The best income to receive tax wise is tax free. And while it may seem surprising there are many kinds of tax free income available. Here are a dozen kinds of income on which you need never to pay tax….
1. New tax free capital gains and dividends. Starting in 2008 capital gains and qualified dividends are tax free to people in the 10% and 15% tax brackets, which cover taxable incomes up to $65,150 on a joint return and $32,550 on a single return. Total income can be larger when taking personal exemptions and standard or itemized deductions into account.
The Alternative: If your income is too high for you to qualify to take such income tax free, consider making gifts of capital gains and dividend paying assets to lower bracket family members who do qualify.
2. Roth IRA and Roth 401(k) earnings. Contributions to these retirement savings accounts are not deductible, but all investment returns earned in them and distributions from them can qualify to be totally tax free.
Long term planning: There is a real risk that tax rates will increase in coming years due to large looming budget shortfalls and surging costs of Medicare and Social Security. If tax rates do rise, tax free income from Roth IRAs and Roth 401(k) will become even more valuable compared with retirement income taxed at ordinary rates when received from traditional IRAs and other kinds of retirement plans.
3. Interest free loans. A parent might want to make a loan to a child. Loan proceeds are tax free to the recipient, and loans given on interest free terms effectively provide fax free income to the recipient by saving the interest cost that would normally be owed when taking out a bank loan or such an amount.
No adverse tax consequences result from an interest free loan if all such loans made by the lender to the recipient do not exceed
A. $10,000 and the recipient does not invest the loan amount in income producing assets
B. $100,000 and the recipient’s net investment income does not exceed $1,000 in one year.
The recipient can obtain a valuable return from the loan proceeds by using them to start a business or buy a home or other asset, pay for education, etc.
Caution: For loans larger than the above amounts and when the rules are not met for loans of the above sizes, interest may be “imputed” on a loan, meaning that tax wise, the loan is treated as if interest is paid on it even though none actually is. The tax consequence: The lender has taxable interest income.
4. Children’s earned income. As a dependent child can receive up to $5,450 of income earned from a job tax free in 2008, protected from tax by the child’s standard deduction. Even better….
A. If the child places a like amount in a Roth IRA, they can earn compounding tax free investment income on it for life.
B. If the child’s salary is paid by a parent’s business, the business can deduct the salary, making that much of its income tax free to the family. If the child is under age 18 and the parent’s business is unincorporated, no Social Security tax is due on the child’s wages.
5. Children’s investment income. The so called “kiddie tax” applies generally to the investment income of children under age 19, and dependent children under age 254 who are full time students, which is taxed at their parent’s tax rate.
But the first $900 of a child’s investment income is exempt from any tax in 2008, and the next $900 will be taxed to the child at the child’s rate. Therefore, you can investment up to $30,000 in the child’s name ; earn the $900 interest and pay no tax on the interest.
6. Perpetually tax deferred gain. Capital gains tax on appreciated properties, such as investment of business real estate, can be delivered by swapping one property for a replacement in a “like-kind exchange” instead of selling the property for case. Taxable gain is deferred until the replacement property is sole, but that property also can be swapped in a tax deferred exchange, and so on, indefinitely. In the meantime, the tax free cash can be obtained from the appreciating properties by borrowing against them.
The requirements to make a like-king exchange are technical, so for the details call your accountant or our office for guidance.
7. Education savings. Contributions to a state sponsored “Section 529” college savings plan and or to a Coverdell Education Savings Account can earn investment returns that are tax free, when used to pay education costs. Also, up to $5,250 received from an employer’s qualified education assistance plan can be taken tax free when used to pay for the employee’s education
8. Home sales. Up to $250,000 of gain can be taken tax free on the sale of a home when you have owned it and used it as a primary residence for two of the prior five years. The income exclusion limit is $500,000 if you file a joint return.
9. Municipal bond interest. This is generally tax exempt from federal income tax, and may be exempt from state and local income tax as well.
Caution: Certain municipal bonds, known as “private activity bonds”, because they finance nongovernmental functions such as construction of sports stadiums, pay interest that is taxable under the alternative minimum tax (AMT). If you may be subject to the AMT, consult your advisor.
10. Gifts. These are tax free to recipients. Gift makers incur no tax cost on gifts up to $12,000 per recipient each year. In addition, gift makers have a $2million lifetime gift tax exemption amount. Gifts can reduce income tax by shifting income producing assets to family members in lower tax brackets, and reduce future estate tax by shifting assets out of an estate.
11. Bequests. These are tax free to recipients, and all taxable gain on bequeathed assets is eliminated at the owner’s death through “stepped up basis”. This resets the basis of inherited property as its market value as of the date of the owner’s death.
Example: A parent owns appreciated investment real estate that would product a $1 million taxable gain if he sold it. If he instead bequeaths the property to his children, they can sell it tax free for its value at the date of his death.
12. Employer provided tax free fringe benefits and “perks”. Employers can provide a wide range of tax free fringe benefits that effectively provide employees with tax free income.
Example: Employer matching contributions to 401(k) savings, group term life insurance coverage, disability insurance, flexible spending accounts into which employees can deposit a pretax portion of salary to pay for medical or dependent care coasts, employee discounts on products or services, free parking worth up to $220 per month and transit passes worth up to $115 per month. Check with your employer’s benefits manager to be sure that you are not missing out on any tax free pay.
CALL ON US
This publication is issued as a service to our clients and friends. This intellectual capital is of general nature and should not be acted upon without professional guidance. So if you know someone that is looking for a way to save taxes and avoid the IRS, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions. No Time limit. No IRS.
Sunday, December 28, 2008
Saturday, December 27, 2008
BUY MOM and DAD'S HOUSE, AND RENT IT BACK
So your aging parents live in a home that has soared in value, but they’re no longer getting any of the homeownership tax breaks during their retirement. Sound Familiar?
GOOD NEWS.
With one stroke of the pen, both you and your parents can win. They’d gain instant access to their home equity, without moving, and you’d pick up some generous new tax deductions. How? Buy your parents’ house, and then rent it back to them, at the going rate.
REASONS FOR THE SALE & LEASEBACK.
Under the current home-ownership setup, your combined family unit is overpaying the IRS. Your parents mortgagee is either paid off or the payments represent mostly principal at this point. Even if they still take interest deductions, your parents’ tax bracket might be low in retirement, so those deductions don’t provide much tax savings. In fact, many retirees take the standard deduction rather then itemizing.
Here are two good reasons for your parents to opt into this plan:
1. It puts cash in their pockets without having to refinance or dip into a home equity loan;
2. It allows them to put their money into safer investments than the real estate market.
TRANSFERING THE HOUSE.
To avoid gift-tax complications, pay a fair price for the home. Support the buying price with newspaper listings of similar homes. Then, both sides should enter into a lease at a fair rental value.
One benefit: Courts have said that landlords can reduce their fair market rent by 20% when renting to relatives. That lower rent reflects the savings in maintenance and management costs. (L.A. Bindseil Tax Court Memo 1983-411) But don’t set the rent too low the IRS might say the rental home is really for your personal use. In that case, your deductions might be limited to mortgage interest and property tax, the same as if you owned a vacation home.
TAKING DEDUCTIONS.
Once you own your parents’ house, you’re entitled to reap the tax benefits of owning rental property. That includes taking write-offs for operating expenses, such as utilities, maintenance, insurance, repairs and supplies.
You can also claim depreciation deductions for the home but you can’t depreciate the cost of the property apportioned to land. So obtain an appraisal allocating the price paid between the depreciable structure and the no depreciable land.
You can use these deductions to offset the rental income received from your parents. Any allowable tax loss will phase out for people with adjusted gross incomes between $100,000 and $150,000. You can take any suspended losses when you sell the house.
Bonus benefit: Once you own the house, you can write off travel expenses you incur when visiting the house. As a result, you can secure generous deductions for your usually nondeductible trip to Mom and Dad’s for Christmas.
ENDGAME.
Eventually, your parents won’t be able to live in the house. Then, you can sell it, rent it to another tenant or move in. If you move in and make it your principal residence for a least two years, you can sell it and shelter another $250,000 to $500,000 worth of capital gains: a true tax bonanza!
CALL ON US.
This publication is issued as a service to our clients and friends. This intellectual capital is of general nature and should not be acted upon without professional guidance. So if you know someone that is looking for a way to save taxes and avoid the IRS, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
GOOD NEWS.
With one stroke of the pen, both you and your parents can win. They’d gain instant access to their home equity, without moving, and you’d pick up some generous new tax deductions. How? Buy your parents’ house, and then rent it back to them, at the going rate.
REASONS FOR THE SALE & LEASEBACK.
Under the current home-ownership setup, your combined family unit is overpaying the IRS. Your parents mortgagee is either paid off or the payments represent mostly principal at this point. Even if they still take interest deductions, your parents’ tax bracket might be low in retirement, so those deductions don’t provide much tax savings. In fact, many retirees take the standard deduction rather then itemizing.
Here are two good reasons for your parents to opt into this plan:
1. It puts cash in their pockets without having to refinance or dip into a home equity loan;
2. It allows them to put their money into safer investments than the real estate market.
TRANSFERING THE HOUSE.
To avoid gift-tax complications, pay a fair price for the home. Support the buying price with newspaper listings of similar homes. Then, both sides should enter into a lease at a fair rental value.
