to charity. If you have enough assets to make estate planning an issue, have you made full use of the $13,000 annual per-donee gift exclusion?

With these tools your tax pro can help you navigate the rest of the year. Decisions you should evaluate include:

- Payment of state and federal estimated taxes before year-end.

- Acceleration of capital asset purchases to reduce taxable income or maximize operating losses.
- Paying cash-basis business expenses before year-end.
- Using capital losses to offset year-to-date capital gains.
- Contribute to the College Savings Iowa Sec. 529 plan, if you are an Iowa taxpayer.
- Year-end charitable contributions of stock or appreciated property.
- Contributions to S corporation capital, or making loans to your S corporation, to ensure that you have basis to deduct corporate losses.

It's time to get moving!

We'll be covering these and other year-end planning moves between now and year-end at the web version of the Tax Update at www.taxupdateblog.com.

Thanks to Joe Kristan at Roth CPA's for this posting!

In Florida for 10 Days ONLY!

2009-11-20T06:28:00.005-05:00
The federal government is preparing to roll out Cash For Appliances, a $300 million program offering rebates to buyers of more energy efficient appliances and other products with the Energy Star label.

The appliance-sale stimulus required individual states to submit plans to run their programs last month. Florida's Cash for Clunker Appliances program has been tentatively scheduled for 10 days in April.

Retailers would offer rebates for 20 percent off before taxes on most energy-efficient appliances from April 16-25 under the proposal submitted to the federal government by the Florida Energy & Climate Commission.

Consumers would receive an additional $75 for sending their old energy-sucking appliances to the landfill rather than reselling them.

Only federally designated Energy Star home appliances are eligible. Items covered under the state program include gas and tank-less water heaters, refrigerators, room air-conditioning units, washing machines and dishwashers.
This information was gathered from an article in the Orlando Sentinel.

Homeowner Tax Credit Extended and Expanded!

2009-11-05T08:33:00.005-05:00
Senate Extends Homebuyer Tax Credit-

The Senate voted to extend the First-Time Homebuyer Tax Credit while also expanding the credit to existing homeowners who want to move to another residence.

The refundable credit was set to expire at the end of November. The new legislation extends the maximum $8,000 tax credit for first-time homeowners to April 30, 2010. It also includes a maximum $6,500 tax credit for existing homeowners who want to purchase a new home. However, they need to have lived in their current home for five consecutive years within the past eight years.

The level of qualifying income has also been expanded, allowing individual taxpayers who make up to $125,000 and joint filers earning up to $225,000 to qualify. The earlier credit had been limited to individuals earning up to $75,000 and couples earning up to $150,000.

A smaller credit would also be available to individuals who make up to $145,000 and couples who earn up to $245,000.

Tax credits could be claimed for homes that cost up to $800,000.

Repayment of the credit would be waived for members of the armed forces who are away from home on extended duty, and the credit would be extended for an additional year if they are away on duty.

Under the bill, first-time home buyers would receive the $8,000 tax credit if they sign a contract by April 30 and close on it by June 30. The plan would also make those who buy a new primary residence eligible for the $6,500 credit if they owned their current home for at least five consecutive years in the previous eight years.

7 facts you need to know about the consumer Enrergy Property Credits!

2009-11-03T16:05:00.001-05:00

Seven Facts about the Nonbusiness Energy Property Credit

Taxpayers who take energy saving steps this year may get bigger tax savings next year. The Nonbusiness Energy Property Credit, a tax credit for making energy efficient improvements to homes has been increased as part of the American Recovery and Reinvestment Act of 2009.

Here are seven things the IRS wants you to know about the Nonbusiness Energy Property Credit:

The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
To qualify as "energy efficient" for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers' Website.
Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
The improvements must be made to the taxpayer's principal residence located in the United States.
To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.

Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.

New rules for travel, lodging, meals expenses

2009-10-01T09:27:00.002-04:00
The Internal Revenue Service has issued new rules for travel, lodging, meals and other expenses, including a new optional method for computing the deductible costs.
Revenue Procedure 2009-47 provides rules for employees who are reimbursed for lodging, meals, and incidental expenses, or meals and incidental expenses only, while traveling away from home, to substantiate the expenses by per diem allowance in lieu of actual expenses.
The revenue procedure also provides an optional method for employees and self-employed individuals who are not reimbursed to use in computing the deductible costs they pay or incur for business meal and incidental expenses, or for incidental expenses only if they pay or incur no meal expenses, while traveling away from home.
Use of a method described in the revenue procedure is not mandatory, and a taxpayer may use actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation.

Pulled cash out of an IRA, you can put it back this year penalty free!

2009-09-30T13:25:00.004-04:00
Here's a chance for a tax-saving do-over you might want to use. The IRS says it will give some taxpayers who took payouts from an individual retirement account or 401(k) this year the chance to put the money back in without paying any taxes or penalty.

New Retirement vehicles brought to you by the IRS!

2009-09-09T09:43:00.002-04:00

IRS Boosts Tax Incentives for Retirement Savings
September 8, 2009

The IRS released several pieces of guidance Tuesday designed to boost tax incentives for retirement savings. The initiatives include expanded opportunities for automatic enrollment in 401(k) plans, vehicles for taxpayers to save their tax refunds and convert accrued vacation time into savings, and better explanations of the available options for taxpayers receiving rollover distributions from Roth and non-Roth employer plans.

Retirement Plans

The IRS issued pre-approved automatic enrollment language so that 401(k) plan sponsors will not have to seek IRS approval to adopt automatic enrollment (Notice 2009-65). The notice includes two sample plan amendments. This should allow plan sponsors to adopt automatic enrollment more quickly.

The IRS also issued guidance that will allow automatic enrollment in SIMPLE-IRAs (Notice 2009-66 and Notice 2009-67). Notice 2009-66 gives guidance for plan sponsors, and Notice 2009-67 contains a sample plan amendment.

The IRS also issued a ruling that allows 401(k) plans to institute voluntary automatic contribution increases (Revenue Ruling 2009-30). The new procedures are illustrated using two specific fact situations: One involves a basic automatic contribution arrangement, and the other involves an eligible automatic contribution arrangement described in IRC § 414(w).

Tax Refund Savings

Another new initiative announced Tuesday will allow taxpayers to purchase U.S. savings bonds with their tax refunds by checking a box on their tax return. This will be implemented in 2010, and starting in 2011 taxpayers will also be able to add co-owners to the bonds.

Converting Vacation Time Into Savings

Two new revenue rulings will allow workers who leave their jobs and receive cash payments for their unused vacation time to contribute those amounts to their 401(k) plans (Revenue Ruling 2009-31 and Revenue Ruling 2009-32).

Plain-English Explanation of Rollovers

The IRS also issued updated “plain English” explanations of the various options involved in rolling over money from a retirement plan when changing jobs that may be given to recipients of eligible rollover distributions from an employer plan to satisfy the requirements of IRC § 402(f). (Notice 2009-68). One explanation covers distributions from IRC § 402A Roth accounts and the other covers distributions not from Roth accounts.

2009-09-08T06:22:00.004-04:00

Cash For Clunkers Appliances

Cash for Clunkers for appliances will be hitting your state by fall 2009. The Cash for Appliances program (also referred to as "Cash for Refrigerators") is part of the economic stimulus plan similar to the popular Cash for Clunkers vehicle trade-in program. The Cash for Appliances program will be implemented this fall to give consumers rebates of $50 to $200 when they purchase new energy-efficient appliances. Qualifying household appliances include refrigerators, washing machines, dishwashers, furnaces, and air conditioners that carry an Energy Star seal. http://www.rtohq.org/02660apro-new-federal-stimulus-effort-cash-for-appliances.html¹
$300 million in funding will be allocated for the Cash for Appliances program. The allocation of funds will be based on each state's population, which will give California the largest share of the stimulus money.http://www.wkowtv.com/Global/story.asp?S=11026663²

Rebates on Energy Star Appliances

The Cash for Appliances program will help to stimulate consumer spending and lessen the nation's energy use. Each state has until October 15, 2009 to submit their plan to the Department of Energy for a program that would give consumers a rebate on the purchase of energy-efficient appliances such as refrigerators, washing machines, dishwashers, air conditioners, and furnaces.http://www.alaskadispatch.com/alaska-beat/78-august-20/1598-appliance-rebate-like-cash-for-clunkers³
The states will submit a plan to the Department of Energy specifying which Energy Star appliances to include in their programs, how much of a rebate each appliance category will receive, how the rebates will be processed, and their plan for recycling old appliances.http://www.wkowtv.com/Global/story.asp?S=11026663²
Under the Cash for Appliances program, consumers could receive up to $200 towards the purchase of an energy-efficient appliance. The program is designed to improve household energy efficiency and stimulate the economy by boosting appliance sales. To qualify for the Cash for Appliances rebate program, consumers are required to purchase an appliance with an Energy Star seal and will receive up to $200 off the purchase price. And unlike the Cash for Clunkers program, consumers will not have to trade in their old appliance to get the rebate.http://marketplace.publicradio.org/display/web/2009/08/20/am-energy-efficient-appliances-q/⁴ The Cash for Appliances economic stimulus program (aka "Cash for Refrigerators") will be capped at $300 million taxpayer dollars.

Late election of tax status extended for S election

2009-09-08T06:17:00.002-04:00
Check-the-box regulations generally allow noncorporate business entities to elect how to be treated for federal tax purposes -- as an association, partnership or, in certain cases, a disregarded entity. The Internal Revenue Service extended the due date for late-entity classification election relief to three years and 75 days after the requested effective date for the election. This gives eligible entities a much longer time to request relief from the IRS if they failed to properly file Form 8832 but have otherwise filed their tax returns consistent with the failed election.

"Green" Tax Incentives

2009-08-13T10:05:00.007-04:00

I have recently taken some CPE courses in Energy Conservation efforts. The substantial credits follow:

ENERGY-EFFICIENT COMMERCIAL BUILDING DEDUCTION

For commercial buildings, IRC § 179D provides a deduction of up to $1.80 per square foot for energy-efficient features of the building’s construction or retrofit. The taxpayer must secure an analysis by a qualified person (defined as a professional engineer or contractor licensed in the jurisdiction where the real estate is located) who must use software prescribed by the IRS. Instead of waiting 39 years, this deduction is effectively an acceleration of depreciation deductions that would have otherwise been spread over a 39-year recovery life, and of course reduces tax basis accordingly. Qualifying commercial buildings can include multifamily residential structures so long as they have more than three stories above grade. So renters can be part of this! Three primary building components are analyzed to determine the qualifying credit, with each available for a deduction of 60 cents per square foot:

Interior lighting systems

HVAC (heating, ventilation and air conditioning) systems

Building envelope (defined as the outer shell used to protect the indoor environment as well as to facilitate its climate control)

In each case, the analysis considers the extent to which the construction of the building provides energy consumption reductions from the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 90.1-2001 baseline, which is a widely used industry standard. Since the majority of states’ standard building codes are based on the subsequently developed ASHRAE 90.1-2004 or later iterations, virtually all buildings in these states will qualify for some or all of the deduction, even if built to only the minimum standards. Engineers use a modeling guideline promulgated by the U.S. Department of Energy. The study, which must include a signed certification, is not attached to the taxpayer’s return but is instead maintained in the taxpayer’s file for future documentation in case of an IRS inquiry or examination.

An interesting application of this benefit occurs when the building is owned by a government, school or municipality. Since Congress’ intent was to encourage energy-conscious construction, and many energy-efficient buildings across the country are owned by government agencies (which of course do not pay taxes), there was concern that the impact of the incentive would be dramatically reduced since it was not useful for these properties. To address this concern, Congress made the unusual decision to allow the building designer (typically the architect/engineer) to take the deduction, even though the designer has no ownership interest in the property. In this case, the deduction is particularly valuable, since no basis reduction is required. The building owner must approve the choice of the designer in writing.

The IRS has released further guidance in notices 2006-52 and 2008-40. The ARRA increased the carryback of net operating losses to up to five years for certain small businesses, so this deduction could provide an immediate cash benefit even if the current economic downturn has reduced or eliminated profitability in the current tax year.

NEW ENERGY-EFFICIENT HOME CREDIT

Although this incentive is scheduled to sunset at the end of this year, IRC § 45L has since August 2005 allowed eligible contractors that construct new energy-efficient homes to claim a federal tax credit of $2,000 for each new home they sell. A qualified energy-efficient home is one that is certified to consume at least 50% less energy for heating and cooling than that of a comparable home constructed in accordance with the standards of section 404 of the 2004 Supplement to the 2003 International Energy Conservation Code (2004 Supplement), and to have building envelope component improvements that provide for a level of heating and cooling energy consumption that is at least 10% below that of a comparable home. In addition to meeting these requirements, manufactured homes must also meet the Federal Manufactured Home Construction and Safety Standards (24 CFR part 3280). A reduced credit of $1,000 is also available for manufactured homes that meet certain lower standards.

