Olinger & Associates: Olinger & Associates, CPA PC: 2007 Newsletters

SEPTEMBER 2007

Major Tax Deadlines

For September 2007

	September 17	Due date for individuals to pay third quarter installment of 2007 estimated tax.

	September 17	Due date for filing 2006 tax returns for calendar-year corporations that had an extension of the March 15 filing deadline.

	October 1	Deadline for businesses to adopt a SIMPLE retirement plan for 2007.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

What's New: IRS launches audit program

Beginning next month, the IRS plans to audit about 13,000 individuals for tax year 2006 as part of a research project to update the Service's audit selection process. Audits will focus on those parts of the individual's tax return that cannot be verified through third-party information reports sent to the IRS.

If the program is extended for several years, as the IRS hopes, it will also provide information about the tax gap (the difference between taxes owed and taxes actually collected).

An HSA might be the right prescription now

Health Savings Accounts (HSAs) are tax-sheltered accounts that, when combined with a high-deductible health insurance plan, allow a tax deduction for contributions made to the HSA. HSAs have been around for some time, but new legislation passed at the end of 2006 makes them an even more powerful tool with which to pay medical bills.

Deductible contributions
Essentially, the contribution to an HSA is deductible annually up to $2,850 if you’re single and $5,650 if you’re married. An additional $800 can be contributed if you are 55 or older.

These deductions help to reduce your current income taxes. Funds with-drawn from the HSA to pay medical bills are not treated as taxable income to you. It’s the best of all possible worlds: you receive a deduction for the contribution to the HSA and don’t have to recognize income when qualified medical payments are made by the HSA.

Eligibility requirements
In order to qualify, you must participate in a high-deductible health policy (HDHP). This simply means that the deductible on your health policy can’t be less than $1,100 for self-only coverage and $2,200 for family coverage.

These are minimum deductible limits, and you’re free to participate in a health plan with higher limits and still qualify for an HSA. However, the maximum out-of-pocket expenses (including deductibles and co-payments, but not insurance premiums) can’t be more than $5,500 for self-only coverage or $11,000 for family coverage. All of the limits noted are for 2007; these limits will be adjusted for inflation in future years.

New rules
In addition to raising the HSA deduction limits, the 2006 legislation also changed two other rules.

You can now fund your HSA with IRA money. You can make a transfer of funds from an IRA to an HSA without realizing any income or penalties for such transfer.

Also, if your employer maintains a flexible spending account (FSA) or health reimbursement account (HRA), you can transfer these funds to an HSA. A transfer from an FSA could make a lot of sense when FSA contributions can’t be used up and would otherwise be lost.

In both cases, the transfer can’t exceed the annual contribution limits, and it can only be made once in your lifetime.

Many taxpayers will benefit from the changes in the HSA rules and should consider using an HSA to help control the cost of health care. If you need assistance in analyzing the use of an HSA in your situation, please call us.

New Business: How’s your customer service?

According to a recent survey, 48% of consumers say that customer service is the biggest factor in creating loyalty to a company. 37% said it was product quality; 13% said it was price. Brand name or the company’s reputation was cited by the remaining 2%.

Is your business paying enough attention to customer service? If you need further convincing, take a look at the following:

Satisfied customers tell five people about good service they receive. Dissatisfied customers tell ten people when they receive bad service.

For every unsatisfied customer who complains, there are 26 other unhappy customers who say nothing. Of those, 24 won’t come back.

The average company loses about 20% of its customers each year.

Of customers who take their business elsewhere —
15% find cheaper products somewhere else.
15% find better products somewhere else.
65% leave because of poor customer service.

Make the right choice in deducting car expenses

Taxpayers generally may use one of two methods for computing business car expenses: the actual cost method or the standard rate method. The standard mileage rate may not be used in certain situations; the actual cost method may be used by any taxpayer.