One benefit: Courts have said that landlords can reduce their fair market rent by 20% when renting to relatives. That lower rent reflects the savings in maintenance and management costs. (L.A. Bindseil Tax Court Memo 1983-411) But don’t set the rent too low the IRS might say the rental home is really for your personal use. In that case, your deductions might be limited to mortgage interest and property tax, the same as if you owned a vacation home.
TAKING DEDUCTIONS.
Once you own your parents’ house, you’re entitled to reap the tax benefits of owning rental property. That includes taking write-offs for operating expenses, such as utilities, maintenance, insurance, repairs and supplies.
You can also claim depreciation deductions for the home but you can’t depreciate the cost of the property apportioned to land. So obtain an appraisal allocating the price paid between the depreciable structure and the no depreciable land.
You can use these deductions to offset the rental income received from your parents. Any allowable tax loss will phase out for people with adjusted gross incomes between $100,000 and $150,000. You can take any suspended losses when you sell the house.
Bonus benefit: Once you own the house, you can write off travel expenses you incur when visiting the house. As a result, you can secure generous deductions for your usually nondeductible trip to Mom and Dad’s for Christmas.
ENDGAME.
Eventually, your parents won’t be able to live in the house. Then, you can sell it, rent it to another tenant or move in. If you move in and make it your principal residence for a least two years, you can sell it and shelter another $250,000 to $500,000 worth of capital gains: a true tax bonanza!
CALL ON US.
This publication is issued as a service to our clients and friends. This intellectual capital is of general nature and should not be acted upon without professional guidance. So if you know someone that is looking for a way to save taxes and avoid the IRS, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
Friday, December 26, 2008
REDUCE YOUR TAXES WITH AN INSTALLMENT SALE
If you’re thinking about selling property at a substantial profit, you should consider an installment sale. An installment sale lets you report your capital gains over a number of years and can often result in sizeable tax savings.
Take Fred Little, for example. Fred owns Adam, Up and Billem, a thriving lawn care firm. Adam, Up and Billem was created when Fred entered State College and spent his summer vacations mowing lawns to help pay for his tuition. Fred quickly built a reputation for reliability and soon hired several follow students to keep up with the demand for his services. By the time he finished his education, Fred had cultivated a growing firm.
Now Fred wasn’t the type to let an opportunity pass him by. When one of his customers told him that he was thinking of selling a piece of land, that Fred mowed, Fred decided to buy the land. This proved to be a good investment after several years. When Fred decided to sell the property it did not take long to find a buyer. When the property was sold Fred made a profit of $80,000.
Unfortunately, Fred didn’t realize that he had a silent partner who would reap a good portion of Fred’s profit. That silent partner was the federal and state taxing authorities. When Fred filed his federal and state tax returns, he discovered that, based on his $75,000 salary from Adam, Up and Billem, the joint tax return tax rates, personal exemptions if $6,200, and ignoring all other deductions, his federal income taxes totaled $20,256. And this did not include the state taxes.
A BETTER SOLUTION
Fred had a green thumb for the landscaping business, but he paid a costly price for not knowing about the advantages of an installment sale. An installment sale would have allowed Fred to use a special method of reporting his gain. Using that method, Fred’s taxes on the gain would have been deferred over a number of years and his current taxes would have been sharply reduced.
Under the method of reporting, the gross profit on the sale, when at least one payment is to be received after the year in which the sale is made, is prorated over the years in which payments are received rather than taxed in the year of the sale.
The taxable gain from an installment sale is determined by multiplying the installment sale receipts in the taxable year by the gross profit ration for the sale. Because the gain is spread over a number of years, the installment method will usually result in a lower total income tax.
Here’s what this would mean to Fred Little. If he had made an installment sale over four years and received payments of $50,000 each year, he would report only $20,000 of income from the sale on his tax return as shown here:
1. Gross profit ($200,000 selling price less $120,000 cost)…..$80,000
2. Gross profit ration ($80,000 gross profit divided by
$200,000 selling price)……………………………...............40%
3. Taxable income (40% of $50,000 per year)…………………$20,000
For Fred, this would produce significant tax savings. If he had sold his land and received payments of $50,000 a year for four years, he would report only $20,000 in gain on his tax return instead of $80,000. This would reduce his federal income tax from $20,256 to $11,256.
Deciding when and how to make an installment sale requires training and experience. Your accountant will be glad to give you the professional advice that is right for your situation.
CALL ON US
This publication is issued as a service to our clients and friends. This intellectual capital is of general nature and should not be acted upon without professional guidance. So if you know someone that is looking for a way to save taxes and avoid the IRS, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
Take Fred Little, for example. Fred owns Adam, Up and Billem, a thriving lawn care firm. Adam, Up and Billem was created when Fred entered State College and spent his summer vacations mowing lawns to help pay for his tuition. Fred quickly built a reputation for reliability and soon hired several follow students to keep up with the demand for his services. By the time he finished his education, Fred had cultivated a growing firm.
Now Fred wasn’t the type to let an opportunity pass him by. When one of his customers told him that he was thinking of selling a piece of land, that Fred mowed, Fred decided to buy the land. This proved to be a good investment after several years. When Fred decided to sell the property it did not take long to find a buyer. When the property was sold Fred made a profit of $80,000.
Unfortunately, Fred didn’t realize that he had a silent partner who would reap a good portion of Fred’s profit. That silent partner was the federal and state taxing authorities. When Fred filed his federal and state tax returns, he discovered that, based on his $75,000 salary from Adam, Up and Billem, the joint tax return tax rates, personal exemptions if $6,200, and ignoring all other deductions, his federal income taxes totaled $20,256. And this did not include the state taxes.
A BETTER SOLUTION
Fred had a green thumb for the landscaping business, but he paid a costly price for not knowing about the advantages of an installment sale. An installment sale would have allowed Fred to use a special method of reporting his gain. Using that method, Fred’s taxes on the gain would have been deferred over a number of years and his current taxes would have been sharply reduced.
Under the method of reporting, the gross profit on the sale, when at least one payment is to be received after the year in which the sale is made, is prorated over the years in which payments are received rather than taxed in the year of the sale.
The taxable gain from an installment sale is determined by multiplying the installment sale receipts in the taxable year by the gross profit ration for the sale. Because the gain is spread over a number of years, the installment method will usually result in a lower total income tax.
Here’s what this would mean to Fred Little. If he had made an installment sale over four years and received payments of $50,000 each year, he would report only $20,000 of income from the sale on his tax return as shown here:
1. Gross profit ($200,000 selling price less $120,000 cost)…..$80,000
2. Gross profit ration ($80,000 gross profit divided by
$200,000 selling price)……………………………...............40%
3. Taxable income (40% of $50,000 per year)…………………$20,000
For Fred, this would produce significant tax savings. If he had sold his land and received payments of $50,000 a year for four years, he would report only $20,000 in gain on his tax return instead of $80,000. This would reduce his federal income tax from $20,256 to $11,256.
Deciding when and how to make an installment sale requires training and experience. Your accountant will be glad to give you the professional advice that is right for your situation.
CALL ON US
This publication is issued as a service to our clients and friends. This intellectual capital is of general nature and should not be acted upon without professional guidance. So if you know someone that is looking for a way to save taxes and avoid the IRS, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
Thursday, December 25, 2008
HOW TO GET THE LOAN
Regardless of whether interest rates are high or low, the ability to borrow is an important factor in running a business. Whether you need to borrow money now or in the future, it’s good business practice to know what information a banker or other lender will need to grant your loan request. This information falls into two broad categories.
The first is general information about you, your business, your product or service, and your plans for the firm. While some banks will gather this information from a loan application, it is wise to prepare a clear, written presentation of the general facts about you, your firm and the product or service. This should be in the form of a business plan.
The second type of information a lender needs is financial information. This includes several key documents, each of which plays an important role in the lender‘s decision.
GENERAL INFORMATION
You’ll probably be asked to supply some of this information on the loan application, but you can often provide additional facts that will have a favorable impact on a lender. That’s why it’s good strategy to prepare a written presentation that gives a lender a clear description of you and the business industry you are in. Here is a checklist for the general information you should include in your written presentation:
1. Your management background, abilities, and accomplishments as well as
those of your key management personnel;
2. A general description of the nature of the industry or business you are in;
3. The sale potential of your product or service. This should include your short-term and long-term marketing plans and how you intend to handle any problems or opportunities which your business face;
4. An explanation of exactly how the money you are borrowing will be spent, whether the amount is sufficient for your immediate or long-term purposes, and how the borrowed funds will contribute to your firm’s overall well being.
In short, your general information presentation should tell the lender who you are, what your business has done and what you expect to do, how you intend to reach your goals, and of course, how the money you are borrowing will help you achieve those goals. If you make a logical presentation of this general information, you will set the stage for a clear understanding of your financial information.
FINANCIAL INFORMATION
It is critical that you present all financial information in a formal, professional manner. A sloppy financial presentation is almost certain to result in the rejection of your loan request. The following financial documents should ge prepared by your accountant:
1. A personal financial statement for you and other principals of the business or other guarantors of the loan. Be sure that your personal financial statement includes the amount of money that you yourself have a risk in the business;
2. A balance sheet which shows your company’s assets and liabilities for your most recent accounting period. It’s important that the balance sheet includes the amount of the company’s present indebtedness and the terms of repayment of any outstanding loans. Copies of recent company tax returns should be attached to the balance sheet as supporting material;
3. An income statement which shows the company’s profit performance over a specific period of time;
4. A cash flow projection which includes the prospective loan funds and other sources of money and shows how the money will be used;
5. A sales forecast which projects and preferably allocates sales by type of customer over a given period of time;
6. A current ratio position which shows the relationship between the company’s current assets and current liabilities;
HOW BANKS USE RATIOS TO MEASURE YOU
When bankers and other lenders look at on your company’s financial statements, they use financial ratios to quickly develop a profile of your business. An understanding of the most common of these ratios cannot only help you in your dealings with your banker, but it can also be a valuable tool to help you manage your business better.