The intent is to encourage builders to invest more in these efficiencies by allowing them to offset some or all of the cost through the credit. Since the credit is per qualifying home, this can add up to a sizable tax benefit. In addition, of course, homeowners will realize monthly savings on energy bills, and probably higher home values, as a result of these enhancements to the property.

As with the section 179D deduction, the certification is made by a licensed professional engineer or a contractor who is unrelated to the homebuilder or manufacturer. Many homebuilders who build in accordance with Leadership in Energy and Environmental Design (LEED) standards will qualify for this credit, and others who might not qualify could do so with relatively minor construction changes. LEED was developed by the U.S. Green Building Council for rating a building’s site design, water and energy conservation, use of environmentally friendly materials and other criteria. The certification must come from an individual certified by the Residential Energy Services Network (or an equivalent rating network) to conduct these studies, using software approved by the IRS for this purpose. As with the section 179D deduction outlined above, this certification is not attached to the tax return but is maintained in the taxpayer’s files in case the IRS conducts an inquiry or examination.

These provisions are outlined in IRC § 45L, and further guidance is provided in IRS Notice 2006-27. The credit coordinates with the other components of the general business tax credit under section 38 and reduces the taxpayer’s basis in the building. Unused current-year credits may be carried back one year or forward up to 20 years. Although this credit is set to sunset at the end of this year, others were extended through 2010 and in some cases expanded by the ARRA. Among these is the section 25C residential building improvement credit available to homeowners.

SECTION 25C RESIDENTIAL HOME IMPROVEMENT CREDIT

For 2009 and 2010, this credit is expanded from 10% to 30% of qualifying improvements, with a lifetime cap per taxpayer of $1,500. Prior credits claimed under similar rules in effect before 2009 do not reduce this credit.

Qualifying improvements include installing insulation materials, exterior windows (including skylights), exterior doors, central air conditioners, natural gas, propane or oil water heaters or furnaces, hot water boilers, electric heat pump water heaters, certain metal roofs and stoves, and advanced main air circulating fans. These improvements qualify only if made to existing homes. The improvements must meet certain efficiency guidelines published by the IRS (see especially an interim guidance update, Notice 2009-53, issued June 1, 2009), and the vendor will typically be able to determine if an item qualifies.

SECTION 25D RESIDENTIAL CREDIT FOR CERTAIN ENERGY-EFFICIENT ITEMS

Another ARRA amendment allows increased credits for installing state-of-the-art energy- efficient systems in new or existing homes through 2016. A 30% tax credit is available for geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells (IRC § 25D). The credit applies to the cost of labor and installation as well as the cost of the equipment. Except for fuel cell credits, which qualify only if made to an existing principal residence, these credits are also available for improvements to rental properties and second homes. There is no cap on the amount of credit that can be claimed. IRS Form 5695, Residential Energy Efficient Property Credit, has been developed to assist taxpayers with claiming this credit. See also interim guidance in Notice 2009-41, issued April 22, 2009.

ACCELERATED DEPRECIATION FOR "SMART" ELECTRICAL SYSTEMS

The EESA amended the IRC § 168 MACRS (modified accelerated cost recovery system) provisions to assign a 10-year recovery period to qualified “smart” electric meters and grid systems (section 168(e)(3)(D)(iii) and (iv)). Otherwise, electrical transmission and distribution equipment and related land improvements generally are 20-year property. The property must have been placed in service after Oct. 3, 2008. The taxpayer realizing the enhanced depreciation, of course, is generally an electrical utility. But smart meters can benefit electric customers as well (see sidebar, “Smarter Electric Power,” below).

On behalf of their clients, particularly those in construction trades, CPAs can review these federal provisions as well as state and local ones in their jurisdiction. Often, the local or state taxing authority will be helpful for gaining a full understanding of additional tax incentives, in addition to providing information regarding any loan or grant incentives that might be available.

TARP funds usage questioned.

2009-08-06T10:43:00.003-04:00
The Obama administration is considering transferring hundreds of billions of dollars in toxic loans from Fannie Mae and Freddie Mac to so-called "bad banks." I question this because TARP funds were supposed to pay down old "bad" debt, not simply remove it? Troubling...

Required Minimum Distribution Holiday in 2009

2009-08-04T19:31:00.007-04:00
Required Minimum Distributions (RMD's) for retirement plans have been waived for 2009. Retirees with other means of support are able to forego the normally required distribution in 2009 thereby deferring taxable income to a later time. This may allow some to perhaps catch up some of the principal they have lost during the recession.
Some instances when a RMD should still be taken would include if a taxpayer would otherwise loose a tax deduction due to high medical expenses or charitable deductions that would be otherwise lost. Also if an individual only has social security income as their means of support, they might only want to take a distribution up until the taxable threashold of social security payments has been reached.

Stimulus a non event with small to midsize companies!

2009-07-21T14:54:00.008-04:00
After months of clients asking me where they could get stimulus payments that the big banks and large companies are getting I resolved to telling most clients that there wasn't much out there for small companies, except for maybe bridge loans (ARC loans) that had to be paid back and also the the Section 179 maximum being increased, all the while knowing that my clients needed a help just as much as the big firms and maybe more. See the following article I pulled from Reuters (my commentary is in red):
Small business seeks help in U.S. economic storm
NEW YORK/WASHINGTON (Reuters) - U.S. small businesses say they feel slighted by the Obama administration and efforts to shore up the economy, with large companies taking much of the government's attention and stimulus cash.
The government decision last week against bailing out small business lender CIT Group raised fears of thousands of companies left without funding for day-to-day operations, and the lack of support showed big corporations can get bailout cash but small business interests are less pressing, many say.

With only some potential relief buried in the healthcare reform proposals in Congress, whose support is waining, small businesses feel pushed aside in the stimulus and recovery efforts.
"There has been nothing really in all the stimulus package that has really helped small business in general," said Kelli Glasser, president of Exhibit Concepts in Dayton, Ohio, whose 87 employees build trade show and museum exhibits.

"Most of the help has been in the form of supporting loans, but we're not looking for loans right now," she said. "We're not looking to heavily invest in equipment. We're just trying to keep our doors open."

Small business is not that small, representing 99.7 percent of all U.S. employer firms.

The U.S. Small Business Administration got $730 million this year to recharge the small business lending market, nearly doubling its budget. However, some say the package was not well structured and dwarfed by the $180 billion the government committed to save insurer American International Group.

'HAVING A TOUGH TIME'

"Only $730 million going to the SBA didn't really help the small business owners," said James Tracy, president of America's Best Companies in Illinois, which represents small businesses nationwide.

"Small business owners are having a tough time financing themselves today because I believe that the stimulus plan should have allowed for more loans to small business owners," he said.

A $15 billion administration plan to buy small business loans for resale on the secondary lending market has not taken effect, in part because market activity picked up after the plan was announced in March, the administration says.

The Obama administration wants small businesses to come out ahead in the reform effort, said Melody Barnes, a domestic policy advisor at the White House. They just have a funny way of showing it!

"We absolutely want to make sure that small business owners and small business can continue to thrive," she said in an interview with Reuters Television. And what are they doing we continue to ask, seems like a lot of talking out of both sides of the mouth? It is like saying to your kids we want you to get a college education but you pay for college yourself???

But applying for a small business loan can be more trouble than it's worth, said Joe Olivo, owner of Perfect Printing in Moorestown, New Jersey, who said his bank advised against it.
"The paperwork was so onerous that my bank told me it was not worth my effort to try and get that money," Olivo said.

FURTHER FINDINGS-
To further the decisions evident in Washington, I then read with concern that the New GM, after having the lions share of its fixed debt erased in bankruptcy, was getting the tax advantage of transferring to itself an old $87 billion Net Operating Loss generated by the old GM. Fact is that NOL's can only be transfered if 51% of the former owners of the old company are owners of the new company. The old GM shareholders comprise 1% of the new company. Government has the lions share and the unions now somehow control a large stake of stock also. Folks this all boils down to the New GM having to make $87 and 1 dollar before it pays any taxes on that $1! The first $87 billion in profit is tax free! Where is the fairness in that?

IRS to regulate tax preparers

2009-06-05T09:16:00.002-04:00
We support this position being considered by the governement in an effort to reduce the amount of revenues lost due to poor regulation as well as the erroneous over taxation of individuals due to preparers relying too heavily on tax software and not questioning if there might be a different option under the tax code. Too often I have seen preparers relying on the tax software they are given without understanding the workings of the tax code. With hundreds of tax software packages in existense I feel preparers should be well versed in the tax code.
The IRS is working on new rules that could require paid tax preparers to be licensed to improve tax compliance and reduce fraud. A large portion of taxpayers get help with their returns, either from paid preparers or computer programs. Tax preparers currently don't have to be licensed, unless they represent clients in proceedings before the Internal Revenue Service.

Year-End Tax Strategies

2008-12-22T13:07:00.005-05:00
One thing is certain: It was a very bad year for investors. And while this will probably come as cold comfort for most people, your investment losses will serve up certain tax benefits. It's worth spending some time now, before the end of the year, to be sure you are maximizing any opportunities to trim your tax bill.

The stock market is a risky place but there is a lot of opportunity out there. Risk is prevelent but my general view is that to all those of who were behind in investing and building their IRAs, this could be a 2nd chance! My firm believes that the market will rebound and when it does the individuals who did not cower but were able to roll with the fluctations, and pick strong companies, will be in very strong positions in the future. Everyone is down right now, research and then consider buying. Think about it, the federal government has given huge Dow 30 firms billions and billions of dollars. They are not going to let them fail. I don't pretend to know what is going to happen with all of the firms-but the Feds can't afford for these companies to fail. So there will be greater insight but also hopefully stronger more agressive companies will prevail.

Keep in mind that taxpayers can use their realized investment losses to offset an equal amount of gains (if you're lucky enough to have any, of course). But if you don't have any investment gains, or your losses exceed your gains, those losses can be used to offset up to $3,000 of ordinary income, or $1,500 for married individuals filing separately. Remaining losses can be carried forward to future years -- indefinitely.
That means you should assess the damage within your taxable portfolios for investments you want to sell, and get rid of them before the end of the year. Of course, you do not want to sell investments haphazardly simply to generate a loss for tax purposes. Your long-term strategy should always take precedence.
'If you do sell a security that you still like and expect to buy back later, be aware of ''wash sale'' rules, which forbid you from reaping a tax benefit if you buy the same investment within 30 days of selling it at a loss. Any losses logged won't count.

Here are several other actions to consider, given depressed asset values:
CHARITY Investors often donate appreciated stock to charity so they can circumvent capital gains taxes. This year, investors might consider selling slumping stocks first, realizing the losses, and giving the proceeds to charity, said Susan Hirshman, a wealth adviser at JPMorgan. Or, donate stock that is still trading above its purchase price.

CONVERT TO A ROTH This is an ideal time for individuals to convert their traditional individual retirement accounts to a Roth I.R.A. You must pay income taxes on the entire amount converted, so lower asset values work to your advantage. For now, individuals will face income limits for converting: single and married joint filers must have adjusted gross income of $100,000 or less. But those income limits expire in 2010.
GIFTS You can give any number of people annual gifts of up to $12,000, free of gift tax, which is an effective way to reduce the value of your taxable estate. It works particularly well now because you can give away more shares when they are worth less, and the shares can recoup their value outside of your estate. Likewise, if you want to give someone more than $12,000, you will also be able to give more shares away. And since the value has declined, you will eat into less of your $1 million lifetime gift tax exemption, which applies to gifts over the $12,000 threshold, said Maureen McGetrick, a partner with BDO Seidman.
Beyond opportunities tied to the market's swoon, some taxpayers might need to rethink their typical tax-savings strategies. Normally, it makes sense to accelerate certain deductions, like paying a portion of next year's property taxes early, and push as much income, like a bonus, into the next year as possible. But if you expect to land in a higher tax bracket in 2009, you might do the reverse: take as much income as possible now and defer certain deductions.
Some wealthier taxpayers might prefer to take this reverse approach because it's unclear if and when their taxes will rise.
''The bottom line is that we don't know where tax rates are necessarily going, but what we do know that the political and economic outlook is ripe for tax increases,'' said Ms. Hirshman of JPMorgan. ''And most importantly, we do know our tax rates are at historical lows.''
On the other hand, if you are a victim of the flagging economy and you expect your income to drop significantly next year -- or you expect to lose your job -- you might accelerate deductions and offset as much of this year's income as you can, said Mark Luscombe, a principal analyst at CCH.
Of course, all strategies need to be considered in light of the alternative minimum tax, a parallel tax system set up in 1969 to ensure that the wealthiest taxpayers paid their fair share of taxes. People who expect to be caught by the A.M.T. should calculate their taxes twice: once under the regular system and again under the A.M.T., which has its own set of complex rules and excludes certain deductions like property taxes. For joint filers, the amount of income exempt from A.M.T. increases to $69,950 this year from $66,250 in 2007, and, for singles, to $46,200 from $44,350.
Several other tax breaks were either extended or added this year by Congress, including these:

PROPERTY DEDUCTION This new, additional standard deduction for property taxes (up to $500 for single filers and $1,000 for joint return filers) can be claimed by people who take the standard deduction and pay property taxes.
It might end up being a better deal for people who normally itemize their deductions. And, ''if you are in this category, consider turning the usual year-end strategy on its head: Shift as many deductible expenses, such as charitable contributions, from 2008 to 2009,'' said Bob Scharin, senior tax analyst from the tax and accounting business of Thomson Reuters. ''That way, you can claim the bigger standard deduction in 2008 and, by shifting what would otherwise be 2008 expenditures into 2009, put yourself in a better position to exceed the standard deduction amount next year.''