Standard mileage
With the standard mileage method, you simply multiply your business miles driven during the year by the IRS’s standard rate. The rate, which is set by the IRS each year, is 48.5¢ per mile for 2007. If you use the standard mileage deduction, you can also deduct related tolls, parking fees, and the business portion of interest expense on your car loan. (Interest expense is not deductible by employees.)

Actual cost
With the actual cost method, you can deduct the actual expenses of operating the car for business. These expenses include gas, tolls, insurance, parking, repairs, maintenance, registration and license fees, loan interest (except employees), and depreciation.

Recordkeeping
Regardless of the method you select, you need records to support the deduction. You’ll need to keep track of your mileage under both methods, but the actual cost method requires more record-keeping than the standard mileage method.

Only the business portion of your total mileage is deductible. For example, if your business mileage is 15,000 and your total driving mileage is 20,000 this year, you can deduct 75% of your total automobile expenses if you choose the actual cost method. If you choose the standard mileage method, you multiply your 15,000 miles of business driving by 48.5¢ a mile and deduct $7,275.

Tax impact
You might be inclined to choose the standard mileage rate to simplify your recordkeeping, but before you opt for this method, consider the potential impact of each method on your tax bill. The price for using the mileage rate’s simplicity may be lost deductions. If you drive often or long distances for business, or if your car expenses are high, the alternative actual cost method may be better.

If it’s advantageous, you can switch to the actual cost method even if you started with the standard mileage rate. Be aware, however, that once you begin using the actual cost method on a vehicle, you can’t switch to the standard mileage deduction for that vehicle. In making your decision, you should consider how long you’ll keep the car and the estimated total tax savings under each method.

The rules governing business car deductions are full of exceptions and limitations. To be certain you use the method that’s right for you — and that maximizes tax savings — give us a call. We can review your situation and your options with you.

What's New: Have you gone too paperless?

It can be convenient to cut out "paperwork" by conducting your financial activities online. But if you do your banking and your investing through online bank and brokerage services, your heirs may have trouble sorting through your finances once you’re gone.

Putting some information on paper — even in a world trying to go paperless — is probably a good idea. At least record basic information about your assets, the names of advisers, and the location of your estate planning documents. Include any other information your heirs will need in order to locate various things and to be able to follow your wishes concerning the disposition of your estate.What’s more important — saving for children’s college or your retirement?

A college education. Retirement. What do these major life events have in common? One shared characteristic is that each comes with a price tag. Here’s another: If you have school-age kids, you might be facing the challenge of having to decide which goal to save for. They’re both important. So how do you make the choice?

Here are some suggestions that can help you reach a sensible solution.

Eliminate excuses for not making a decision. Procrastination can be costly. For example, to accumulate $100,000 in five years, you’d have to deposit a little over $1,500 every month in an account that earns 4%. But with a ten-year time horizon, assuming the same return, you can build up $100,000 by socking away less than half that amount, or approximately $700 per month.

What you need to know: Estimate the total amount required for both goals, how much time you have, and how much cash you’ll need to set aside on a regular basis.

Expand your resource horizon. Once you’ve computed the expense side of the equation, figure out how much you can afford to save. You may find that, with one pool of income and two goals, there’s not enough money to fully fund both goals.

But who says you have to pay for everything yourself? Turn an obstacle into an opportunity by searching out alternatives. For instance, while your income in retirement may be dependent in large part on your savings, there are plenty of options for paying college tuition.

Where to look: Investigate the possibility of advanced placement credits while your child is still in high school. Other potential sources of help include scholarship prospects, federal work/study programs, and summer internships.

Adopt a flexible approach. Broadly speaking, you have three alternatives for divvying up your available savings between the two goals. You can save for retirement only, save for college only, or opt to do both.

Yet within each alternative are creative strategies. As an illustration, you could start out by saving strictly for retirement, shift toward saving for college when your child reaches a certain age, then switch back after graduation.