To assess the company performance, bankers compare your financial ratios to those of other companies in your industry, so whether your ratios are good or bad depends on the type of business you are in. Of the dozens of financial ratios that can be computed, here are the six that many bankers, accountants and business executives consider the most meaningful.
A. Current assets to current liabilities. This ratio is also called a “current ratio”. It is an indicator of your company’s ability to pay debts that are due within a year. In calculating this ratio, “current” assets mean “liquid” assets such as cash, receivables, inventory, and marketable securities. Many lenders consider this ratio the most important of all and look for a current ratio of as least 1 ½ to 1.
B. Net after tax profits to tangible net worth. This ratio is an important indication of profitability and of how well you manage your business, because it measures return on investment. A high percentage return on investment is an important sign that a business is healthy.
C. Average collection period of receivables. By dividing accounts receivable by average credit sales per day, you can calculate your average collection period in days. This will tell you the extent to which your operating capital is tied up in receivables. For example, if your average collection period is 80 days and your credit terms are 30 days, your collection procedures may need improvement or some of your larger customers may be well past due.
D. Inventory turnover. By dividing net sales by average inventory in a given time period, you can determine who many times your inventory has turned over. Because it is based on financial information, this turnover does not represent actual physical inventory turnover, but if it is high, it is usually an indication that your inventory turnover is good.
E. Fixed assets to tangible net worth. This ratio shows what portion of your capital is tied up in plant and equipment and therefore is not available for operating capital or for payment of debts. It is a measure of the liquidity of your company’s net worth.
F. Total debt to tangible net worth. This ratio is often critical to bankers because if your company’s total debt is greater than its tangible net worth, your business is considered to be under-capitalized; much like the banks are right now. Inadequate capitalization is usually a red flag to a loan officer.
WHAT IS MY ROLE… YOUR ACCOUNTANT
It is important to involve your accountant in both the preparation of all financial documents and in your meetings with the lender. Your accountant can supply whatever degree of asurance about the financial information that your lender may require. The degree of assurance will vary, depending on matters such as the lender’s previous experience with you, the size of the loan, and how well the bank knows your firm.
For example, audited financial statements may be required if you are requesting a large loan and the lender has not had any previous experience with your company. In other situations, a review of the financial information by your accountant may be sufficient, particularly if the lender has had previous dealings with and your firm.
It is generally recognized that banks credit standards vary among banks, some banks have tighter credit standards than others. But if you’re properly prepared and make a solid presenetation, your chances of getting that vital business loan will be greatly improved.
CALL ON ME
The intellectual capital is of general nature and should not be acted upon without professional guidance. As the founder and managing member, I want to be your guide. So if you know someone that is looking for a way to save taxes and avoid IRS audits, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
The first is general information about you, your business, your product or service, and your plans for the firm. While some banks will gather this information from a loan application, it is wise to prepare a clear, written presentation of the general facts about you, your firm and the product or service. This should be in the form of a business plan.
The second type of information a lender needs is financial information. This includes several key documents, each of which plays an important role in the lender‘s decision.
GENERAL INFORMATION
You’ll probably be asked to supply some of this information on the loan application, but you can often provide additional facts that will have a favorable impact on a lender. That’s why it’s good strategy to prepare a written presentation that gives a lender a clear description of you and the business industry you are in. Here is a checklist for the general information you should include in your written presentation:
1. Your management background, abilities, and accomplishments as well as
those of your key management personnel;
2. A general description of the nature of the industry or business you are in;
3. The sale potential of your product or service. This should include your short-term and long-term marketing plans and how you intend to handle any problems or opportunities which your business face;
4. An explanation of exactly how the money you are borrowing will be spent, whether the amount is sufficient for your immediate or long-term purposes, and how the borrowed funds will contribute to your firm’s overall well being.
In short, your general information presentation should tell the lender who you are, what your business has done and what you expect to do, how you intend to reach your goals, and of course, how the money you are borrowing will help you achieve those goals. If you make a logical presentation of this general information, you will set the stage for a clear understanding of your financial information.
FINANCIAL INFORMATION
It is critical that you present all financial information in a formal, professional manner. A sloppy financial presentation is almost certain to result in the rejection of your loan request. The following financial documents should ge prepared by your accountant:
1. A personal financial statement for you and other principals of the business or other guarantors of the loan. Be sure that your personal financial statement includes the amount of money that you yourself have a risk in the business;
2. A balance sheet which shows your company’s assets and liabilities for your most recent accounting period. It’s important that the balance sheet includes the amount of the company’s present indebtedness and the terms of repayment of any outstanding loans. Copies of recent company tax returns should be attached to the balance sheet as supporting material;
3. An income statement which shows the company’s profit performance over a specific period of time;
4. A cash flow projection which includes the prospective loan funds and other sources of money and shows how the money will be used;
5. A sales forecast which projects and preferably allocates sales by type of customer over a given period of time;
6. A current ratio position which shows the relationship between the company’s current assets and current liabilities;
HOW BANKS USE RATIOS TO MEASURE YOU
When bankers and other lenders look at on your company’s financial statements, they use financial ratios to quickly develop a profile of your business. An understanding of the most common of these ratios cannot only help you in your dealings with your banker, but it can also be a valuable tool to help you manage your business better.
To assess the company performance, bankers compare your financial ratios to those of other companies in your industry, so whether your ratios are good or bad depends on the type of business you are in. Of the dozens of financial ratios that can be computed, here are the six that many bankers, accountants and business executives consider the most meaningful.
A. Current assets to current liabilities. This ratio is also called a “current ratio”. It is an indicator of your company’s ability to pay debts that are due within a year. In calculating this ratio, “current” assets mean “liquid” assets such as cash, receivables, inventory, and marketable securities. Many lenders consider this ratio the most important of all and look for a current ratio of as least 1 ½ to 1.
B. Net after tax profits to tangible net worth. This ratio is an important indication of profitability and of how well you manage your business, because it measures return on investment. A high percentage return on investment is an important sign that a business is healthy.
C. Average collection period of receivables. By dividing accounts receivable by average credit sales per day, you can calculate your average collection period in days. This will tell you the extent to which your operating capital is tied up in receivables. For example, if your average collection period is 80 days and your credit terms are 30 days, your collection procedures may need improvement or some of your larger customers may be well past due.
D. Inventory turnover. By dividing net sales by average inventory in a given time period, you can determine who many times your inventory has turned over. Because it is based on financial information, this turnover does not represent actual physical inventory turnover, but if it is high, it is usually an indication that your inventory turnover is good.
E. Fixed assets to tangible net worth. This ratio shows what portion of your capital is tied up in plant and equipment and therefore is not available for operating capital or for payment of debts. It is a measure of the liquidity of your company’s net worth.
F. Total debt to tangible net worth. This ratio is often critical to bankers because if your company’s total debt is greater than its tangible net worth, your business is considered to be under-capitalized; much like the banks are right now. Inadequate capitalization is usually a red flag to a loan officer.
WHAT IS MY ROLE… YOUR ACCOUNTANT
It is important to involve your accountant in both the preparation of all financial documents and in your meetings with the lender. Your accountant can supply whatever degree of asurance about the financial information that your lender may require. The degree of assurance will vary, depending on matters such as the lender’s previous experience with you, the size of the loan, and how well the bank knows your firm.
For example, audited financial statements may be required if you are requesting a large loan and the lender has not had any previous experience with your company. In other situations, a review of the financial information by your accountant may be sufficient, particularly if the lender has had previous dealings with and your firm.
It is generally recognized that banks credit standards vary among banks, some banks have tighter credit standards than others. But if you’re properly prepared and make a solid presenetation, your chances of getting that vital business loan will be greatly improved.
CALL ON ME
The intellectual capital is of general nature and should not be acted upon without professional guidance. As the founder and managing member, I want to be your guide. So if you know someone that is looking for a way to save taxes and avoid IRS audits, call me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions. No Conditions, No Time limit. No IRS.
Thursday, December 4, 2008
2009 Automobile Mileage Rates
The Internal Revenue Service has issued the 2009 optional standard mileage rates to calculate the deductible costs of operating an automobile for business, chaitable, medical or moving purposes.
Beginning on January 1, 2009, the standard mileage rates for the use oa a car, van, pickup or panel truck will be:
55 cents per mile for business miles driven;
24 cents per mile driven for medical or moving
14 cents per mile driven in the service of charities
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were increased by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from the 2008 level.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half of 2008. The medical and moving rate was 19 cents in the first half of 2008 and 27 cents in the second half of 2008.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year age, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The study was conducted by the independent contractor, Ruzheimer International.
Taxpayers may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
This publication is issued as a service to our clients and friends. The information is of general nature and should not be acted upon without professional guidance. I want to offer that professional gudiance. So if you know someone that is looking for a way to save taxes and avoid IRS audits, phone me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions.