SALES TAX Individuals who itemize their deductions have the choice of deducting state and local sales taxes instead of income taxes. This works well for anyone who has made an unusually large purchase or for those in states without income taxes, like Florida.
I.R.A. DONATIONS Individuals who are at least 70 1/2 can use tax-free distributions up to $100,000 from their I.R.A.'s for contributions to qualified charities in 2008 and 2009. Such distributions do not count as income and cannot be deducted as charitable donations.

HOME BUYER CREDIT First-time home buyers can take what amounts to an interest-free loan from the government in the form of a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. You must pay back the loan over 15 years, and income limits apply.
EDUCATION A deduction for higher education expenses was extended through 2009 and applies to all taxpayers, including those who do not itemize their deductions. Single filers with adjusted gross incomes under $65,000 (or $130,000 for joint filers) can deduct up to $4,000 for education expenses. Taxpayers with income of $65,000 to $80,000 (or $130,000 to $160,000 for joint filers) can claim a reduced deduction of up to $2,000.

KIDDIE TAX Beginning this year, children under age 19 (up from age 18) and full-time students under age 24 with investment income in excess of $1,800 will be subject to their parents' tax rate.

Source for this article: New York Times

Ponzi Scheme Victim?

2008-12-16T14:59:00.000-05:00
IRS assisance-Investors can deduct losses in same year suffered: Because IRS rules are fairly generous about losses from theft, the apparent victims of an alleged Ponzi scheme that is the basis for charges against Bernard Madoff should be able to take their tax losses in the same year they were experienced. The Willens Report, published by tax and accounting expert Robert Willens, says most of the losses from the alleged fraud would qualify for same-year write-offs.

IRS looking at S corp officer pay

2008-11-21T18:02:00.001-05:00
IRS 'Fact Sheet' on S corporation compensation and health insuranceThe IRS has issued a Fact Sheet (FS-2008-25) on salary requirements for S corporation officers. The main point of the Fact Sheet is that corporate officers are required to take a "reasonable" salary out of the S corporation. The IRS doesn't like it when S corporation owners don't take a salary; S corporation income that passes through on a K-1 instead of a W-2 isn't subject to FICA and Medicare tax, so S shareholders are tempted to take little or no salary to avoid the 15.3% combined employer and employee tax hit.However, the tax law isn't clear on how much salary you need to take to avoid IRS trouble, and there is little IRS guidance on the matter .

Courts that have ruled on this issue have based their determinations on the facts and circumstances of each case. Some factors considered by the courts in determining reasonable compensation: Training and experience, Duties and responsibilities, Time and effort devoted to the business, Dividend history, Payments to non-shareholder employees, Timing and manner of paying bonuses to key people, What comparable businesses pay for similar services, Compensation agreements, The use of a formula to determine compensation S corporation shareholder medical insurance. etc...

The fact sheet also addresses S corporation owner health insurance: The health and accident insurance premiums paid on behalf of the greater than 2 percent S corporation shareholder-employee are deductible by the S corporation as fringe benefits and are reportable as wages for income tax withholding purposes on the shareholder-employees Form W-2. They
are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. Therefore, this additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder, but would not be included in Boxes 3 or 5 of Form W-2.The shareholder can then deduct these amounts on Line 29, page 1, Form 1040.

The Fact Sheet refers to Notice 2008-1, the detailed IRS guidance on reporting S corporation owner health insurance, and it addresses a question posed to us by several commenters: Payments of the health and accident insurance premiums on behalf of the shareholder may be further identified in Box 14 (Other) of the Form W-2. Schedule K-1 (Form 1120S) and Form 1099 should not be used as an alternative to the Form W-2 to report this additional compensation.So as you head into the final paychecks of the year, be sure your S corporation shareholders have their health insurance as a taxable benefit (but not for FICA and Medicare) on their paystubs before year-end so the W-2s come out right.

Economic Problems

2008-11-20T13:53:00.000-05:00
In this time of uncertainty, it is good to remember Warren Buffet's strategy of buying and holding stocks he likes "forever." The market will recover, it is just a question of when. Is it better to sit out on the sidelines and get back in when things are calm, that answer is different for everyone. The market will be back and most blue chips will recover nicely.

Advice on Job Loss or a cut in hours

2008-11-01T09:42:00.002-04:00
FINANCIAL ADVICE ON JOB LOSS -
Some things to consider in this troubled market...

-Conserve cash. I know easy to write but tough to do. If you're paying more than the required payment on your mortgage, auto or student loans, pay only the required amount and conserve your cash for your living expenses.
-Create a new budget. Budget your expenses and figure out which items can be eliminated or at least reduced.
-Assess your financial situation. Review your assets to determine the best sources to tap for your cash needs. Set up a plan for which assets you'll use and in what order if your unemployment is lengthy. Make sure you understand the potential tax consequences of each.
- Consider purchasing medical insurance outside of COBRA. You may find a better deal.
-Obtain a home equity line of credit. If you think you might lose your job, and you will absolutely have to borrow money to see you through, it is easier to get this type of loan while you’re still employed.
-Discuss severance benefits with your employer. Ask about severance pay, outplacement services and medical insurance continuation options.
-Here is the tough one- Try to Make sure you have six to twelve months of living expenses. The rule of thumb used to be three – six, but it’s a different world now.
-SO IMPERATIVE-I think most will work with you but YOU HAVE TO CONTACT THEM----Contact your mortgage lender as well as your credit card companies to explain your current situation and ask them to work with you. If you continue to run up your credit you could end up filing for a bankruptcy and that will stay on your records for a long time, making obtaining future loans that much more expensive.
-Remember that cash is king. It’s going to be harder and more expensive to get credit.

Fair Value Accounting-how firms value securities...

2008-10-30T12:43:00.000-04:00
Fair value accounting is still fair game for attack, but there may be more common ground than imagined between critics and proponents of the rules governing how financial firms value the securities they hold.
The SEC recently heard comments on fair value, or mark-to-market bookkeeping, which requires firms to value securities in their portfolio at, well, market prices.
Such accounting arcana has turned into a political football in recent months as firms were forced to write down the value of debt for which few buyers existed - like mortgage-backed securities in a deflating real estate bubble. SEC chief Christopher Cox said Wednesday that the fair-value standards need "further work."
He wasn't alone. Though fans maintain the fair-value approach results in greater transparency for investors, critics such as former Federal Deposit Insurance Corp. chief William Isaac argue that it does no such thing.
Worse, they say, it's intensifying the financial-sector meltdown by forcing banks to write down the value of debt securities even if the loan payment streams behind them are flowing satisfactorily.
"[M]ark-to-market accounting has been extremely and needlessly destructive of bank capital in the past year, and is a major cause of the current credit crisis and economic downturn," Isaac said in prepared remarks.
"The rules have destroyed hundreds of billions of dollars of capital in our financial system, causing lending capacity to be diminished by ten times that amount." (Banks typically lend out around ten times their capital.)
Caught in the middle is the Financial Accounting Standards Board, the private-sector group that sets U.S. accounting rules along with the SEC.
Not so opposite
Despite the lively debate, one expert says there is more common ground than might be initially apparent - which, in his view, means the mark-to-market rules are likely here to stay.
"Those who looked like polar opposites were actually much closer than they appeared," says David Larsen, a managing director at investment advisor Duff & Phelps and a member of the FASB committee that advises the board on fair-value accounting issues. "The task now is to harmonize the conflicting views."
Isaac's broadsides aside, Larsen says he believes many comments made at Wednesday's meeting show that critics of the mark-to-market regime often misunderstand the current rules and how they should be applied. Proponents and critics of the rules, he says, often agree on some principles but don't know it because they're "speaking different languages."
That observation, he says, gives the FASB and the SEC latitude to possibly issue further guidance and make minor changes to the rules, without throwing them out - a move that he said would reduce whatever insight investors have into often opaque financial firms.
One aspect of the fair-value approach that may need adjusting, Larsen says, revolves around how to hold accountants, auditors and financial executives accountable for the judgments they make in assessing the value of an infrequently traded security.
He says that one common misperception centers on what happens when a recent trade has been at a fire-sale price. He takes the example of Merrill Lynch's (MER, Fortune 500) agreement in July to sell a $30.6 billion portfolio of troubled debt to Lone Star funds for 22 cents on the dollar.
Fair value rules don't force holders of similar securities to use 22 cents as their mark, Larsen says. But he says some comments made by opponents of the fair value rules suggest they believe otherwise - and he fears that accountants and auditors who recall Arthur Andersen's prosecution for its mishandling of Enron's books may see things the same way.
"We have people who are doing the right thing who are just afraid of making a mistake," said Larsen. He says one thing regulators might consider is some sort of safe harbor that would permit accountants to make difficult securities-valuation judgments without the risk of jail time.
Those aren't the only changes that may come to the fair-value regime. The FASB is working on adding disclosure requirements, Financial Week reported, that would help investors and analysts more fully understand the types of assumptions firms made in valuing infrequently-traded securities.
Wednesday's roundtable came about as a result of the passage earlier this month of the Emergency Economic Stabilization Act, which directed the SEC to study the economic impact of fair-value accounting. The agency is due to hold another roundtable next month and to report back to Congress by Jan. 2.
Larsen, for one, believes the fair value rules are here to stay, even if their form is apt to change at the margins. "My sense is that investors want and need transparency," he said. "That's out of Aladdin's lamp, and you can't push it back in."

Fed rushes in...

2008-09-22T13:47:00.001-04:00
Bailout Cost: $6K Per Taxpayer...Or Nothing at All?
The big news this weekend is Hank Paulson put a $700 billion price tag on a bailout package designed to prevent a financial market crisis from becoming an economic calamity.
Paulson's plan would require Congress to raise the U.S. debt limit to $11.3 trillion. Don't forget it was just in July when the debt limit was raised by $800 billion to $10.6 billion as a result of the Housing Bill. On that basis, the cost of the bailouts thus far is $1.5 trillion - and counting.
But the newly proposed $700 billion will probably just be a starting point.

The 5th annual Pennewell Invitational

2008-08-16T09:30:00.006-04:00
This is the official posting of the 5th annual Pennewell Invitational (PI) to be held at Imperial Lakes on November 8th. Play will be in the afternoon and our champions will be crowned by nightfall.
This years contestants are being assembled currently but this is shaping up to be our best tournament yet. Some of the contestants are as follows:
-A group of players from up north who play in the annual R.I.O.T golf event (tournament centered in the Pinehurst, NC area) are promising to come down and take home the PI Trophy! From this group committed so far is Emerson Rudacille and Wes Bryant.
-Wayne Pennewell and Carl Walls (the Southern arm of the R.I.O.T) will be teamed together for the event and are listed as dark-horses to win the title...
-Kris Pennewell and his brother Mark will comprise one of the strongest teams in the competition but need to be alert for putts within 2-feet (Mark) and sand wedges from 90 yards in (Kris)
-Non committed but 2 time defending champions Tom Dorsch and long hitting Scott Carter will surely defend their title and try to 3-pete
-Tim Coyle and Nick Pennewell will try to emerge as dark-horse contestants seeing as Tim has not played golf since the 3rd annual PI!
-Level headed Larry Sellers will be teamed with a lucky participant as the contestants unfold.
This message will be updated as contestants secure places in the tournament.
The Imperial Lakes website is http://www.imperiallakescc.com/.