Caution: Be careful of falling into the deadline trap. It’s likely your kids will attend college before you retire. Since the tuition deadline is closer, you might be tempted to reduce or eliminate retirement plan contributions in the early years of your savings plan in order to focus on education savings.

But consider this: A typical retirement will generally last longer and cost more than your child’s education. By putting college tuition first, you could end up with less than you need in your retirement nest egg. Instead, take your overall time horizon into account.

For assistance with the numbers, give us a call.

Looking back 100 years

Compare the following statistics for 1907 with today. What a difference 100 years makes!

The average life expectancy in the U.S. was 47 years.

A three-minute call from Denver to New York City cost $11.

There were only 8,000 cars in the U.S. and only 144 miles of paved roads.

Alabama, Mississippi, Iowa, and Tennessee were each more heavily populated than California.

The average U.S. wage was 22 cents an hour.

90% of all U.S. doctors had no college education.

The American flag had 45 stars. Arizona, Oklahoma, New Mexico, Hawaii, and Alaska hadn’t become states yet.

The population of Las Vegas was 30.

There was no Mother’s Day or Father’s Day.

AUGUST 2007

Major Tax Deadlines

For August 2007

Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

What's New: Charities and churches warned to stay out of politics

Though national elections are not until next year, the IRS is reminding charities, churches, and other nonprofit organizations to stay out of politics. A 2006 report on political activities showed a steep increase in the number of complaints about improper activities by these organizations. The tax-exempt status of nonprofit organizations is dependent on their refraining from engaging in partisan political activities.

In its attempt to increase compliance with the rules, the IRS has issued guidance on what constitutes legal and illegal activity. Details can be found in Revenue Ruling 2007-41 on the IRS's Web site www.irs.gov.

Manage "AGI" to keep tax breaks from disappearing

At tax time it pays to read the fine print. A variety of allowances, deductions, credits, and exemptions are phased out as income rises. If your income reaches these "phase-out" levels, you may lose tax benefits.

For example, let’s say you finally snag that big promotion. If the promotion causes this year’s income to climb into the phase-out zone, your deduction for college bond interest or child credits may be reduced. The result? You earn more money, but more of it is taxed. Your big promotion — after taxes — is now smaller.

Some items subject to phase-out income levels are the child tax credit (starts at $110,000 for joint filers), the Hope and Lifetime Learning credits ($94,000 to $114,000), Roth IRA eligibility ($156,000 to $166,000), and the college bond interest exclusion ($98,400 to $128,400). These phase-out levels are for "adjusted gross income" — also known as AGI — on 2007 joint returns.

Clearly, many middle-class families and small business owners reach these income levels. And these are just a few of the items affected by phase-outs. Others include personal exemption amounts, rental real estate passive loss allowances, exclusion of social security benefits, charitable deductions, and medical deductions.

How can you avoid losing all or part of these tax benefits as your income rises? One way is to manage your AGI, the main number used to determine your taxable income. The goal is to manage income levels so you won’t lose tax benefits for which you would otherwise qualify. Here are three suggestions.

Take more "above-the-line" deductions. These deductions are reported on your tax return above where the AGI is calculated. They include contributions to individual retirement accounts, self-employed retirement plans, and health savings accounts. Other "above-the-line" deductions are alimony payments, moving expenses, payments for student loan interest, and self-employed health insurance.

Reduce your business’s taxable income. Companies are taxed on their net income. To reduce this year’s taxable income you might consider sending out invoices in late December so you’ll receive payments after year-end. Bumping up year-end expenses — such as business equipment purchases, advertising, and repairs — is another strategy to keep your AGI below the phase-out levels.

Defer income. Even if you don’t own a business, you can sometimes push your income into the following year, thus lowering your AGI. For example, you might work out an arrangement with your boss to receive a bonus in January rather than December. Or you might wait to sell that hot stock until after year-end.

For assistance with the tax planning that will help you retain your tax benefits, give us a call.