No Conditions. No Time limit. No IRS.
Beginning on January 1, 2009, the standard mileage rates for the use oa a car, van, pickup or panel truck will be:
55 cents per mile for business miles driven;
24 cents per mile driven for medical or moving
14 cents per mile driven in the service of charities
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were increased by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from the 2008 level.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half of 2008. The medical and moving rate was 19 cents in the first half of 2008 and 27 cents in the second half of 2008.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year age, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The study was conducted by the independent contractor, Ruzheimer International.
Taxpayers may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
This publication is issued as a service to our clients and friends. The information is of general nature and should not be acted upon without professional guidance. I want to offer that professional gudiance. So if you know someone that is looking for a way to save taxes and avoid IRS audits, phone me at (702) 642-8953 or write me at isueirs@aol.com. No Exceptions.
No Conditions. No Time limit. No IRS.
Sunday, November 23, 2008
Do You Need A Money Manager
Are you nervous about the stock market and your 401(k)? Are you too busy to manage your stock holdings? Do you wish someone else made the investment decisions for you? If you have a sizeable account, you can hire your own money manager. Those questions were asked by Investor Business Daily with the accompanying solution. There is a money management firm in Dallas that will "hold the hands" of their clients and "let the client be involved in the process as much as they want to be."
Money managers do exactly what their title suggest, they manage your money. A financial planner gives advise in several areas, includiing retirement planning, estate planning, insurance, taxes and investment asset allocation. A money manager actually manages your assets, choosing which stocks and mutual funds to invest in.
You will need to invest at least $100,000 to be able to hire a manager. Many firms have set portfolios made up of mutual funds and will invest the moey in these portfolios according to each client's situation.
If you have $ 1 million or more, you can hire managers who will invest your money in individual holdings. Often you won't pay mutual fund fees or money manager fees. Smith Barney Asset Management will customize portfolios, for investors with specific social and enviromental concerns. If an investor is adverse to tobacco stocks, the firm will not include such qquities in the client's portfiolo. Or if the client wants to invest in companies that are proactive in reducing pollution, the firm will find the best stocks in that category.
Your professional money manager will also help manage your tax situation, says Paine Webber. Since the manager knows your cost basis, the manager can take that into considertion, when buying and selling equities.
Your money manager fee will usually be between 1% and 2% of assets, depending on the size of your account, the bigger the account, the smaller the percentage. With over 27,000 registered investent advisers in the U. S. you have plenty to choose from.
Do your due diligence before selecting a money manager. Experts suggest:
1. Do a background check with a Form ADV Part II;
2. Look at real returns based on actual client accounts after management; fees
3. Consider risk by looking at how the manager performs in bad times;
4. Ask where your assets will be held. They should be with a third party custodian;
5. Have the manager sign a fiduciary oath which states the manager is acting as a fiduciary and is not selling products;
6. Get referrals through a third party, such as a broker, financial planner or CPA.
GIVE OUR OFFICE A CALL
This intellectual capital is provided to our friends and clients. While this letter hopefully gives you a heads up on several strategies that you might use before the year end, there are any more techniques that can be used depending on a client's individual circumstances. If you know someone that is looking for a way to save taxes and avoid IRS audits, think of us. We may be reached by phone at (720) 642-8953 or by write us at isueirs@aol.com.
Remember, we save you taxes and keep you away from the IRS. No Exceptions. No Time Limit. No Conditions. No IRS.
Money managers do exactly what their title suggest, they manage your money. A financial planner gives advise in several areas, includiing retirement planning, estate planning, insurance, taxes and investment asset allocation. A money manager actually manages your assets, choosing which stocks and mutual funds to invest in.
You will need to invest at least $100,000 to be able to hire a manager. Many firms have set portfolios made up of mutual funds and will invest the moey in these portfolios according to each client's situation.
If you have $ 1 million or more, you can hire managers who will invest your money in individual holdings. Often you won't pay mutual fund fees or money manager fees. Smith Barney Asset Management will customize portfolios, for investors with specific social and enviromental concerns. If an investor is adverse to tobacco stocks, the firm will not include such qquities in the client's portfiolo. Or if the client wants to invest in companies that are proactive in reducing pollution, the firm will find the best stocks in that category.
Your professional money manager will also help manage your tax situation, says Paine Webber. Since the manager knows your cost basis, the manager can take that into considertion, when buying and selling equities.
Your money manager fee will usually be between 1% and 2% of assets, depending on the size of your account, the bigger the account, the smaller the percentage. With over 27,000 registered investent advisers in the U. S. you have plenty to choose from.
Do your due diligence before selecting a money manager. Experts suggest:
1. Do a background check with a Form ADV Part II;
2. Look at real returns based on actual client accounts after management; fees
3. Consider risk by looking at how the manager performs in bad times;
4. Ask where your assets will be held. They should be with a third party custodian;
5. Have the manager sign a fiduciary oath which states the manager is acting as a fiduciary and is not selling products;
6. Get referrals through a third party, such as a broker, financial planner or CPA.
GIVE OUR OFFICE A CALL
This intellectual capital is provided to our friends and clients. While this letter hopefully gives you a heads up on several strategies that you might use before the year end, there are any more techniques that can be used depending on a client's individual circumstances. If you know someone that is looking for a way to save taxes and avoid IRS audits, think of us. We may be reached by phone at (720) 642-8953 or by write us at isueirs@aol.com.
Remember, we save you taxes and keep you away from the IRS. No Exceptions. No Time Limit. No Conditions. No IRS.
Savings Opportunities for 2008
Tax laws are constantly changing; and this year is no exception. There has been a world of changes and opportunities. With proper planning, you can save month in taxes in 2008. Here is a sampling of the opportunities:
CAPITAL GAINS AND DIVIDENDS
The maximum tax rate on new long term capital gains and qualified dividends for taxpayers in the 15% or 10% regular income tax brackets is reduced form 5% to 0%. As the stands right now, the 0% rate is scheduled to remain in effect through 2010.
This may be a good year to have your children sell securities that have increased in value. However, such sale may trigger the “kiddie tax”.
The tax break isn’t just limited to low-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket, your long term capital gains and dividend income could qualify for the 0% rate.
SMALL BUSINESS ASSETS
Under the new economic stimulus law, your business can deduct up to $250,000 of business assets placed in service in 2008. In addition, a firm may elect bonus depreciation equal to 50% of the cost of any qualified assets.
If transacted properly, your firm can combine the improved Section 179 deduction with the bonus depreciation. Your regular depreciation deductions may be claimed for any un-recaptured cost.
MORTGAGE INSURANCE
Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deduction was available for taxpayers with and Adjusted Gross Income of under $100,000. Once income exceeded that threshold amount, the deduction was phased out. The new mortgage relief law extends this tax break for three years, through 2010.
IRA CONTRIBUTIONS
If you contribute to an IRA, the contributions may be fully or partially deductible. Although deductions are generally not available to high-earning taxpayers, if either spouse participates in an employee’s retirement plan, contributions may still grow on a tax-deferred basis until withdrawn.
The contribution limit for 2008 increased from $4,000 to $5,000. If you are age 50 or older, you can increase the deduction by an additional $1,000. The deadline for contributions, for 2008, is April 15 of 2009.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No exceptions. No time limits. No IRS
CAPITAL GAINS AND DIVIDENDS
The maximum tax rate on new long term capital gains and qualified dividends for taxpayers in the 15% or 10% regular income tax brackets is reduced form 5% to 0%. As the stands right now, the 0% rate is scheduled to remain in effect through 2010.
This may be a good year to have your children sell securities that have increased in value. However, such sale may trigger the “kiddie tax”.
The tax break isn’t just limited to low-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket, your long term capital gains and dividend income could qualify for the 0% rate.
SMALL BUSINESS ASSETS
Under the new economic stimulus law, your business can deduct up to $250,000 of business assets placed in service in 2008. In addition, a firm may elect bonus depreciation equal to 50% of the cost of any qualified assets.
If transacted properly, your firm can combine the improved Section 179 deduction with the bonus depreciation. Your regular depreciation deductions may be claimed for any un-recaptured cost.
MORTGAGE INSURANCE
Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deduction was available for taxpayers with and Adjusted Gross Income of under $100,000. Once income exceeded that threshold amount, the deduction was phased out. The new mortgage relief law extends this tax break for three years, through 2010.
IRA CONTRIBUTIONS
If you contribute to an IRA, the contributions may be fully or partially deductible. Although deductions are generally not available to high-earning taxpayers, if either spouse participates in an employee’s retirement plan, contributions may still grow on a tax-deferred basis until withdrawn.
The contribution limit for 2008 increased from $4,000 to $5,000. If you are age 50 or older, you can increase the deduction by an additional $1,000. The deadline for contributions, for 2008, is April 15 of 2009.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No exceptions. No time limits. No IRS
Sunday, November 9, 2008
Year-End Savings for Individuals
The end of 2008 is happening upon us faster than we think. With the year drawing to a close, now is an ideal time to review your tax situation and evaluate strategies that may help minimize your tax bill. Once December 31 passes, your 2008 tax bill is essentially set. Taking certain steps before then, however, can make a difference.
As is the case year after year, favorable changes to the tax laws made in 2008 are also accompanied by unfavorable modifications. This year-end, of course, our unprecedented financial crisis looms large. This crisis generates tax loss situations that we may not have faced in recent years, as well as a more urgent need to maximize current income that involves taking steps to minimize tax payments whenever possible.