Housing relief signed by the President

2008-07-31T10:26:00.000-04:00
Bush signs housing bill to provide mortgage relief

President Bush on Wednesday signed a massive housing bill intended to provide mortgage relief for 400,000 struggling homeowners and stabilize financial markets.
Bush signed the bill without any fanfare or signing ceremony, affixing his signature to the measure he once threatened to veto, in the Oval Office in the early morning hours. He was surrounded by top administration officials, including Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.
“We look forward to put in place new authorities to improve confidence and stability in markets," White House spokesman Tony Fratto said. He said that the Federal Housing Administration would begin right away to implement new policies "intended to keep more deserving American families in their homes."
The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.
It offers a temporary financial lifeline to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses.
The House passed the bill a week ago; the Senate voted Saturday to send it to the president.
Bush didn't like the version emerging from Congress, and initially said he would veto it, particularly over a provision containing $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.
But he withdrew that threat early last week, saying hurting homeowners could not wait - and even blaming the Democratic Congress' delays in action for forcing an imperfect solution.
Meanwhile, many Republicans, particularly those from areas hit hardest by housing woes, were eager to get behind a housing rescue as they looked ahead to tough re-election contests. Paulson's request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. So did the creation of a regulator with stronger reins on the government-sponsored companies, as Republicans long have sought.
Democrats won cherished priorities in the bargain: the aid for homeowners, a permanent affordable housing fund financed by Fannie Mae and Freddie Mac, and the neighborhood grants.
The bill takes several approaches to curing the ailing housing market.
It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.
The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.
The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill permanently would increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.
It goes far beyond addressing the current crisis, however.
The legislation overhauls the Depression-era FHA. It requires lenders to show how high a borrower's payment could get under the terms of his mortgage. It provides $180 million in pre-foreclosure counseling for struggling homeowners.
The Treasury Department gains unlimited power, until the end of 2009, to lend money to Fannie Mae and Freddie Mac or buy their stock should they need it. The Federal Reserve takes on a new "consultative" role overseeing the companies.
The measure includes $15 billion in tax cuts, including a significant expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers for houses purchased between April 9, 2008, and July 1, 2009.
Democratic leaders, recognizing that the measure could be one of the last items to become law during what's left of their abbreviated election-year schedule, tacked on an $800 billion increase, to $10.6 trillion, in the statutory limit on the national debt.
Conservative Republicans were vehemently opposed to the bill, particularly the help for Fannie Mae and Freddie Mac. Critics charge the companies enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.

Volunteering needed skills

2008-04-29T10:42:00.006-04:00
Clients often ask me what I do when tax season is over! The answer is relax and do some things that I have wanted to do during tax season but was unable to do. However another area of involment is Volunteering. Personally, I volunteer in two groups:

a) the Second Time Arounders Marching band in beautiful St. Petersburg as the Treasurer
and
b)I am in the process of joing a fellow FSU Seminole, Tim Coyle, in getting more involved in the Polk County Seminole Boosters Club in a variety of functions....Both of these are great avenues for learning how to work within large groups and produce needed results as well as networking to further my own CPA firm.

Benefits of Volunteering-
I. Volunteering has intangible benefits, such as making a difference in a group that needs specialized training but is straped and restricted in the manner that funds may be raised. (UBI comes to mind--money collected by a non profit group can be subject to taxes if the money raising idea is not a fund raising idea that the non profit group has established to raise funds under )
II. Volunteering also has tangible benefits too.
1)It can assist in getting your name in front of many people who would not consider using you skills otherwise—
2) it can force you out of your comfort zone. Skills-based volunteerism is a powerful and cost-effective professional development tool, yet very few companies are leveraging volunteer programs for this purpose, according to a survey. The obvious problem is that a company does not want to pay a portion of a salary for helping another concern. This is a problem that presents a dilema for a company. But if it builds proficiency in a needed skill set and enhances leadership qualities isn't that as good as sending an employee to a conference for the week? Maybe...

The national 2008 Volunteer IMPACT Survey of Fortune 500 human resource managers found that, while training and development is perceived as vital to corporate success, many managers are laboring under shrinking or flat budgets, underscoring the need for cost-effective innovation. One solution could be found in an unlikely place — the company's volunteer program.
According to the American Society of Training and Development, corporate America invests heavily in training and development, spending more than $100 billion a year.
Studies revealed that the slowing economy and threat of a talent shortage are placing increased pressure on talent development programs, often without added financial resources.
Skills-based volunteer activities are perceived as a cost-effective development option; only 2 percent of total respondents believe that incorporating skills-based volunteering into talent development programs would cost more than traditional training and development options.
"Skills-based volunteer programs provide valuable experiential learning opportunities for employees that build business and leadership skills without the expense often associated with traditional corporate training programs," said Evan Hochberg, national director of community involvement, Deloitte Services LP. "As leading companies become adept at leveraging their community investments to drive key business goals, corporate community involvement programs will be positioned to deliver more business value and social impact."
However, the benefits of incorporating skills-based volunteerism into corporate training and development programs remain largely unrealized. The survey found that even in those companies that do offer skills-based volunteer opportunities, they are generally not viewed as a strategic business tool. In fact, among HR professionals who agree that skills-based volunteering is an effective way to further develop leadership skills, only 13 percent offer it to all employees.
"Corporate America has yet to fully tap the benefits of integrating skills-based volunteerism into talent development strategies and programs," said Susan Burnett, national director of talent development, Deloitte Services LP. "With a focus on learning and development, a volunteer role can become a stretch assignment that develops leadership and client service skills that benefit the volunteer organization, the employee and their company. This will be a priority for Deloitte as we ‘refresh' our talent development agenda."

Stimulus Payments

2008-04-21T16:07:00.000-04:00
Stimulus Payment Schedule for Tax Returns Processed by April 15

Economic stimulus payments will be issued according to the last two-digits of the main filer's Social Security number. People who use direct deposit also will be among the first to receive the payments starting May 2. Paper checks will be put in the mail starting May 16.
DIRECT DEPOSIT
Last two SSN digits:
Payment will be transmitted:
00 through 20- May 2
21 through 75- May 9
76 through 99- May 16

PAPER CHECK
Last two SSN digits:
Payments will be mailed by:
00 through 09- May 16
10 through 18- May 23
19 through 25- May 30
26 through 38- June 6
39 through 51- June 13
52 through 63- June 20
64 through 75- June 27
76 through 87- July 4
88 through 99- July 11

People who file a return after April 15 will receive their economic stimulus payment, but probably about two weeks later than the schedule shows. A return must be filed by October 15 in order to receive a stimulus payment this year. See the online calculator for an estimate of the amount you will receive.
A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.
Related Item: IR-2008-44, IRS Announces Economic Stimulus Payment Schedules, Provides Online Payment Calculator

Tax Rebates are coming

2008-02-08T13:33:00.000-05:00
HOW YOU WILL BE STIMULATED

The final stimulus bill that flew through Congress yesterday is very close to the House bill, except with free stuff thrown in for old folks and veterans who might not get any free stuff otherwise. The rebates will work like this:

The IRS will look at your 2007 return. If you incurred at least $600 in tax, or $1,200 on a joint return, the IRS will mail you a $600 ($1,200 joint) check.

If your tax was less than that, the IRS will send you the lesser amount.

You'll also get a $300 check for each child for whom you received a 2007 credit.

The rebate will be reduced by 5 cents for each dollar your adjusted gross income exceeds $75,000, or $150,000 for joint returns.

For folks without at least $300 of 2007 income tax liability, the rebate works this way:

IF:

- you had at least $1 of tax liability and gross income of at least $8,750 (or $17,500 joint);

OR

at least $3,000 of income from self-employment, social security benefits, or veterans disability or survivor benefits,

you will get a $300 check, or $600 for a joint return. You also will get $300 per qualifying child.

The credit phases out five cents for each dollar adjusted gross income exceeds $75,000 on single returns or $150,000 on joint returns. This means no credit for singles with AGI over $87,0000 and joint filers with AGI over $174,000, unless they have children; then the phase out stretches out to eventually reclaim the $300-per-child credit.

When you do your 2008 return, you will recompute the credit using 2008 numbers. If you compute a higher credit, you get the difference when you file your return. If the credit is lower using 2008 numbers, you won't have to pay it back.

BUSINESS PROVISIONS

Increased Sec. 179 deduction. Section 179 allows businesses to expense in the year of acquisition the cost of non-rental property, other than real property, that would otherwise have to be capitalized and depreciated. This was to be limited to $128,000 in 2008. The stimulus package raises this to $250,000 for taxable years that begin after 12/31/2007 but before 12/31/2008. It phases out dollar-for-dollar as fixed asset purchases exceed $800,000.

Bonus Depreciation. The bill allows taxpayers to expense 50% of the cost of new property placed in service during the period beginning January 1, 2008, and ending December 31, 2008, regardless of your taxable year. Used property normally won't qualify. Aircraft and some property with a long construction period qualify through 12/31/2009. Qualifying property includes machinery, software, and certain "qualified leasehold improvements." If there was a binding contract in place to acquire the property before January 1, 2008, the property will not qualify for bonus depreciation. Property placed in service after 2008 may qualify if it is acquired pursuant to a binding contract entered into during calendar year 2008.

Both bonus depreciation and Section 179 deductions are fully allowed in computing alternative minimum tax.

I would like to thank Roth & Co, a CPA firm based in Iowa for the excellent presentation of the stimulus package noted above.

Tax Rebate SCAMS-Watch OUT!

2008-02-08T09:45:00.000-05:00
The Rebates will be here in May-and you don't have to do anything to get it, it is conditional on your tax returns.
IRS Warns of Rebate Scams to Steal Personal Information
Under one scheme, the IRS said, people are receiving phone calls telling them they can only receive a rebate if they provide bank account information for a direct deposit.
The tax agency stressed that it does not collect information by telephone and that no legislation has been enacted that would allow it to provide advance payments to taxpayers or that specifies the details of those payments.
The House last week, as part of an economic stimulus package, approved tax rebates of $600 and $1,200 respectively for most individuals and couples, with another $300 per child. The Senate is now considering a slightly different version.
The IRS also repeated past warnings of e-mails, supposedly coming from the agency, where people are asked to enter personal information on a form needed to obtain a tax refund.
A new scam, it said, involves an e-mail notification that a person's tax return will be audited with instructions to click on links to complete forms with personal and account information.
Businesses and accountants are also getting e-mails with instructions to download information on tax law changes. Clicking on these links could download "malware" onto the recipient's computer that gives the scammer remote access to the computer hard drive.
In another telephone scam, a caller claims to be an IRS employee who says the taxpayer has not cashed a refund check and asks the person to verify his or her bank account number.
On Tuesday, at a Senate Finance Committee confirmation hearing for Douglas Shulman, the nominee to be IRS commissioner, Sen. Charles Schumer, D-N.Y., expressed concern that taxpayers would be victimized by tax preparers and lenders who charge high interest rates for short-term advances on their stimulus rebates.
The IRS advised people not to click on any link from an e-mail purporting to come from the tax agency. People receiving questionable e-mails can contact the IRS through phishing@irs.gov.

Preparing to file your taxes!

2007-11-26T12:35:00.000-05:00
2007 Tax Planning
Tax Planning Ideas for 2007

On planning the timing of your deductions . . .
-Your home . . .
Mortgage interest is deductible as is real estate taxes. Generally, if you pay points on your mortgage when you purchase your home, those points are deductible in full in the year your purchase the home. But, you can also choose to deduct them ratably over the life of the loan. This may make sense if you purchase your home very late in the year and will not otherwise have enough deductions to allow you to itemize in the year you make the purchase.
Points paid on refinancing a mortgage on the other hand are not fully deductible in the year the transaction takes place. Rather, the points can only be deducted ratably over the life of the new loan term. Remember to write off any remaining unamortized points though if you then subsequently sell the home and pay off the mortgage.
-Also, new for 2007, mortgage insurance will be deductible.
-Selling your home may allow you to walk away with a tax free gain.

-Your investments . . .
Review your investments.
Investment interest expense (ie margin interest) is deductible up to the amount of your net investment income. To the extent you do not have enough investment income to utilize the full investment interest deduction, you can carry over the excess to subsequent years.
If you are holding mutual funds that expect to pay large year end dividends consider selling the funds prior to the dividend record date if you have owned the fund for more than one year. In effect, you will have converted the dividend which is taxed as ordinary income into capital gain income which can be taxed at a lower rate. If you sell a fund at a loss, be aware of the wash-sale rule if you then want to go back into the same fund which could prevent you from utilizing the loss.Be wary of buying mutual funds late in the year in any non-retirement account.

-Avoiding underpayment penalties . . .
If you are facing an underpayment tax penalty for failing to make sufficient estimated payments toward investment or other sources of income during the year, increase the amount of your employee W-2 withholding tax. In order to avoid underpayment penalties you need to prepay 90% of 2006 actual tax or 100% of 2006 tax (or 110% if Adjusted Gross Income for 2006 was more than $150,000 - married filing jointly). Estimated tax payments cannot be "made up" at year end (unless that is when the additional income was actually earned). However, employee withheld taxes are treated as being paid evenly throughout the year. Therefore, extra withholding late in the year can overcome prior underpayments.