New Business: Free IRS online workshop available to nonprofit organizations

The IRS now has an Internet version of its Exempt Organizations Workshop available on its Web site at www.irs.gov. The workshop, titled "Stay Exempt – Tax Basics for 501(c)(3)s," covers tax compliance issues faced by small and mid-sized tax-exempt organizations, including charities and churches.

The workshop has five interactive modules including the following:

Tax-Exempt Status — How can you keep your 501(c)(3) exempt?

Unrelated Business Income — Does your organization generate taxable income?

Employment Issues — How should you treat your workers for tax purposes?

Form 990 — Would you like to file an error-free return?

Required Disclosures — To whom do you have to show your records.

Is your worker an "employee" or an "independent contractor"?
There’s an ongoing debate that’s almost as old as the tax code itself. If you have people working for your business, should you classify them as employees or as independent contractors?

Classifying your workers as independent contractors generally saves you money. That’s because you avoid paying employment taxes and benefits on their behalf.

In most instances, however, very few of your workers actually qualify as independent contractors. If the IRS determines that you misclassified your employees as contractors, you could end up paying back all of the employment taxes and benefits that should have been paid over the years. Depending on the size of your workforce, the cost to you could be substantial, potentially bankrupting your business.

How can you ensure that you properly classify your workers? Start with the factors listed by the IRS to determine a worker’s classification. If you maintain control over your workers through hiring, training and supervision, scheduling the work to be done, and by providing them with tools and materials, your workers are most likely your employees. The same holds true if you pay your workers a set salary or an hourly wage and have the right to let them go at any time.

As a general rule, if you only have the right to control or direct the result of the work and not the means and methods of accomplishing the result, the individual may qualify as an independent contractor.

If your business employs independent contractors, take steps to protect yourself and your business. The IRS is currently focusing its audit efforts in this employment tax area. Be consistent with how you classify your workers, and follow how other businesses in your industry classify their workers. And don’t forget to send a Form 1099-MISC to any contractor who earns more than $600 from you during the year.

To find out more about properly classifying your workers, please give us a call.

What's New: What’s new on the home front?

Existing home sales fell to a four-year low in May, with the median home price declining for the 10th straight month.

According to the National Association of Realtors, the number of homes for sale is now the highest in 15 years.

To add to the housing market's woes, mortgage companies are tightening requirements for home loans. Buyers are expected to have higher credit scores and to put down larger down payments.

Marriage? Divorce? Review your finances after a change in marital status

If you are getting married, divorced, or have recently lost your spouse, you certainly have a lot on your mind. While you may feel overwhelmed with all there is to do, it is important not to overlook financial matters when your marital status changes. Some actions you may want to consider include the following:

Will. Update your will and power of attorney if you have them. If you do not, hire a lawyer to draw them up for you.

Life insurance. Review your life insurance coverage. Given the recent events in your life, you may want to change your beneficiary and the amount of your coverage.

Beneficiaries. Review the beneficiaries you have named for your 401(k) and IRA plans. Make any changes that are appropriate given your new circumstances.

If you’re getting married, review your combined contributions to 401(k) plans to make sure you’re maximizing both employers’ matching contributions.

Withholding. Adjust your Form W-4 (income tax withholding form) for your change in marital status and any change in the number of your dependents.

If you’re getting married and both you and your spouse work, check to see if you will be affected by the marriage penalty. If so, you may need to adjust your payroll withholding.

Health insurance. Analyze your health insurance options. If you are getting married, you may be able to save money by joining your spouse’s plan or by having your spouse join your plan.

If you are divorcing or have lost a spouse and have relied on him or her for health insurance, you should investigate the COBRA laws, which may allow you to retain your insurance coverage for up to 18 months.

Disability insurance. Consider purchasing disability insurance if someone will be dependent on you for financial support.