TRADITIONAL TAX STRATEGIES
Year-end tax planning tips typically fall into two general groups: (1) the traditional strategies that have proven themselves useful year after year, and (2) new opportunities and pitfalls that have arisen from recent changes to the tax laws.
Tried and true tax planning techniques can help virtually every taxpayer save money; some, of course, more than others. How much you can save depends on your individual circumstances, but examination of the following general areas is worth a look --in addition to considering the tax impact of any special circumstances in which you might find yourself this year.
Income shifting. One of the most fundamental year-end tax planning techniques involves accelerating deductible expenses in 2008 and deferring income, if economically feasible, into 2008. By delaying taxable income you defer taxes. Delaying taxable income may also prevent you from losing lucrative tax breaks that can be reduced or eliminated altogether as your income level rises and propels you into a higher tax bracket.
With only a few months left until the end of the year, you can probably anticipate with reasonable certainty what income and deductions you will be reporting on your 2008 tax return. You may also be able to predict with relative accuracy what your income and expenses for the first few months of 2009 will include. The ability to gauge your income and expenses for 2008 and into 2009 provides a golden opportunity to shift income or expenses into one year or the other depending on what will save you the most overall taxes.
Shifting income, however, is not always a matter of simply delaying receipt of funds. Tax rules may require you to recognize certain types of income when you have earned the right to receive it, even if you arrange for its delayed payment. This office can help you recognize and navigate the differences.
Deduction management. Essential year-end tax planning requires determining whether you will take the standard deduction or whether you will itemize your deductions. Consider "bunching" deductible expenses into one or the other year depending upon whether the standard deduction may be taken in one year or whether the adjusted gross income limits for medical (7.5 percent) or miscellaneous itemized deductions (2 percent) may be more easily met.
Even if you know you will itemize deductions, accelerating or deferring them is often a question of determining your probable tax bracket for year end and the next year to maximize their after tax value. Sometimes planning is as simple as paying your state estimated tax or real estate taxes in one year or the other; at other times, it's a question of making certain you gather the right proof and follow the proper steps in time to be entitled to a deduction in one year or the other. Again, this office can help.
Portfolio timing. The end of the year is the right time to examine your investments (winners and losers over the course of the year) to take the steps necessary to minimize your capital gains income and maximize the benefit of any capital losses. Especially this year, when the stock market took its roller-coaster ride, gathering your portfolio's records for the entire year can make a difference in not only what you might buy or sell in November and December but what estimated tax you will need to pay (or not pay) for the fourth quarter of 2008.
Long-term capital losses can be used to fully offset long-term capital gains. Losses taken in excess of gains can also be used to offset up to $3,000 in ordinary income (or $1,500 for a married couple filing separately). The strategy for short-term gains and losses follows a similar game plan, although coordinating the two sometimes takes special care. Unlike excess business losses that can be carried back two years to net an immediate refund in many cases, an individual's net capital losses unfortunately can only be carried forward.
In calculating gains or loss for purposes of balancing your gains and losses at year end, remember that, for tax purposes, it's not how much your stocks have gone down for the year but rather have much gain or loss you've realized since purchasing them. For example, you still may owe capital gains tax on stock acquired in 2001 at $15/share even though it may have dropped $20 in 2008 from a high of $65 to $45 when you sold it. You still have capital gain of $30/share on the sale.
Retirement planning. Year-end planning for 2008 also involves maximizing annual contributions to your retirement plan accounts, since one year's limit cannot be added to the next years if not taken in time. While contributions to IRAs may be applied retroactively if made before the filing deadline, an individual's elective deferral contribution made as an employee to a qualified plan must be made before the end of the calendar year.
Maximizing contributions to your retirement plan (or plans) before year-end also allows you to reduce your adjusted gross income in direct proportion to those contributions. This in turn can give you the benefit of increasing the deductibility of medical and other deductions subject to adjusted gross income floors.
As many 401(k) plan account owners have realized in 2008, managing a tax-deferred retirement account is not a "set it and forget it" proposition. Although sheltered from tax, a 401(k) or other defined contribution plan also requires careful management of the performance of those investments and re-allocation of assets whenever appropriate. Unfortunately, losses on any 401(k) plan are not tax deductible; nor can they offset capital gains in non-tax sheltered accounts.
Gift-giving. Slow and steady estate planning can yield dramatic results. Nowhere is that more apparent than devising an annual gift giving plan to family members. Before year-end 2008, you can transfer up to $12,000 per person, per year, without paying gift tax on the amounts transferred. Married couples can gift $24,000 per person by "splitting" their gifts. In 2009, the annual exclusion rises to $13,000 ($26,000 for couples). This strategy not only avoids the possibility of paying a hefty estate tax later, but it removes earnings from those gifts from your taxable income bracket into that of the lower-bracket gift recipient.
NEW OPPORTUNITIES
Tax law changes constantly, and therefore so must individual tax planning. Tax year 2008 is no exception. While fundamental techniques should not be overlooked, attention to tax legislation is equally important for most taxpayers. In 2008, Congress passed a host of provisions to encourage consumers to jumpstart the economy by having more money in their pockets to spend.
In addition to the Economic Stimulus checks that were mailed out -for the most part- before this past September, tax legislation in 2008 renewed or enhanced many benefits for individual taxpayers, some only for 2008 and others for both 2008 and 2009. Maximizing these tax benefits between 2008 and 2009, therefore, requires care in respecting a variety of effective dates.
AMT patch. The Emergency Economic Stabilization Act of 2008 (EESA) included among its many provisions a so-called alternative minimum tax (AMT) "patch." For the 2008 tax year, the AMT exemption amounts are raised to once again insulate most middle-income taxpayers from the reach of the AMT. The patch is only for 2008. Hopes are high that in 2009 Congress finally will face up to the need to find a permanent solution to the AMT and pass AMT reform rather than yet another patch.
Income for forgiveness of mortgage indebtedness. Those principal-residence homeowners who have part of their mortgage debt forgiven as part of a workout or foreclosure have been spared having to pay income tax on that forgiven income. The Mortgage Indebtedness Relief Act of 2007 first applied this tax-free treatment to debt forgiveness taking place from 2007 through 2009. The Emergency Economic Stabilization Act of 2008 extended it through 2012.
State and local sales tax deduction. Despite being one of the more popular tax breaks, the deduction for state and local sales taxes is not permanent and had been set to expire at the end of 2007. Under this deduction, taxpayers who itemize deductions the option of claiming either state and local income taxes or state and local general sales taxes. The Emergency Economic Stabilization Act of 2008 extended this deduction for 2008 and 2009.
Tuition and fees deduction. Taxpayers may continue to deduct qualifying tuition and fees paid in 2008 that are required for the student's enrollment or attendance at a post-secondary school. The tuition and fees deduction is an above-the-line write-off that, depending on adjusted gross income, can reduce taxable income by as much as $4,000. They are frequently more valuable than taking a Hope or Lifetime learning education credit. Since this deduction also has been extended for 2009, deciding in which tax year an upcoming tuition payment will be made can help maximize your overall education deductions and credits.
Classroom deduction. Full-time teachers, instructors, counselors, and other educators can deduct up to $250 worth of books, supplies, software, and other qualifying materials that they provide out of pocket expenses. The deduction had been set to expire at the end of 2007, but Congress now has extended it for 2008 and 2009. Educators should remember that this deduction is based on the calendar year rather than the school year.
Tax-free IRAs charitable contributions. The EESA extends through December 31, 2009, the opportunity for certain taxpayers age 70 1/2 or older to make tax-free distributions from IRAs for charitable purposes. This contribution can include any required minimum distribution that the taxpayer would be otherwise required to take.
Residential energy property. The high cost of energy is encouraging many people to make energy efficient improvements to their homes. If you are contemplating installing energy-efficient doors and windows, water heaters or other items in 2008, you may want to wait until 2009.
Several years ago, Congress created a residential tax credit for installing energy efficient doors and windows, water heaters and similar items. The nonrefundable lifetime credit could reach as high as $500. However, the credit expired at the end of 2007. Surprisingly, the EESA reinstates the credit but not for 2008. The new law reinstates the credit for 2009 through 2016. The EESA also expands the credit to include certain stoves that use renewable plant-derived fuel along with other enhancements; so while the credit is not available for 2008, the expanded credit for 2009 may be worth waiting for.
Another incentive is available in 2008 for certain energy efficient improvements. Solar electric property, small wind energy property and some heat pump property may qualify for the residential alternative energy tax credit. Additionally, you can use the residential alternative energy credit against AMT liability in 2008.
Biking to work. Another new tax break that doesn't begin until 2009 is a new employer- provided transportation fringe benefit. In addition to transit passes and van pooling, employers starting in 2009 can offer their employees up to $20/month as a tax-free benefit if they commute to work by bicycle. To inaugurate this benefit starting in January, however, employers must incorporate it into their written fringe benefit plan, a process that should start soon.
Vacation Home Conversions. Gain from the sale of a principal residence that is allocable to periods of "nonqualified use" can no longer be excluded from the taxpayer's gain realized on its sale. A technique that has been used by many vacation home owners is to eventually convert that second home into a principal residence before its sale and claim a full $250,000 principal residence exclusion ($500,000 for joint filers) on the gain. Due to a loophole closing provision in the 2008 Housing Assistance Tax Act, any conversion made after December 31, 2008, cannot shelter the portion of that gain allocable to post-2008 appreciation.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to incorporate into your year-end tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to utilize before year-end, there are many more techniques that can be used depending upon a client's individual circumstances. For a more detailed plan that can be customized to your particular circumstances, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time limit. No IRS.