-Maximizing your charitable contribution deductions . . .
Use appreciated securities to make donations to charity

-Taking maximum benefit of retirement plans . . .
-Contribute to an IRA.Contribute to a Roth IRA.Regular IRA’s can be converted to Roth IRA’s

-Education related tax benefits . . .
The deduction for education interest of up to $2,500 is available even to non-itemized taxpayers. The interest is only deductible if the loan was used to pay higher education expenses for you, a spouse, or your dependent at the time you incurred the debt. However, the deduction is phased out for single taxpayers with modified AGI between $50,000 and $65,000 or between $100,000 and $130,000 for a married filing joint return.
You can deposit up to $2,000 per year into an Education Savings Account for a child up to the age of 18. Although you cannot take a tax deduction for the contribution, the investment earnings that build up tax free over time and are not taxed at withdrawal so long as the money is used to pay the qualified education expenses of the child. Keep in mind, however, there are income phase-out ranges to be considered before making contributions.
Section 529 plans offered by states are another good idea to consider. While the contributions you make into the plan are not deductible on your tax return for federal purposes, they are for PA purposes. When distributions are used for the student's education expenses they are tax free.
The Hope Scholarship Credit is available to you, your spouse or your dependent for tuition and related expenses for the first two years of post-secondary education at an eligible institution if the student carries at least a half-time credit load. The maximum credit is $1,650 per student.
The Lifetime Learning Credit is available for undergraduate, graduate and professional degree courses. Unlike the Hope Scholarship Credit, there is no minimum half-time enrollment requirement. The maximum credit available is up to 20% of the first $10,000 of qualified education expenses or $2,000, regardless of the number of students in the household.
Both of these education credits have phase-out ranges and there are other factors to consider so we strongly encourage you to consult with us for further information.
A Higher Education Expense Deduction of up to $4,000 may instead be available if the Hope Scholarship Credit or the Lifetime Learning Credit is not claimed. This deduction is available for tuition and related expenses and can be claimed even if you do not itemize. However, the amount of the deduction depends upon the modified adjusted income level on the return and also varies depending on whether a single or joint return is filed.

-On transferring income to lower tax bracket family members . . .
Transfer assets to family members with lower tax brackets

-Home office deductions for self-employed . . .
More self-employed individuals working out of their home will find it easier to qualify for a home office deduction. Those who regularly use their home for management or administrative tasks and have no other location where these functions are performed may now qualify for the home office deduction. If you qualify, you may be able to take a deduction for expenses such as utilities, maintenance and depreciation. Also, if you are a Schedule C filer, the partial allocation of mortgage interest and real estate taxes to home office expenses will also lower the self employment taxes on the business net income. To qualify, you must use the designated area of your home exclusively and regularly as: (1) your principal place of business (2) As a place of business where you meet with patients, clients or customers in the normal course of business. If you are an employee rather than a business owner, you must be able to demonstrate that the reason for the home office use was due to the convenience of the employer - not solely for your convenience.

-Your business . . .
If you operate your own business certain new business equipment purchases up to $125,000 can be written off as an expense for 2007 under IRS code sec. 179. Therefore, if you had planned to make capital asset purchases anyway, you may want to accelerate the purchase into 2007. However, the maximum expense deduction is reduced dollar for dollar by the cost amount of qualified property placed in service during the year in excess of $430,000. Other requirements and restrictions apply as well depending on the business entity type. Hire your children in a family business, be sure the treat them the same as any other employee, and deduct their salary on the business return. In addition to a standard deduction, a child with earned income get a $4,000 IRA deduction meaning the child can earn up to $9,000 tax free. Also, children under the age of 18 who are hired by a parent's unincorporated business do not need to pay FICA taxes.

-Other items that may effect you . . .
If your AGI is close to one of the phaseout ranges discussed in any of the above topics, consider selling investments that show a capital loss and are unlikely to recover soon so that you can lower the AGI amount. If you have children under age 18 with interest and dividends, file a separate return for the children rather than elect to report the children’s income on your return. This will also serve to reduce your AGI.
Alternative Minimum Tax is affecting more taxpayers. The AMT rates are 26% and 28%. You could possibly fall into a situation of owing AMT tax in addition to your regular tax if any of the following situation apply: (1) You receive tax-exempt interest from private activity bonds issued after 8/7/86 (2) You exercise incentive stock options (3) Are claiming a high number of dependent exemptions (4) Are claiming a large itemized deduction for job or other miscellaneous expenses on Schedule A (5) Are claiming a large itemized deduction for state and local tax payments.
And finally . . .
It is tough when a client brings you information after year end and says "what can we do that will effect my taxes?" The time for implementing tax planning strategies is before the end of the year. The above tax topics are just a sample of some of the tax planning strategies you can implement. Be warned that there are always many exceptions, phase-outs, limits etc to consider in the above suggestions.

I love accounting!

2007-08-27T20:06:00.000-04:00

4th Annual Pennewell Invitational

2007-08-23T15:47:00.000-04:00
The 4th annual Pennewell Invitational (PI) will be played on October 6th at the challenging Walden Lake Golf Club in Plant City, Florida.
The PI will have a diverse group of contestants coming to play this year, with some familiar faces along with some "rookies" who will be new to the event. Last year's champions returning to defend their title are big hitting Scott Carter and level headed Tom Dorsch. It is expected that Charlie Jeromine and his hot shot partner, who came in a close 2nd last year, will be back seeking the title. Jay Allen and his partner, Ben, are preparing to make a run at the title with the expectation of winning back what they once held. Wayne Pennewell and Carl Walls, last year's 3rd place finishers are desperately hoping to maintain their position as #3 in an ever deepening field of contestants. Also expected back are long hitting Johny Groubert and his dad, John. Danny Reynolds and Terry Zipprer could make a run at the title this year, barring any medical injuries or rumors of such injuries. Plant City's own Larry Sellars will team with a new participant only known as "The Professor" in an attempt to keep the PI Title in Plant City. Long hitter Mark Pennewell will be paired with the tournament organizer, Nick Pennewell and the two plan on making a serious run at the tournament title.
Newcomers from Pinehurst are possible this year. Rumor has it that Emerson Rudicil and his partner are hot to take on the Pennewell and Walls team and knock them out of their #3 position. There is even talk of a 2nd group from the Pinehurst tournament, the Team of Larry and Luvell are planning on making a run at the title, if Emerson makes the drive. Other new groups invited to play this year are Mike Dejesus and Willie Tims and Taylor and Dennis. Whatever the outcome, the tournament will be a great time for all involved!

Gift Tax

2007-08-20T16:33:00.000-04:00
Gift Taxes

IRS Guidelines-If you gave any one person gifts in 2006 that valued at more than $12,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts. The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value. It is the person who gives the gift that is liable for the tax.
Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:
Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
Gifts to your Spouse
Gifts to a Political Organization for its use
Gifts to Charities
If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

Summer Tax Items

2007-08-07T08:15:00.000-04:00
MOST taxpayers don’t think about their taxes until the start of the filing season in January. The other day I was asked by a rather astute business person if we could set up a meeting in January to give him some tax options for the current year? The time to evaluate tax stratgies is now, not next year. Steps such as getting the proper receipts from charities, adjusting your withholding or pursuing a tax strategy to increase your deductions are most effective if they are done well before year’s end.
Possible topics of personal interest are: how parents can get credit for sending their kids to day camp or reassessing your federal withholdings, charitable contributions, back-to-school advice, and the saver's credit amoung others.
There is also a vast array of possiblities available to the tax concerns of small business owners.

Gambling winnings are Income too...

2007-07-11T17:32:00.000-04:00
Gambling Winnings and Losses
Your summer vacation may mean a trip to the casino or the racetrack. What will you owe the IRS if Lady Luck happens to be on your side?
Gambling winnings are fully taxable and must be reported on your tax return.
You must file Form 1040 and include all of your winnings. Gambling income includes, among other things, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips.
Anyone who pays your winnings or awards you a prize is required to issue you a Form W-2G if your winnings are subject to Federal income tax withholding or if your winnings are over a certain amount.
However, all gambling winnings must be reported regardless of whether any portion is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings.
If your luck isn’t always so good, you may deduct gambling losses. Losses may be deducted only if you itemize deductions and only if you also have gambling winnings. Claim your gambling losses as a miscellaneous deduction on Form 1040, Schedule A. But remember, the losses you deduct may not be more than the gambling income you report on your return.
Even though you may be on vacation, if you want to deduct losses when you file your return next spring, it is important to keep an accurate diary or similar record of your gambling winnings and losses right now.

To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show both your winnings and losses

What about next year's taxes???

2007-05-05T19:18:00.000-04:00
Less than 8 months away...

Unless you've extended your return, 2006's return is done and filed! It's time to move on. Some important items to consider
DON'T FALL BEHIND. The hardest tax problems are those when people don't keep up on their taxes. It can happen when you reduce your withholding too much. It can also happen when you don't keep up with your estimated tax payment obligations. If you own an interest in a partnership or an S corporation, it can become a problem in a hurry, especially if you spend the nice distributions they give you without putting them away for your taxes.

DO THE EASY STEPS NOW, BEFORE THE MONEY IS SPENT
Most people who come to their tax preparers in April looking for a miracle have already squandered most of their tax-saving opportunities. These are likely to be found at work. Take advantage of the following:
- Maximize your 401(k) contribution. If you aren't at least putting in enough to get the entire employer match, you are making an unforgivable financial blunder. More is better.
-Small Business owners can start a SIMPLE, SEP, or a plethora of other savings vehicles that are in ways superior to a company 401k program.
- Review your health plan opportunities. If your employer offers an Health Savings Account option, think several times before rejecting it. Many employers offer generous breaks to switch to high deductible health insurance, and often you'll be financially better off with an HSA. If there is no HSA at your job, make sure you take full advantage of any cafeteria plan.
- Start funding your 2007 IRA. The main benefit of an IRA is tax-free buildup of earnings; if you fund it now instead of next April, your earnings are tax-sheltered an extra year.
- If you are saving for college, put a little money away in a Section 529 or a State Prepaid College plan.

EXPECT THE UNEXPECTED Every tax preparer has seen someone with a $500,000 W-2 struggle to raise $15,000 to pay taxes in April. It's wise to be prepared for a tax surprise, especially if you own all or part of a business; Some advisors say you should keep cash available to pay six months of living expenses; you might do with less if you have ample liquid investments, or if you have an untapped home-equity line. If you start getting ready now, maybe next April won't be so bad.

Businesses and Tax Exempts also get Telephone Tax Refund

2006-12-12T07:03:00.000-05:00

Businesses and Tax-Exempts Can Use Formula for Telephone Tax Refund

The IRS today announced a formula that will allow businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds.
“The formula will provide a less burdensome option than gathering up to 41 months of old phone records,” said IRS Commissioner Mark W. Everson.
In May 2006, the IRS announced that individuals, businesses and tax-exempt organizations who paid the long-distance telephone excise tax can request the refund on their 2006 federal income tax returns.“Businesses and tax-exempt organizations generally have more varied phone usage patterns than individuals,” Everson said.
To request a refund, businesses (including sole proprietors, corporations and partnerships) and tax-exempt organizations must complete Form 8913, Credit for Federal Telephone Excise Tax Paid. To complete this form, businesses and tax-exempt organizations may determine the actual amount of refundable long-distance telephone excise taxes they paid for the 41 months from March 2003 through July 2006, or use the formula to figure their refunds. Businesses should attach Form 8913 to their regular 2006 income tax returns. Tax-exempt organizations must attach it to Form 990-T.
Businesses and tax-exempt organizations can figure their refund amounts by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax. The bills they should use are the bill with a statement date in April 2006 and the bill with a statement date in September 2006. They must first figure the telephone tax as a percentage of their April 2006 telephone bills (which included the excise tax for both local and long-distance service) and their September 2006 telephone bills (which only included the tax on local service). The difference between these two percentages should then be applied to the quarterly or annual telephone expenses to determine the amount of their refunds.
The refund is capped at 2 percent of the total telephone expenses for businesses and tax-exempt organizations with 250 or fewer employees — which covers more than 99 percent of all businesses. The refund is capped at 1 percent for those with more than 250 employees. Most organizations in this category typically are able to figure the actual amount they paid in long-distance excise tax. However, the formula provides a more limited, but simpler, approach for those large employers who wish to use it.
For example, if a business has an April 2006 telephone bill of $1,000, which includes federal telephone excise tax of $28, the tax percentage is 2.8 percent. If the September 2006 bill is $1,100 including federal telephone excise tax of $16.50, the tax percentage is 1.5 percent. The business’ long-distance excise tax percentage is 1.3 percent (2.8 percent for April minus 1.5 percent for September). The business multiplies 1.3 percent by its total phone expenses over the 41-month period to arrive at the amount of its refund. If this business had more than 250 employees, its refund would be limited to 1 percent of its total phone expenses for the period. If the business had 250 or fewer employees, the 2-percent cap would apply and would not limit the amount of the refund.
The IRS already has provided individual taxpayers with the option to use standard amounts based on the number of exemptions allowed to that taxpayer. Individual taxpayers can request a $30 refund with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.
Options for requesting this refund vary for sole proprietors, who file a Schedule C with the Form 1040, depending on the gross income reported on the Schedule C. Sole proprietors who report gross income of $25,000 or less on their Schedule C may use the standard amounts or request a refund based on their actual expenses. Sole proprietors reporting more than $25,000 of gross income have three options: they can use the standard amounts which cover both personal and business expenses, they can use the formula for their business expenses and actual for their personal ones, or they can choose to use actual amounts for both business and personal.
Similar rules depending on the amount of gross income reported on Schedule F or Schedule E apply to farmers and individual owners of rental property.
Trusts and fiduciaries may not use the standard amount available to individuals. They should use the formula to figure their refunds, or request the actual amount paid.
The Treasury Department announced in May that the government would stop collecting the federal excise tax on long-distance telephone service beginning Aug. 1, 2006, and provide refunds for taxes billed after Feb. 28, 2003.

Great job to Congress!

2006-12-11T15:26:00.000-05:00
Congress Passes Extension of Tax Breaks
The House approved the Tax Relief and Health Care Act of 2006 (H.R. 6408), which was then combined with H.R. 6111 before being sent to the Senate.

Effect of passage of the bill on HEALTH SAVINGS ACCOUNTS-
The HSA provisions will permit rollovers from health flexible spending accounts and health reimbursement accounts into an HSA for a limited time and allow a one-time rollover from an IRA to an HSA. The limit on the annual deductible contributions that can be made to an HSA will also be modified so the maximum deductible contribution is not limited to the annual deductible under a high-deductible health plan.

Among those tax relief measures commonly referred to as "extenders," the bill makes retroactive to the beginning of 2006 and extends through 2007:
* an expanded and modified version of the research credit;
* the deduction for state and local sales taxes;
* the above-the-line deduction for qualified higher education expenses;
* the above-the-line deduction for teachers' classroom expenses;
* state and local governments' authority to issue qualified zone academy bonds;
* expensing for brownfields remediation costs;
* tax incentives for investment in the District of Columbia;
* tax incentives for Indian employment and business property depreciation on Indian reservations;*
the 15-year straight-line cost recovery for qualified leasehold and restaurant improvements;
*the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties;
*the availability of Archer medical savings accounts;
and
* additional provisions related to distilled spirits, corporate donations of scientific property, and American Samoa.
-The legislation also extends for two years the work opportunity and welfare-to-work tax credits and will combine the two credits beginning in 2007.
-Other provisions in the bill extend the new markets tax credit through 2008, extend through 2008 the election to include combat pay as earned income for purposes of the earned income tax credit, and extend for one year a provision related to mental health benefits.
-An extension of the traditional alternative minimum tax relief "patch," which prevents additional taxpayers from becoming subject to AMT, was not included in the final package. One provision does modify the AMT refundable credit for individuals.
-The section 199 manufacturing deduction is extended to Puerto Rico, and tax incentives for mine safety equipment and mine rescue team training are created.
-Also, bonus depreciation for qualified Gulf Opportunity (GO) Zone property is extended through 2010.

Other tax provisions also made their way into the Senate bill, along with technical corrections related to the GO Zone Act of 2005 and the controlled foreign corporation look-through provision included in this year's tax reconciliation bill. The bill extends most expiring energy and excise tax provisions. Among those provisions, the bill extends and modifies the section 45 renewable electricity production credit. The placed-in-service date is extended through 2008 for qualified facilities.Other provisions extend for one year a number of energy incentives, including the deduction for energy-efficient commercial buildings; the business credit for energy-efficient new homes; the credit for residential energy-efficient property purchases; and a business credit for the installation of qualified fuel cells and stationary microturbine power plants and the purchase of solar energy property.

Business vehicle record keeping

2006-12-06T11:04:00.000-05:00
This passage sets forth the Recordkeeping requirements for business use of a vehicle. Call us with any questions on the matter.

It is important to keep complete records to substantiate items reported on a tax return. In the case of car and truck expenses, the types of records required depend on whether the taxpayer claims the standard mileage rate or actual expenses.
To claim the standard mileage rate, appropriate records would include documentation identifying the vehicle and proving ownership or a lease and a daily log showing miles traveled, destination and business purpose.
For actual expenses, a mileage log helps establish business use percentage. Taxpayers should also retain receipts, invoices and other documentation to show cost and establish the identity of the vehicle for which the expense was incurred. For depreciation purposes they need to show the original cost of the vehicle and any improvements as well as the date it was placed in service

2007 Standard mileage rates for the use of a "car"

2006-11-13T11:18:00.000-05:00
Beginning Jan. 1, 2007, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
48.5 cents per mile for business miles driven;
20 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service to a charitable organization.
The new rate for business miles compares to a rate of 44.5 cents per mile for 2006. The new rate for medical and moving purposes compares to 18 cents in 2006. The primary reasons for the higher rates were higher prices for vehicles and fuel during the year ending in October.

Domestic Production Activities Deduction analyzed

2006-11-10T14:15:00.000-05:00
For those that produce goods, develop software or construct property in the U.S., regardless of whether they are exported, Congress has provided you the means to significantly reduce your tax bill.
How does the Section 199 deduction work?
The deduction is permanent in nature and is equal to a percentage of the lesser of your taxable income or net income earned from qualified production activities. It is available for tax years beginning after Dec. 31, 2004. The deduction will be 3% for tax years 2005 and 2006; 6% for tax years 2007, 2008 and 2009; and 9% for tax years 2010 or later.

What activities qualify for the Section 199 deduction?
Qualified domestic production activities include:
Manufacture, production, growth or extraction of tangible personal property, computer software or sound recordings or qualified films
Production of electricity, natural gas or potable water in the U.S.
Construction services including related engineering and architectural services performed in the U.S.

How is Qualified Production Activities Income calculated?
Domestic Production Gross Receipts minus expenses equal Qualified Production Activities Income (QPAI). Expenses include the cost of goods sold allocable to the receipts, allocable direct and indirect costs, and a ratable portion of other costs.

What's so complex about Section 199?
There are a number of interlinking issues that come into play when calculating the most advantageous Section 199 deduction. Ask yourself the following questions:

How did you define your revenue streams?
Do you have a full understanding of the relevant Section 861 regulations; and can you demonstrate how you maximized them?
Which of the three W-2 limitations is most beneficial?
What impact does the expanded affiliated group definition have on your calculation?
What state planning activities need to be re-evaluated after completing your Section 199 computation?

Figuring the Tax Deduction -
Calculating the Domestic Production Activities Deduction (DPAD) can be either simple or complex, depending on the nature of the business. The key to figuring the Domestic Production Activities Deduction (DPAD) is to examine "qualified production activities income" (QPAI) and the limitations (QPAE).

The formula
DPAD=QPAI-QPA=QPANI*3%=Tentative QPA Deduction [3% for 2005&6, higher later]
Domestic Production Activities Deduction (DPAD) Calculation Qualified production activities income (QPAI) minus Qualified production activities expenses (QPAE) equals Qualified production activities net income (QPANI) times The QPA deduction amount of 3% equals The Tentative QPA Deduction

Definitions
1-Qualified Production Activity Income (QPAI)
Qualified production activity income (QPAI) is all income arising from qualified production activities in the US. For a business with only one line of business, this will be the same as gross income. For businesses with multiple lines of business, income will need to be allocated.
2-Qualified Production Activity Expenses (QPAE)
Qualified production activity expenses are all expenses directly related to the qualified production activities. For a business with only one line of business, this will be the same as total expenses. For businesses with multiple lines of business, income will need to be allocated.

Limits on the Deduction
W-2 Wages can limit the amount of the DPAD!!

General Overview
Although Section 199(a)(1) allows a deduction equal to 9 percent (3 percent in the case of taxable years beginning in 2005 or 2006, and 6 percent in the case of taxable years beginning in 2007, 2008, or 2009) of the lesser of (A) the qualified production activities income (QPAI) of the taxpayer for the taxable year, or (B) taxable income (determined without regard to section 199) for the taxable year (or, in the case of an individual, adjusted gross income (AGI)).
Section 199(b)(1) limits the deduction for a taxable year to 50 percent of the W-2 wages paid by the taxpayer during the calendar year that ends in such taxable year.

Tax items to consider before year-end

2006-11-03T15:17:00.000-05:00
Here's a checklist of tax savings strategies to apply before the end of December:
* 1-Make Charitable Contributions and Donations: Generally, for individuals,
contributions to tax-exempt charitable organizations are limited to 50
percent of the taxpayer's adjusted gross income for the tax year. Those
unused items cluttering closets can be donated to a qualified charity or
non-profit organization and deducted as charitable contributions.
Document your donations by saving receipts, cancelled checks and any
letters or correspondence from the charity.
2-Pay property taxes in the current year, and if applicable, pay state and local income taxes now: That way you can deduct them for 2006. Any payments made on a credit card or by check dated before the end of 2006 are eligible.
3- Add to your retirement accounts: See if your 401(K) plan offers an
opportunity to "catch up" with additional contributions before year's
end. There's even more time to add to the value of your IRAs, right up
to the April 16, 2007 deadline.
4- IRAs are more generous. The deductible amount for a contribution to a
traditional IRA is up to $4,000 per person, and up to $5,000 per person
age 50 or older. In 2006, workers over 50 can make additional
contributions to their SIMPLE IRAs up to $2,500. If you're self-
employed, you can set up a Simple Employee Pension plan and contribute
up to $44,000 before April 16, 2007.
5-* Check the Amount of Your Medical Deductions for 2006: Taxpayers can
check to see if they have enough medical deductions to itemize (over 7.5
percent of adjusted gross income) this year. It's not too late to
schedule additional dentist or eye doctor appointments. However, it may
make sense to "bunch" medical deductions into one year, and plan ahead
for 2007.
6- Know What Medical Deductions Are Allowed: There are numerous medical
costs that are deductible including lasik eye surgery, doctor-prescribed
weight loss programs, and capital expenses for ramps, railings, etc.
installed in a home to accommodate disabilities. The IRS allows the cost
of smoking-cessation programs as a medical expense, but not the costs of
patches and gums. Don't overlook mileage to and from the doctors,
hospitals, and the pharmacy at 18 cents a mile in 2006.
7- Buy Supplies Now, If You're Self-Employed: Self-employed taxpayers who
use the cash method of accounting can pay bills on or before December
31, to claim the expense on a 2006 return. Stock up on necessary
supplies and equipment and take advantage of the section 179 deduction
of up to $108,000 for fax machines, computers and other big-ticket
items.
8- Sell "loser" stocks. Perhaps you have experienced a stock market slide
and its effect on your portfolio.

Religion-Based Tax Breaks: Housing

2006-10-12T15:57:00.000-04:00
A legal battle between the IRS and the author of, ''The Purpose Driven Life,'' by Pastor Warren recently ended with positive results for leaders of houses of worship.

The housing deduction is one of several tax breaks that leave extra money in the pockets of clergy members and their religious employers. Ministers of every faith are also exempt from income tax withholding and can opt out of Social Security. And every state but one exempts religious employers from paying state unemployment taxes -- reducing the employers' payroll expenses but also leaving their workers without unemployment benefits if they are laid off.

For Tens of thousands of ministers -- and their financial advisers -- Pastor Warren will also be remembered as their champion in a fight over the most valuable tax break available to ordained clergy members of all faiths: an exemption from federal taxes for most of the money they spend on housing, which typically represents roughly a third of their compensation. Pastor Warren argued that the tax break is essential to poorly paid clergy members who serve society.

The Housing Exemption
The one small passage in the vast federal tax code that originally conferred the housing-expense exemption on clergy members did not cap the deduction. But in 1971, the Internal Revenue Service limited it to the ''fair market rental value'' of the furnished home, utilities included.
During a routine audit in 1996, according to court documents, the I.R.S. decided that Pastor Warren's housing deduction exceeded the rental value of his new home on Via Del Sol in the rugged Trabuco Canyon, southeast of Los Angeles.

Pastor Warren, who gives 90 percent of his considerable income to charities, later explained in an open letter to other ministers that he decided to sue because the housing allowance was the only way small churches could pay their pastors enough to live -- and he knew that those ministers could not fight the I.R.S. as he could.

It took four years -- and far more of Pastor Warren's money than the $55,300 disputed in the audit -- but on May 16, 2000, the United States Tax Court struck down the I.R.S.'s cap and ruled that clergy members could deduct ''the amount used to provide a home,'' however much that might be.