As is the case year after year, favorable changes to the tax laws made in 2008 are also accompanied by unfavorable modifications. This year-end, of course, our unprecedented financial crisis looms large. This crisis generates tax loss situations that we may not have faced in recent years, as well as a more urgent need to maximize current income that involves taking steps to minimize tax payments whenever possible.
TRADITIONAL TAX STRATEGIES
Year-end tax planning tips typically fall into two general groups: (1) the traditional strategies that have proven themselves useful year after year, and (2) new opportunities and pitfalls that have arisen from recent changes to the tax laws.
Tried and true tax planning techniques can help virtually every taxpayer save money; some, of course, more than others. How much you can save depends on your individual circumstances, but examination of the following general areas is worth a look --in addition to considering the tax impact of any special circumstances in which you might find yourself this year.
Income shifting. One of the most fundamental year-end tax planning techniques involves accelerating deductible expenses in 2008 and deferring income, if economically feasible, into 2008. By delaying taxable income you defer taxes. Delaying taxable income may also prevent you from losing lucrative tax breaks that can be reduced or eliminated altogether as your income level rises and propels you into a higher tax bracket.
With only a few months left until the end of the year, you can probably anticipate with reasonable certainty what income and deductions you will be reporting on your 2008 tax return. You may also be able to predict with relative accuracy what your income and expenses for the first few months of 2009 will include. The ability to gauge your income and expenses for 2008 and into 2009 provides a golden opportunity to shift income or expenses into one year or the other depending on what will save you the most overall taxes.
Shifting income, however, is not always a matter of simply delaying receipt of funds. Tax rules may require you to recognize certain types of income when you have earned the right to receive it, even if you arrange for its delayed payment. This office can help you recognize and navigate the differences.
Deduction management. Essential year-end tax planning requires determining whether you will take the standard deduction or whether you will itemize your deductions. Consider "bunching" deductible expenses into one or the other year depending upon whether the standard deduction may be taken in one year or whether the adjusted gross income limits for medical (7.5 percent) or miscellaneous itemized deductions (2 percent) may be more easily met.
Even if you know you will itemize deductions, accelerating or deferring them is often a question of determining your probable tax bracket for year end and the next year to maximize their after tax value. Sometimes planning is as simple as paying your state estimated tax or real estate taxes in one year or the other; at other times, it's a question of making certain you gather the right proof and follow the proper steps in time to be entitled to a deduction in one year or the other. Again, this office can help.
Portfolio timing. The end of the year is the right time to examine your investments (winners and losers over the course of the year) to take the steps necessary to minimize your capital gains income and maximize the benefit of any capital losses. Especially this year, when the stock market took its roller-coaster ride, gathering your portfolio's records for the entire year can make a difference in not only what you might buy or sell in November and December but what estimated tax you will need to pay (or not pay) for the fourth quarter of 2008.
Long-term capital losses can be used to fully offset long-term capital gains. Losses taken in excess of gains can also be used to offset up to $3,000 in ordinary income (or $1,500 for a married couple filing separately). The strategy for short-term gains and losses follows a similar game plan, although coordinating the two sometimes takes special care. Unlike excess business losses that can be carried back two years to net an immediate refund in many cases, an individual's net capital losses unfortunately can only be carried forward.
In calculating gains or loss for purposes of balancing your gains and losses at year end, remember that, for tax purposes, it's not how much your stocks have gone down for the year but rather have much gain or loss you've realized since purchasing them. For example, you still may owe capital gains tax on stock acquired in 2001 at $15/share even though it may have dropped $20 in 2008 from a high of $65 to $45 when you sold it. You still have capital gain of $30/share on the sale.
Retirement planning. Year-end planning for 2008 also involves maximizing annual contributions to your retirement plan accounts, since one year's limit cannot be added to the next years if not taken in time. While contributions to IRAs may be applied retroactively if made before the filing deadline, an individual's elective deferral contribution made as an employee to a qualified plan must be made before the end of the calendar year.
Maximizing contributions to your retirement plan (or plans) before year-end also allows you to reduce your adjusted gross income in direct proportion to those contributions. This in turn can give you the benefit of increasing the deductibility of medical and other deductions subject to adjusted gross income floors.
As many 401(k) plan account owners have realized in 2008, managing a tax-deferred retirement account is not a "set it and forget it" proposition. Although sheltered from tax, a 401(k) or other defined contribution plan also requires careful management of the performance of those investments and re-allocation of assets whenever appropriate. Unfortunately, losses on any 401(k) plan are not tax deductible; nor can they offset capital gains in non-tax sheltered accounts.
Gift-giving. Slow and steady estate planning can yield dramatic results. Nowhere is that more apparent than devising an annual gift giving plan to family members. Before year-end 2008, you can transfer up to $12,000 per person, per year, without paying gift tax on the amounts transferred. Married couples can gift $24,000 per person by "splitting" their gifts. In 2009, the annual exclusion rises to $13,000 ($26,000 for couples). This strategy not only avoids the possibility of paying a hefty estate tax later, but it removes earnings from those gifts from your taxable income bracket into that of the lower-bracket gift recipient.
NEW OPPORTUNITIES
Tax law changes constantly, and therefore so must individual tax planning. Tax year 2008 is no exception. While fundamental techniques should not be overlooked, attention to tax legislation is equally important for most taxpayers. In 2008, Congress passed a host of provisions to encourage consumers to jumpstart the economy by having more money in their pockets to spend.
In addition to the Economic Stimulus checks that were mailed out -for the most part- before this past September, tax legislation in 2008 renewed or enhanced many benefits for individual taxpayers, some only for 2008 and others for both 2008 and 2009. Maximizing these tax benefits between 2008 and 2009, therefore, requires care in respecting a variety of effective dates.
AMT patch. The Emergency Economic Stabilization Act of 2008 (EESA) included among its many provisions a so-called alternative minimum tax (AMT) "patch." For the 2008 tax year, the AMT exemption amounts are raised to once again insulate most middle-income taxpayers from the reach of the AMT. The patch is only for 2008. Hopes are high that in 2009 Congress finally will face up to the need to find a permanent solution to the AMT and pass AMT reform rather than yet another patch.
Income for forgiveness of mortgage indebtedness. Those principal-residence homeowners who have part of their mortgage debt forgiven as part of a workout or foreclosure have been spared having to pay income tax on that forgiven income. The Mortgage Indebtedness Relief Act of 2007 first applied this tax-free treatment to debt forgiveness taking place from 2007 through 2009. The Emergency Economic Stabilization Act of 2008 extended it through 2012.
State and local sales tax deduction. Despite being one of the more popular tax breaks, the deduction for state and local sales taxes is not permanent and had been set to expire at the end of 2007. Under this deduction, taxpayers who itemize deductions the option of claiming either state and local income taxes or state and local general sales taxes. The Emergency Economic Stabilization Act of 2008 extended this deduction for 2008 and 2009.
Tuition and fees deduction. Taxpayers may continue to deduct qualifying tuition and fees paid in 2008 that are required for the student's enrollment or attendance at a post-secondary school. The tuition and fees deduction is an above-the-line write-off that, depending on adjusted gross income, can reduce taxable income by as much as $4,000. They are frequently more valuable than taking a Hope or Lifetime learning education credit. Since this deduction also has been extended for 2009, deciding in which tax year an upcoming tuition payment will be made can help maximize your overall education deductions and credits.
Classroom deduction. Full-time teachers, instructors, counselors, and other educators can deduct up to $250 worth of books, supplies, software, and other qualifying materials that they provide out of pocket expenses. The deduction had been set to expire at the end of 2007, but Congress now has extended it for 2008 and 2009. Educators should remember that this deduction is based on the calendar year rather than the school year.
Tax-free IRAs charitable contributions. The EESA extends through December 31, 2009, the opportunity for certain taxpayers age 70 1/2 or older to make tax-free distributions from IRAs for charitable purposes. This contribution can include any required minimum distribution that the taxpayer would be otherwise required to take.
Residential energy property. The high cost of energy is encouraging many people to make energy efficient improvements to their homes. If you are contemplating installing energy-efficient doors and windows, water heaters or other items in 2008, you may want to wait until 2009.
Several years ago, Congress created a residential tax credit for installing energy efficient doors and windows, water heaters and similar items. The nonrefundable lifetime credit could reach as high as $500. However, the credit expired at the end of 2007. Surprisingly, the EESA reinstates the credit but not for 2008. The new law reinstates the credit for 2009 through 2016. The EESA also expands the credit to include certain stoves that use renewable plant-derived fuel along with other enhancements; so while the credit is not available for 2008, the expanded credit for 2009 may be worth waiting for.
Another incentive is available in 2008 for certain energy efficient improvements. Solar electric property, small wind energy property and some heat pump property may qualify for the residential alternative energy tax credit. Additionally, you can use the residential alternative energy credit against AMT liability in 2008.
Biking to work. Another new tax break that doesn't begin until 2009 is a new employer- provided transportation fringe benefit. In addition to transit passes and van pooling, employers starting in 2009 can offer their employees up to $20/month as a tax-free benefit if they commute to work by bicycle. To inaugurate this benefit starting in January, however, employers must incorporate it into their written fringe benefit plan, a process that should start soon.