Pennewell Invitational Tournament Recap

2006-10-10T13:16:00.000-04:00
Wow, a battle erupted at our golf tourney! Late Sunday with the sun going down, Tom Dorsch and Scott Carter won an epic battle for the 3rd annual Pennewell Invitational. They inched out Charlie Jaromin and Bob who were both questioning how they did come away with a repeat of a past years victory. 3rd place went to John Groubert and his son Johnny Groubert who this author told you would place well. Rounding out the winners circle was your very own Nick Pennewell and Steve Bishop.
The long drive contest was donated by Kelly & Coyle, PA. The long drive contest went to Scott Carter who used a technical ruling to attain the prize. His drive had landed just off the fairway, but with the 1 club rule traditional in scrambles he "found" the fairway and the win. The other long drive was aptly won by the 3rd place finisher John Groubert.
Closest to the Pin was won by Wayne Pennewell who somehow managed to get inside of his son Nick for the win. There is some question wheter a technical ruling assisted the eldest Pennewell. Johnny Groubert stoned the closest to the pin on the back nine for the win going away.
We appreciate our donors: Penn Pro, Kelly & Coyle, PA, and Nicholas J. Pennewell, CPA for their assistance in putting the tournament together.

Great news for CPAs

2006-10-02T13:27:00.000-04:00
The following is about to become law.
Oct. 2, 2006
— Congress passed a bill that exempts certified public accountants from the Gramm-Leach-Bliley Act's requirement that CPAs send their clients an annual privacy notice, the American Institute of Certified Public Accountants announced. The exemption will be effective as soon as President Bush signs the bill.

Pennewell Invitational, 3rd Annual
The 3rd annual Pennewell Golf Invitational will get underway on Oct 7, 2006 at 1pm. We are expecting a good turnout as defending champion Charlie Jaromin and his fierce accomplice will try to repeat as champions once again. Jay Allen and his son, past champions, will try to regain their lost glory but face an uphill climb as the competition is tough. A dark horse in the competition is the team of Wayne Pennewell and his partner from Atlanta. The team is considered dark horses because Wayne injured himself (emotionally) at an earlier golf outing and has yet to recover. Nick Pennewell will team with Orlando resident Steve Bishop in an attempt to bring home the tournament title he has created. Making his first appearance will be John Groubert playing with son. John is expected to show well. Mark Pennewell and Justin Powers combine forces to attempt to overshadow the "older" competitors in the competition. A new team in the tourney is Danny Reynolds and Zip. This twosome is probably the early favorites as the tournament approaches!

Financial questions, talk to a CPA today!

2006-08-30T20:17:00.000-04:00

IRS Tax Conference

2006-08-23T07:02:00.000-04:00
Attended an IRS Tax conference in Orlando, Florida in the first week of August. Involvement included classes on some of the most controversial tax matters of today as well as face to face meetings to get a lock on IRS positions with some cases that I am involved with.

Ownership of Health Insurance Plan

2006-06-01T06:44:00.000-04:00
IRS: ABOVE-THE-LINE DEDUCTION FOR S CORP HEALTH INSURANCE ONLY WORKS FOR COMPANY-OWNED POLICIES: In recent years S Corp taxpayers could deduct all of their health insurance "above the line," without having to clear the 7.5% of AGI hurdle.The IRS has decided to make it just a little harder for S corporation owners to qualify for this deduction. According to an announcement yesterday, S corporation shareholders will be able to take their health insurance costs "above the line" only when the S corporation has purchased the health insurance.This means S corporation shareholder-employees need to make sure that they have their corporations purchase their health insurance and include it in their W-2 income; otherwise the IRS will challenge the deduction.

New Tax Deduction!!!

2006-05-29T07:54:00.000-04:00
Government to Stop Collecting Long-Distance Telephone Tax

The Internal Revenue Service will stop collecting the federal excise tax on long-distance telephone service.
The tax on telephone services was first imposed in 1898. The current rate is 3% of the charges billed for these services. The IRS announcement follows decisions in five federal appeals courts holding that the tax does not apply to long-distance service as it is billed today.
Taxpayers will be eligible to file for refunds of all excise tax they have paid on long-distance service billed to them after Feb. 28, 2003. Interest will be paid on these refunds.
Taxpayers will claim this refund on their 2006 tax returns. In order to minimize burden, the IRS expects to announce soon a simplified method that individuals may use.
“So taxpayers won’t have to spend time digging through old telephone bills, we’re designing a straightforward process that taxpayers may use when they file their tax returns next year,” said IRS Commissioner Mark W. Everson. “Claiming a refund will be simple and fair.”
The IRS announcement does not affect the federal excise tax on local telephone service, which remains in effect. Likewise, various state and local taxes and fees paid by telephone customers are also unaffected.

Everyone can convert an IRA to a Roth in 2010

2006-05-18T11:16:00.000-04:00
Roth IRA will save U.S. taxpayers Billions (collectively)
The President signed into law an extraordinary deal for high-income people with retirement savings accounts. By paying $1 in income taxes before the taxes are due, these investors may be able to avoid future taxes equivalent to $3.50.
The SAVINGS ARE A a one-time opportunity in 2010 for anyone to convert a conventional individual retirement account, where taxes are deferred until money is withdrawn, into a Roth IRA, where investment gains are tax-free. Conversions are now limited to people who make less than $100,000 a year.
Part of the tax savings arises from rules, set by Congress, that require people to withdraw money from traditional retirement accounts starting the year after the one in which they turn 70. For Roths, mandatory withdrawals apply only to heirs, permitting the magic of compound interest to swell the accounts' value for a much longer time for those willing to leave the money alone.
The estimated tax savings was based on current income tax rates. The savings would be greater if tax rates rose in the future, as Mr. Burman says they will because the government is spending more than it is taking in.
Some government officials also warned that people who converted to Roths might be worse off, especially if they withdrew their money quickly instead of allowing their Roth accounts to grow in value.
And some of the government officials warned that much of the tax advice on Roths that he saw promoted on the Internet was flawed. They noted that even technical violations of retirement savings rules could result in draconian tax penalties. ''This is a very tricky area,'' he said.
Roth IRA's are now available only to couples making less than $160,000 and single people making less than $110,000. But in 2010 anyone, regardless of income, would be permitted to roll over unlimited sums from IRA's into a Roth.
Everyone interviewed agreed that the smart strategy would be to pay the taxes from a source outside of the retirement account being converted to a Roth. That would preserve the amount of money available to generate tax-free returns.
To help people cover the tax on the conversion, the measure would permit the taxes to be paid in two installments, in 2011 and 2012. An almost identical deal was signed into law by President Clinton, permitting such conversions to Roths in 1998, but with the taxes paid in four annual installments.

Social Security tax items

2005-12-05T08:12:00.000-05:00
SOCIAL SECURITY MAX INCREASES TO $90,000 FOR 2005
The government increases the maximum social security taxes that you can pay each year. The maximum wage base for 2005 is $90,000, an increase of $2,100 from the 2004 max of $87,900. At a rate of 6.2%, the total social security taxes that your employer will withhold from your salary increases from $5,449.80 in 2004 to $5,580.00 in 2005. In addition, every employee has Medicare taxes withheld from their pay at a rate of 1.45%. There is no limit on your wages subject to this tax.
If you work for more than one emloyer and Earn More Than $90,000 for 2005, each of your employers will withhold social security taxes from the first $90,000 that you earn from them. At a rate of 6.2%, this translates into total social security taxes of $5,580.00. There are situations when you might have more than the maximum withheld during the course of the year. Since employers are required to withhold social security taxes on the first $90,000 earned by each of their employees (this allows the government to keep the employer's matching contributions), if you work for more than one employer and earn more than $90,000 during 2005, you'll have excess social security taxes withheld. Make sure to take credit for these excess taxes on your 1040 as additional federal taxes paid in.

IRS details 2006 Mileage allowance

2005-12-02T15:14:00.000-05:00
IRS Adjusts Mileage Rate to 44.5 Cents
The Internal Revenue Service on Friday set the deductible rate that workers can claim next year for using personal cars on business at 44.5 cents a mile.
That's less than a temporary rate that the tax agency put in place for the last four months of this year, reflecting higher prices at gas pumps nationwide. The temporary rate is 48.5 cents a mile.
Next year's rate is higher than the 40.5 cents a mile in effect for most of this year. Many businesses use the IRS rate as a benchmark for reimbursing employees for travel costs.

IRS Changes rules for filing an extension

2005-11-13T12:06:00.000-05:00
The IRS has altered the way it accepts filing for extension. Taxpayers now can ask for an automatic, six-month filing extension for business and individual returns.
The old IRS procedure was to allow an automatic four month extension; then, a 2 month extension request could be filed, but there had to be a reason with the second extension.
Lastly, a tax filing extension does NOT extend the tax-payment deadline.

Looking to really build up your Deferred Compensation?

2005-11-05T09:14:00.000-05:00
If you have business, then you need to consider the following plan:
A Simplified Employee Pension Plan, commonly known as a SEP-IRA, is a retirement plan specifically designed for self-employed people and small-business owners.

To Establish the SEP
When establishing a SEP-IRA plan for your business, you and any eligible employees establish your own separate SEP-IRA; employer contributions are then made into each eligible employee's SEP-IRA.

Key features are highlighted below:
- Plan eligibility
- Tax advantages
- SEP-IRA deadline
- Contribution flexibility
- Plan eligibility

You can establish a SEP-IRA if you: Are a sole proprietor, in a partnership, or a business owner (of either an unincorporated or incorporated business, including Subchapter S corporations);
Earn any self-employed income by providing a service, either full-timeor part-time, even if you are already covered by a retirement plan at yourfull-time job. Top

Tax advantages Tax-deductible contributions-
Up to 25% of compensation, as much as $41,000 for the 2004 plan year and$42,000 for the 2005 plan year.*
Tax-deferred growth potential Any investment earnings grow tax-deferred until withdrawn.

* The maximum compensation on which contributions can be based is $205,000for the 2004 plan year and $210,000 for the 2005 plan year. For self-employed individuals, compensation means earned income. Top SEP-IRA deadline The deadline to open and contribute to a SEP-IRA is: Your tax filing deadline (including any extensions). For most self-employed individuals and small-business owners, thatdeadline is usually April 15.

2005 Tax Year IRA information

2005-11-04T09:40:00.000-05:00
Question: Can I contribute to a traditional IRA if I have other retirement plans?
Answer: Yes, you can contribute to a traditional IRA whether or not you are covered by another retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer-sponsored retirement plan.
Also, note that contributions to a Roth IRA are not deductible and income limits apply.] See Publication 590 for further information.
Their is an effect if You Are Covered by a Retirement Plan at Work. If you are covered by a retirement plan at work, use the IRS tables to determine if your modified AGI affects the amount of your deduction.

IF your filing status is .(fill in status a,b,or c below).. AND your modified adjusted gross income (modified AGI) is ...
THEN you can take ...
(a) single or head of household(filing status) $45,000 or less a full deduction. OR more than $45,000 but less than $55,000 a partial deduction. $55,000 or more no deduction.
(b) married filing jointly or qualifying widow(er) $65,000 or less a full deduction.
more than $65,000 but less than $75,000 a partial deduction.
$75,000 or more no deduction.
(c) married filing separately 2 less than $10,000 a partial deduction.
$10,000 or more no deduction.

1 Modified AGI (adjusted gross income). 2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the ?Single? filing status).

College costs continue to RISE!

2005-10-20T15:56:00.000-04:00
College costs going nowhere but up as growing cost of higher education shows no sign of slowing.
While college freshmen may be unnerved by their new environment, their cash-strapped parents are probably trembling more.
As they have for the last ten years, college costs rose faster than inflation this year, according to the report "Trends in College Pricing 2005."
The rate of growth in tuition costs at four-year private colleges was about the same as last year -- 5.9 percent -- to $21,235. But growth slowed in tuition costs at four-year public universities. They rose 7.1 percent to $5,491. Last year, public school tuition jumped 10.5 percent.
Oh yeah, tuition costs are not all there is. Including room and board, the cost of attending a private college is $29,026 per year on average, and $12,127 at four-year public universities.

Financial Aid helps-Many college students don't pay sticker price. 63 percent of students receive some form of aid, either loans, grants or both, according to the National Association of Student Financial Aid Administrators.
On average, full-time students at private institutions get about $9,600 in aid in the form of grants and tax benefits. At public four-year schools, the average is $3,300.
On an inflation-adjusted basis, federal grant aid has increased by $8 billion over the past decade, while loans provided by college and universities to their students rose $11 billion. Also, state grant aid for students is up 78 percent over the last ten years.
Nevertheless, the 2004-5 increase in inflation-adjusted grant dollars was the smallest in the past decade, and grants represent a smaller percentage of students' aid package.
Ten years ago, grants comprised 23 percent of federal aid, loans 75 percent and work-study programs 2 percent. This year, grants are down to 20 percent, loans make up 70 percent, work-study makes up 1 percent. The remaining 9 percent comes from federal tax credits and deductions.
The study found that the average debt for graduating college seniors who borrow to finance their undergraduate degree is just under $20,000. Talk about starting in the hole. And loans from private sources -- which frequently have less favorable interest rates than federal programs -- are growing more common.
Lower-income students still receive a larger percentage of available aid than upper-income students, but significant changes in aid distribution are afoot.
A major benefit to low-income students in years past was the Pell Grant, which is provided strictly on the basis of financial need. But the grant's ceiling has not been adjusted for inflation or tuition increases, even as both have eroded families' ability to foot college bills.
The maximum PELL contribution remains at $4,000. Therefore the Pell Grant covers a smaller and smaller portion of students' total tuition costs."
And apparently tax credit and deduction options disproportionately benefit people in higher tax brackets.
Why costs continue to mount
Public universities have in recent years found themselves at the mercy of strained state budgets, and had to hike their tuitions to keep their books balanced.
While the College Board report does not go into depth in looking at the reasons behind cost hikes, it says that health benefits and rising utility costs have factored into the increases.
Given the past decade of steady prices increases it might not be unreasonable to take the steep annual hikes as a given.
The study found that some schools -- in response to complaints about continual price hikes -- have offered families guarantees that tuition will remain constant through four years of study.

The benefits of a bachelor's
In an accompanying survey, "Education Pays 2005," the College Board analyzes the benefits in lifetime earnings trends of those who've earned a college degree.
In 2003, workers with bachelor's degrees earned a median of $49,900. Those who'd completed several years of college with no degree had median earnings of $35,700, while those with a high school diploma averaged $30,800.
Projecting this over a 40-year career, the study calculated that a college graduate will earn about 73 percent more than a high school graduate.

Mileage Rate Increase from 9/1-12/31/05

2005-09-10T21:30:00.000-04:00
IRS Increases Mileage Rate Until Dec. 31, 2005

The Internal Revenue Service announced an increase to the optional standard mileage rates for the final four months of 2005.
The rate will increase to 48.5 cents a mile for all business miles driven between Sept. 1 and Dec. 31, 2005. This is an increase of 8 cents from the 40.5 cent rate in effect for the first eight months of 2005, as set forth in Rev. Proc. 2004-64.
While gasoline is a major factor in the mileage figure, other items enter into the calculation of mileage rates, such as the price of new vehicles and insurance.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of the extra burden of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
The new four-month rate for computing deductible medical or moving expenses will be 22 cents a mile, up from 15 cents for the first eight months of 2005. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Charities that Qualify for deductions

2005-09-02T11:52:00.000-04:00
See the web site below in order to find a Charity where donations are allowed by the IRS.

http://www.irs.gov/charities/article/0,,id=96136,00.html

Just click on Search Now, in the Most Recent Date Update section and you will be given search criteria to complete.

Thanks...

2005-09-01T06:19:00.000-04:00
With the Pennewell Invitational golf tournament only days away, October 1st, I would like to take time to recognize the contributions of our event sponsors. Without the generous gifts of these individuals, we would not be able to have this event. Thanks to the following sponsors of the Pennewell Invitational:

1-Jay Allen of RSS Field Services, Inc.
2-Nancy Nguyen of Brandon Realty, Inc.
3-Wayne Pennewell of PENN PRO, Inc.
4-I also sponsor the tournament but without the beforementioned individuals, there would not be a tournament.

Energy awareness helps at Tax Time!

2005-08-08T13:05:00.000-04:00
--Businesses get the bulk of the new tax breaks, there are perks for consumers in the new energy legislation awaiting the president's signature.
Tax breaks for hybrid car purchases or home improvements that conserve energy will take effect next year. Still, these tax incentives might be just enough to prompt consumers to make environmentally friendly, energy efficient moves, experts said.
"There are good tax breaks for the consumer," said an officer with the Alliance to Save Energy. "One thing to note, these are tax credits now, not tax deductions." Tax credits reduce your bottom line tax bill dollar-for-dollar, making it more valuable than a deduction.
Among the new federal tax breaks:
--Hybrid cars. Tax credits worth up to thousands of dollars will be available to those buying hybrid cars fueled by gas and electricity as well as other vehicles using alternative power sources.
[This tax credit essentially will replace the $2,000 federal tax deduction on hybrid purchases.
The size of the credit will depend upon the vehicle's weight, fuel economy and lifetime fuel savings.]
Buy a hybrid car next year, for example, and you may receive a tax credit ranging from $250 to $3,400.
But don't wait too long to make that purchase. The credit may only be claimed on the first 60,000 hybrids sold by each manufacturer, and thereafter it's phased out.
The credit will expire in 2010 for hybrid medium and heavy trucks and a year later on hybrid cars and light trucks, according to CCH. It runs through 2014 on fuel cell vehicles.
--Home improvements. You may qualify for a 10 percent tax credit on the cost of home improvements that prevent energy from seeping out of the house, such as adding insulation and energy-efficient windows and doors. (See WSJ, Personal Journal, pp.1&4)
The credit is available for the next two years, and the maximum credit over that time is $500. Of that, no more than $200 can be claimed for windows.
Additionally, homeowners can receive a tax credit for 30 percent of the cost of buying and installing a solar water heater or a solar electric system. The maximum credit is $2,000.
The credit also is available for two years, expiring at the end of 2007.
Often environmentally friendly appliances and equipment cost more upfront, and homeowners recoup the cost over time through lower energy bills. The maximum grant available is $2,000 for a solar water heater and $3,000 for a solar electric system for the home.
--Home construction. Builders may qualify for tax credits on installing energy efficient heating and cooling appliances, and that savings could be passed on to home buyers, Luscombe said. Depending on how much energy is conserved, the credit may be up to $1,000 or $2,000 per residence.

If approved, there will be more time for Individual Filers next year

2005-08-08T11:36:00.000-04:00
New Form 4868 Provides Six-Month Filing Extension-IF APPROVED
We will keep you posted on its passage.

— The Internal Revenue Service released a draft of the revised IRS Form 4868, which if approved will give individual taxpayers a six-month extension without the need to file an intervening form.

Provided the necessary regulations are approved, taxpayers will be able to use the revised form for Tax Year 2005.
For Tax Year 2004, a taxpayer filing a Form 4868 had until August 15 to file the return. The taxpayer needed to file Form 2688 to get an additional two months and had to supply a reason for needing the additional time.

Ways to Pay for College - Scholarship thoughts

2005-06-10T08:24:00.000-04:00
Because Tuition for college is climbing so rapidly, I felt compelled to deliver this timely information to parents in the same boat that I am in (kids and future college expenses!).

Tips on landing Scholarships
Start early (real early), be relentless and don't stop looking for free money even if you're already enrolled, and knock on every door

How early do you need to start thinking about financing higher education?
A: Around eighth grade. When you start earlier, you'll find programs for younger kids that have scholarship money attached. For example, you might do a science or history project, send in your results to a group [holding some sort of competition], and get money in the form of a $1,000 U.S. savings bond. But it's never too late to start. Once you get into college, in fact, a whole new class of scholarships becomes available as you choose an academic major or career path.

Q: What can parents of young children do to save for college?A: Over the past decade, the average increase in college costs has averaged around 6% per year. Investing in a 529 college savings plan or the Florida Prepaid Plan are great ways set aside money.

Q: What's the No. 1 piece of advice for financing higher education?A: There are millions of dollars awarded every year from corporations, foundations, associations, industry groups, and individual schools. You need to approach these organizations. It's up to you to find out about all sorts of help -– from the opportunity to earn credits for college by taking certain standardized tests, like Advanced Placement or International Baccalaureate exams, to financial aid offered by individual institutions.

Q: What's the biggest mistake people make in paying for college?A: One huge mistake people make is that they apply for one or two scholarships and then they stop. How many resume's did you send out before you landed your first job out of college? Something to think about.

Q: Is it a myth that you have to be supersmart or athletic to win money for school?A: Many have minimal requirement, 2.75 GPA and once you meet that minimum bar, the judges don't look at your grades at all. So, you could have a 2.76 or a 3.9, and it wouldn't make a difference. Sometimes, students with really high GPAs have trouble filling out scholarship applications because they tend to rely on their scores alone, and that's not enough. Show how you demonstrated leadership within a club, rather than just listing your affiliation. You want to paint a portrait of who you are, not just what you've done. You do that by making your applications intensely personal and as unique as possible. That helps to make an emotional connection with scholarship judges. They award scholarships to people, not to résumés.

Q: What pitfalls should people avoid when taking out loans? A: Most parents and students pick a lender from their college's preferred lender list. Those lenders don't necessarily offer the best deal to students. They're just the ones that are the easiest for the college to manage, because the partnership allows them to process the paperwork more effectively. That's why it pays to shop around for student loans, rather than just picking one from the preferred list. Also, consider a lender that offers repayment benefits. Some lenders will reduce your loan interest rate a point or two after you have made consecutive, on-time payments. Others will reduce it another quarter-point if you agree to make an electronic-funds transfer directly from your bank account each month.

Protection from Creditors through IRA Accounts

2005-06-07T07:57:00.000-04:00
U.S. Supreme Court Extends Bankruptcy Protection to IRA Accounts
Employee IRA accounts are safe from creditors! The Court ruled that an individual's IRA account balances are safe from the claims of creditors in bankruptcy. The ruling makes it clear that balances in any retirement plan that restricts access to payments with plan provisions governed by ERISA, or just an early withdrawal penalty, are protected whether the plan is an ERISA plan or an IRA.

10% Penalty on Early withdrawal has a Silver Lining
Basis for the Court's Decision is that dreaded 10% penalty incurred if funds are withdrawn before age 59%. The Court stated that 10% is a lot! Since the 10% "restriction" is removed when the individual reaches age 59 Â½, the right to payment is a right to payment "on account of age," and the fund is protected, not by the anti-alienation provision of ERISA, but by the Bankruptcy Code itself.

That analysis is supported by:
-A requirement that distributions must begin no later then the year after the year in which the IRA owner turns 70 Â½
-IRA accounts are not taxed until money is distributed
-withdrawals before age 59 Â½ are subject to a 10% penalty

Getting ready for the Hurricane Season!

2005-06-03T08:43:00.000-04:00
Remember last years Hurricanes?
Twelve days of sales-tax free hurricane supplies is under way. Businesses have altered their computers - starting today - to waive sales tax on many hurricane supplies and welcome those customers who want to save some cash on certain supplies.
"While supplies of all things hurricane-related have been popular since last year's nasty storm season, 12 days of no sales tax on related items could be a bigger boost to local sales," said Karen Cobb, spokeswoman for Lowe's Home Improvement.
Hurricane related items will be covered during the tax holiday, which runs through June 12.
Cobb said the memory of last year's hurricanes is so fresh that generators have already been selling well.
"But we still feel that the awareness of being properly prepared for the season, coupled with the tax-free holiday, will help us to achieve strong and consistent sales all year long," Cobb said.
Keith Phillips, assistant store manager at Lowe's in East Manatee, said his store has already sold several generators.
"We have been busy and generator sales are leading the pack," he said.
The sales tax holiday has Lowe's sponsoring how-to-clinics every day at 11 a.m. on four subjects: generator safety, installing hurricane shutters, boarding up windows and chain saw safety.
"It's one thing to purchase these items with no sales tax, but it's another to go out and use them properly," Cobb said.
When the clocks struck midnight, Florida stores implemented new programming for their computers and registers to knock off the sales tax on the items specified by Gov. Jeb Bush and the state Legislature.
Don Harrison, spokesman for Home Depot, said the company's software and technology department handled the price adjustments from the company's headquarters in Atlanta.
"It's an easy adjustment that we were ready for," Harrison said. "Price changes are automatically fixed when needed for all of our stores."
Also Tuesday, the chain announced plans to reduce prices on affected items by 7.5 percent, which is the maximum sales tax that can be charged by Florida counties. Manatee County's sales tax is 6.5 percent, meaning the additional cut amounts to a 14 percent savings. In Sarasota County, where sales tax is 7 percent, the cuts total 14.5 percent.
Brian Piech, store manager at Crowder Bros. Ace Hardware on Manatee Avenue West, said his store spent extra time identifying and flagging nontaxable items Thursday night.
"We are prepared with additional merchandise," Piech said. "The computers are ready and it will be interesting to see what happens in terms of sales in the coming days."

Grocers react-
"We are fully stocked to for this tax holiday and hope people take advantage of it," said Sweetbay and Kash n' Karry spokeswoman Nicole LeBeau.
Dick Gulash, store manager at Albertsons on Manatee Avenue West, said his store spent several hours checking the prices of related items Thursday.
"It's like putting a discount in the system or changing advertisements on certain items," Gulash said.

Grocer trying to rebound from bankruptcy gets ready for the season.
Terry Derreberry, neighborhood marketing manager for Winn-Dixie Stores, said customers are more aware of what you need to prepare for a storm.
"We have learned you need to prepare for the worst, but hope for the best," Derreberry said. "Both Winn-Dixie and our customers have taken that motto to heart."