Vacation Home Conversions. Gain from the sale of a principal residence that is allocable to periods of "nonqualified use" can no longer be excluded from the taxpayer's gain realized on its sale. A technique that has been used by many vacation home owners is to eventually convert that second home into a principal residence before its sale and claim a full $250,000 principal residence exclusion ($500,000 for joint filers) on the gain. Due to a loophole closing provision in the 2008 Housing Assistance Tax Act, any conversion made after December 31, 2008, cannot shelter the portion of that gain allocable to post-2008 appreciation.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to incorporate into your year-end tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to utilize before year-end, there are many more techniques that can be used depending upon a client's individual circumstances. For a more detailed plan that can be customized to your particular circumstances, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time limit. No IRS.
Over the next 12 months, the Small Business and Self Employed Division (SB/SE) of the Internal Revenue Service will focus on increased enforcement, says Faris Fink, Commissioner of the SB/SE division.
The Small Business is responsible for the majority of the tax gap, Fink told a session of the American Institute of Certified Public Accountants National Tax Conference. Fink said "Enforcement has a necessary presence when you are talking about tax administration".
But the enforcement will recognize (a) there are taxpayers who can not properly do their taxes, (b) taxpayers who will not properly do their taxes and (c) some who truly need assistance with compliance. All, of which, must be coupled and balanced with education and taxpayer services.
How such recognition will occur is unclear. But, the Commissioner said some of the areas the Division will be examining include
S-corporation;
LLC's;
High-income filers, and;
Abusive transactions.
S corporations are likely to receive particular scrutiny but further review would not be limited to S corporations but to all passthrough entities like partnerships, which can expect to receive a "significant amount of attention" because SB/SE has found this to be an area of abuse and would like to curb what he called a growing trend of abusive transactions. The Commissioner said there would be a renewed effort to address high-income filers, typically classified as those whth an adjusted gross income of over $200,000.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to use in your business planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several audit techniques that are coming, you might like to know how to avodi the audits. For a more detailed plans that can be customized to your particular circumstances, give us a call at 702-642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. We guarantee our work. No Exceptions. No Time limit. No IRS.
The Small Business is responsible for the majority of the tax gap, Fink told a session of the American Institute of Certified Public Accountants National Tax Conference. Fink said "Enforcement has a necessary presence when you are talking about tax administration".
But the enforcement will recognize (a) there are taxpayers who can not properly do their taxes, (b) taxpayers who will not properly do their taxes and (c) some who truly need assistance with compliance. All, of which, must be coupled and balanced with education and taxpayer services.
How such recognition will occur is unclear. But, the Commissioner said some of the areas the Division will be examining include
S-corporation;
LLC's;
High-income filers, and;
Abusive transactions.
S corporations are likely to receive particular scrutiny but further review would not be limited to S corporations but to all passthrough entities like partnerships, which can expect to receive a "significant amount of attention" because SB/SE has found this to be an area of abuse and would like to curb what he called a growing trend of abusive transactions. The Commissioner said there would be a renewed effort to address high-income filers, typically classified as those whth an adjusted gross income of over $200,000.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to use in your business planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several audit techniques that are coming, you might like to know how to avodi the audits. For a more detailed plans that can be customized to your particular circumstances, give us a call at 702-642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. We guarantee our work. No Exceptions. No Time limit. No IRS.
Wednesday, November 5, 2008
Business Forms
As part of our educational series, we answer the question of why it is so useful to set up your firm as an LLC. When setting up a new business or expanding an existing one...one of the most important decisions to make is the choice of legal entity.
Today, few firms are formed as regular C corporations, and even S corporations are becoming less popular. LLC’s are becoming the entity of choice. Some of the key tax issues when selecting a form of business are....
How its operating income will be taxed, and
How its owners will be taxed in the future when they exit the firm
In addition, a business founder will want to have flexibility in managing it, arranging its ownership structure, and allocating income among themselves. On all of these points,
C-corporations now generally are inferior compared with the pass-through entity alternatives available today.
A C-corporation is a separate taxpayer subject to corporate level taxes. But a pass-through entity has its income taxed directly on the personal tax returns of its owners..avoiding the corporate level tax. The pass-through entity alternatives are....
S-corporations are corporations organized in the normal manner under state law, which provide their owners with corporate protection against personal liability for the business obligations. The IRS imposes important restrictions on S-corporations. For instance: they can only have one class of stock; profits must be distributed to owners pro rate with stock ownership; and, there can be no more than 100 shareholders.
Partnerships are unincorporated business entities. They are not subject to the restrictions that the IRS applies to S corporations and so are much more flexible to use. A catch is at least one partner who is active in the firm must be personally liable for its obligations as a general partner. Others who are passive investors may attain limited liability as limited partners.
Limited liability companies (LLCs) have only recently become available in all 50 states as a cross between a corporation and a partnership, offering the best of both. Like a corporation, an LLC provides protection to all its owners against personal liability for a business obligation. But an LLC owner is usually taxed by the IRS as a partner.
The advantages of pass through entities to consider...Operating income. Because
C-corporations are subject to their own corporate level tax, profits paid to shareholders as dividends are subject to double taxation. First, as income to the corporation, then to the dividend recipient.
Capital gains realized by the corporation do not receive the new low 15% tax rate paid by individuals. They are taxed at ordinary corporate rates. Losses incurred by a business are locked in the business and can’t be used by its owners to offset other income.
The income of pass-through entity is taxed directly on its owners’ personal tax returns. Thus, double taxation of profits is avoided, capital gains receive the lower personal tax rate, and business losses can be deducted by the firm’s owners personally.
Corporate level taxes also create problems when the owner of a private C-corporation wants to sell the firm. The owner probably will want to sell the stock of the business to obtain tax-favored capital gains. But the buyer probably will want to buy the business’s assets so the purchase price will be attributed to them and they can be depreciated from a higher basis. If the seller insists on a stock sale, the buyer will want to pay less because they obtain smaller depreciation deductions. But if the seller accepts a sale of assets, gain will be taxed to the corporation at normal rates, and profits distributed from the sale will be subject to double tax. Pass-through entities are able to avoid these problems because of the lack of entity level tax. A sale of either the business or its assets will have the same basic result on its owners tax return.
Here are the differences among pass-through business forms. For many years the choice of pass-through entity was only between an S-corporation and a partnership. The trade-off was that an S-corporation provides protection against personally liability for business debts. The details of the law that apply to LLCs vary by state and LLC status may not be available for all kinds of businesses or in all circumstances. If you own a business that is already operating as a C corporation, consider expanding it through subsidiary or sibling firms organized as a pass-through entity. But there are problems...
Profits are taxed to owners even when not distributed to them. So if profits are retained in the business to fund growth, the owners may not have cash with which to pay the tax. You can, however, have the business always distribute enough funds to cove the tax on its total profits.
Owners of pass-through entities are subject to restrictions on tax-favored benefits and perks that do not apply to owners-employees of C corporations.
Owners of partnerships and LLCs are not salaries employees who receive W-2s and IRS rules governing their compensation are complex.
This intellectual capital is provided to our clients and friends. For this and other strategies write us at isueirs@aol.com or phone our office at (702)642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. We guarantee our work product. No exceptions, No conditions. No time limits. No IRS.
Today, few firms are formed as regular C corporations, and even S corporations are becoming less popular. LLC’s are becoming the entity of choice. Some of the key tax issues when selecting a form of business are....
How its operating income will be taxed, and
How its owners will be taxed in the future when they exit the firm
In addition, a business founder will want to have flexibility in managing it, arranging its ownership structure, and allocating income among themselves. On all of these points,
C-corporations now generally are inferior compared with the pass-through entity alternatives available today.
A C-corporation is a separate taxpayer subject to corporate level taxes. But a pass-through entity has its income taxed directly on the personal tax returns of its owners..avoiding the corporate level tax. The pass-through entity alternatives are....
S-corporations are corporations organized in the normal manner under state law, which provide their owners with corporate protection against personal liability for the business obligations. The IRS imposes important restrictions on S-corporations. For instance: they can only have one class of stock; profits must be distributed to owners pro rate with stock ownership; and, there can be no more than 100 shareholders.
Partnerships are unincorporated business entities. They are not subject to the restrictions that the IRS applies to S corporations and so are much more flexible to use. A catch is at least one partner who is active in the firm must be personally liable for its obligations as a general partner. Others who are passive investors may attain limited liability as limited partners.
Limited liability companies (LLCs) have only recently become available in all 50 states as a cross between a corporation and a partnership, offering the best of both. Like a corporation, an LLC provides protection to all its owners against personal liability for a business obligation. But an LLC owner is usually taxed by the IRS as a partner.
The advantages of pass through entities to consider...Operating income. Because
C-corporations are subject to their own corporate level tax, profits paid to shareholders as dividends are subject to double taxation. First, as income to the corporation, then to the dividend recipient.
Capital gains realized by the corporation do not receive the new low 15% tax rate paid by individuals. They are taxed at ordinary corporate rates. Losses incurred by a business are locked in the business and can’t be used by its owners to offset other income.
The income of pass-through entity is taxed directly on its owners’ personal tax returns. Thus, double taxation of profits is avoided, capital gains receive the lower personal tax rate, and business losses can be deducted by the firm’s owners personally.
Corporate level taxes also create problems when the owner of a private C-corporation wants to sell the firm. The owner probably will want to sell the stock of the business to obtain tax-favored capital gains. But the buyer probably will want to buy the business’s assets so the purchase price will be attributed to them and they can be depreciated from a higher basis. If the seller insists on a stock sale, the buyer will want to pay less because they obtain smaller depreciation deductions. But if the seller accepts a sale of assets, gain will be taxed to the corporation at normal rates, and profits distributed from the sale will be subject to double tax. Pass-through entities are able to avoid these problems because of the lack of entity level tax. A sale of either the business or its assets will have the same basic result on its owners tax return.
Here are the differences among pass-through business forms. For many years the choice of pass-through entity was only between an S-corporation and a partnership. The trade-off was that an S-corporation provides protection against personally liability for business debts. The details of the law that apply to LLCs vary by state and LLC status may not be available for all kinds of businesses or in all circumstances. If you own a business that is already operating as a C corporation, consider expanding it through subsidiary or sibling firms organized as a pass-through entity. But there are problems...
Profits are taxed to owners even when not distributed to them. So if profits are retained in the business to fund growth, the owners may not have cash with which to pay the tax. You can, however, have the business always distribute enough funds to cove the tax on its total profits.
Owners of pass-through entities are subject to restrictions on tax-favored benefits and perks that do not apply to owners-employees of C corporations.
Owners of partnerships and LLCs are not salaries employees who receive W-2s and IRS rules governing their compensation are complex.
This intellectual capital is provided to our clients and friends. For this and other strategies write us at isueirs@aol.com or phone our office at (702)642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. We guarantee our work product. No exceptions, No conditions. No time limits. No IRS.
The Good Habit Groove
When entrepreneurs empbrace these thirteen business management habits, success is sure to follow. As a business owner, you are... well... busy. But those nitpicky tasks you are putting off could help you avoid some serious future problems. Ty Freyvogel, founder of EntrepreneusLab.com, has a "good habit" list you should adopt pronto.
When you started your own company, your focus was on doing anything and everything to get it off the ground. Most likely, you spent day and night building the business, solving problems, working overtime to please customers. Now you are proud to say that your venture is a success. But in all the hustle and bustle, you've likely let some small but critcal details fall by the wayside. Unfortunately, says entrepreneurial expert Ty Freyvogel, those nagging little business practices that so often get overlooked are the same ones that can keep you a step or two or ten ahead of the competition.
Being a really successful business owner is all about forming good habits, says Freyvogel. If you don't keep up with certain tasks, tasks that you probably think of as non-essential...you might get lucky and avoid a major catastrophe. But then again, you might not. And is that really a chance you want to take? There's no time like the present to start devolping habits that will help you run a more solid business. And if you're worried about where to start, don't be. EntrepreneursLab.com has created a checklist of business management habits that will help you keep a tight rein on your business and pull ahead of the pack.
Items on the the checklist will help business owners minimuze the number of problems they must deal with on a daily basis. You've got enough on your plate. Having a checklist of tasks that helps you eliminate problems before they arise will keep your business healthy and you sane. So here is the checklist of thirteen good habits that every busienss owner should develop.
When you started your own company, your focus was on doing anything and everything to get it off the ground. Most likely, you spent day and night building the business, solving problems, working overtime to please customers. Now you are proud to say that your venture is a success. But in all the hustle and bustle, you've likely let some small but critcal details fall by the wayside. Unfortunately, says entrepreneurial expert Ty Freyvogel, those nagging little business practices that so often get overlooked are the same ones that can keep you a step or two or ten ahead of the competition.
Being a really successful business owner is all about forming good habits, says Freyvogel. If you don't keep up with certain tasks, tasks that you probably think of as non-essential...you might get lucky and avoid a major catastrophe. But then again, you might not. And is that really a chance you want to take? There's no time like the present to start devolping habits that will help you run a more solid business. And if you're worried about where to start, don't be. EntrepreneursLab.com has created a checklist of business management habits that will help you keep a tight rein on your business and pull ahead of the pack.
Items on the the checklist will help business owners minimuze the number of problems they must deal with on a daily basis. You've got enough on your plate. Having a checklist of tasks that helps you eliminate problems before they arise will keep your business healthy and you sane. So here is the checklist of thirteen good habits that every busienss owner should develop.
1. Review all your systems from top to bottom. Carefully examine what is working and what isn’t. Decide where the problems are and figure out what can be fixed. You might be able to repair the problems yourself, or you might need outside guidance. maybe you need a computer expert to help you use the technology more efficiently or maybe you need a financial or tax expert to improve the way you do your books. Whatever you do, don’t assume anything. Don’t assume that just because you have had a certain system in place from day one that it is adding value to your firm.
2. Review all vendor contracts. Take a look at how much business you are doing with each vendor. Are you getting the best rates based on how much you are working together? Is the relationship mutually beneficial for you and for them? If not, don’t be afraid to make a chance. If you’re happy with your vendors, on the other hand, take the time to tell them.
3. Find your best customers. You may be surprised to find out that your best customers are not who you think they are. Examine all your customers through a profitability lens. When I do my customer review, I am always surprised to see who may best customers are. Just because you always seem to be doing something for certain customers does not mean they are the most profitable.
4. Touch base with your best clients. Be sure to tell them you appreciate their business and ask if there is anything you can improve on or do differently to help them grow their business.
5. Hold annual performance reviews. Discuss with your employees what they can do to help the company run more smoothly. Also, take the time to find out what they feel most passionate about in their work, and ask if there is another part of the business in which they’d like to play a larger role.
6. Engage your employees as partners. The best people to help you solve problems, particularly those involving customers, are the ones who experience them on a daily basis. That’s right. your employees are a wellspring of ideas on how you can make your customers happier. Hold a meeting designed to get them to share those ideas. Listening to an implementing your employee’s suggestions is a great way to make them feel valued.
7. Do a “spring cleaning” at lease once a year. Purge your office. There’s no need to hand onto all of that stuff that you either don’t need or that doesn’t work anymore. Your employees will like working in a cleaner environment. Chances are they...and you, will be happier and more productive.
8. Review your marketing campaign. You should always make time to take a look at which marketing efforts are driving businesses, and which are not. Do not hesitate to make changes if you think your current efforts are not paying off.
9. Overhaul your website. In the same way that retail stores move around their floor sets, you need to make changes to your website to keep people coming back. Make sure all of your information is updated, and post any articles that have recently mentioned your work.
10. Take a look at your business cards. Chances are you are handing out your business cards to all kinds of people; your customers, your vendors, potential customers, everyone. Make sure all of the information is updated.
11. Review professional magazine subscriptions. Are you really reading all those magazines that come each month? Chances are at lease some of them are getting piled up somewhere in the office. Cancel magazine subscriptions that are not valuable for you or your employees.
12. Consider technology upgrades. If you need new computers or a new phone system to help things run more smoothly, don’t hesitate to make these upgrades. A new computer, phone system or other technology upgrade can make a huge difference in the daily lives of your employees.
13. Smart companies use accountants for more than counting beans. If you are not talking with your accountant year round about changes in business strategy and tax and reporting issues, you could be wasting a precious resource. First, no one knows you and your industry better than the firm that checks your books. Today’s accountants handle tax planning, risk management, mergers, strategic planning, budgeting and regulatory compliance, asset protection and IRS audits.
This intellectual capital is provided to our clients and friends. For more on this and other strategies contact us at isueirs@aol.com or phone our office at (702) 642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. Saving you money is what we do. No exceptions, No conditions. No time limits. No IRS.
Sunday, November 2, 2008
Massive Tax Act Provides Relief for Individuals
On October 3, 2008 the Emergency Economic Stabilization Act is designed to help rescue the economy from the current financial situation. As part of this"bailout" there are $132.2 billion in tax braks. The law extends many tax breaks that had expired at the end of 2007 and adds a "patch" to the alternative minimum tax (AMT) to keep 23 million taxpayer from owing this tax in 2008.
EXTENDERS: You may benefit from the dozens of tax deductions and credits that had expired at the end of 2007. These include:
* Deduction for educators out of pocket classroom expeses of $250
* Deduction for tuition and fees up to $4,000 as an adjustment to gross income
* Option to deduct state and local sales tax or state and local income tax
* Tax-free transfer of IRA funds up to $100,000 to charity if over age 70
* Tax-free treatment for homeowners who have their indebtedness forgiven when their home is forclosed on or they work out their mortgage with lenders. This break sunsets in 2012.
* Homeowners who do not itemize deductions can deduct real property taxes up to $500 for singles or $1,000 for joint filers as an additional standard deduction.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time Limits, No Conditions. No IRS
EXTENDERS: You may benefit from the dozens of tax deductions and credits that had expired at the end of 2007. These include:
* Deduction for educators out of pocket classroom expeses of $250
* Deduction for tuition and fees up to $4,000 as an adjustment to gross income
* Option to deduct state and local sales tax or state and local income tax
* Tax-free transfer of IRA funds up to $100,000 to charity if over age 70
* Tax-free treatment for homeowners who have their indebtedness forgiven when their home is forclosed on or they work out their mortgage with lenders. This break sunsets in 2012.
* Homeowners who do not itemize deductions can deduct real property taxes up to $500 for singles or $1,000 for joint filers as an additional standard deduction.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time Limits, No Conditions. No IRS
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