Auto insurance. Talk to your automobile insurance agent. If you are getting married, you may save money by combining separate policies. You may also qualify for a marriage discount.

Prenup. Consider a prenuptial agreement if you’re getting married and you have children from a previous marriage or have substantial assets.

Name and address. Notify the Social Security Administration if you change your name. If you move, notify the IRS of your address change.

Getting your affairs in order after a change in marital status is an important step toward financial well-being. For any assistance you need, contact our office. We can help you sort through your options and find the right choices for your new situation.

A graying America: Some statistics to ponder

The number of Americans over the age of 65 is projected to double by 2030 to 72 million.

The fastest growing category of Americans is the 85-and-older group.

The wealthiest 20% of older Americans have an average net worth of $328,432, not counting their homes.

14,000,000 seniors say they have health conditions such as heart disease, arthritis, or other chronic illnesses.

JULY 2007

Major Tax Deadlines

For July 2007

July 31

Due date for filing retirement or employee benefit plan returns (5500 series) for plans on a calendar year.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

What's New: Small Business Tax Act is signed by President Bush

President Bush signed the Small Business and Work Opportunity Tax Act on May 25, 2007. This law is part of a larger bill that provides funds for the troops and increases the federal minimum wage over a two-year period to $7.25.

To help offset the cost of the increased minimum wage, the law provides a number of tax breaks for businesses. Some individual taxpayers may find their tax bills are increased by the revenue raising portions of the law.

Here’s a brief overview of the tax changes.

The limit for the Section 179 election to expense business equipment purchases is immediately increased from $112,000 to $125,000, with the phase-out amount increased from $450,000 to $500,000.

The Work Opportunity Tax Credit for hiring certain disadvantaged workers was set to expire at the end of 2007. The new law extends the credit through August 31, 2011, and broadens the credit to include more veteran groups.

The FICA tip credit will continue to be based on the old $5.15 minimum wage even though the minimum wage increases to $7.25 an hour.

Married couples who jointly operate an unincorporated business and who file a joint return may elect not to report their income as a partnership. Instead of filing a partnership return, they can each report their income on Schedule C of Form 1040.

The age limit for the “kiddie tax,” the taxing of a child’s unearned income above a certain amount at the parents’ higher rate, is increased from age 18 to 19. For full-time students, the kiddie tax will apply until age 24. This change is effective for tax years beginning after May 25, 2007 — which for most taxpayers means the change will become effective in 2008.

Among other provisions in the law are tax incentives to help taxpayers recovering from Hurricane Katrina and some S corporation changes. If you would like to review how these recent changes might affect your business and personal tax planning, give us a call.

Act soon to benefit from this new IRA charitable donation option

A recent change in the charitable contribution rules provides a potential tax planning opportunity involving your individual retirement account. If you’re 70½ or older, you can make contributions of up to $100,000 directly from your IRA to a qualified charity.

Charitable IRA distributions are penalty-free withdrawals that are neither included in, nor deducted from, your taxable income. Better yet, such payments qualify as required minimum distributions (RMD) from your retirement account. Thus, if you do not need the IRA distribution to live on, and you wish to make a donation, a charitable IRA rollover might be a win-win strategy.

Charitable rollovers also make sense when the inclusion of the IRA distribution in your income would result in the phasing out of other deductions, such as personal exemptions or itemized deductions. Non-itemizers also benefit since the donated amount is excluded from their taxable income.

Keep in mind that there are unique restrictions on this type of gift. The IRA rollover cannot be contributed to a donor advised fund or supporting foundation. Also, if any benefit is received in exchange for the gift, such as dinner tickets, the entire distribution becomes taxable. As with any donation, the charity needs to provide you with a tax receipt containing all the proper substantiation for your contribution. Without it, the gift is disqualified. Also be aware that the donation must be made directly from the IRA to the charity and not paid to you first.

This provision is scheduled to expire this year, so now’s the time to act. If you’re interested in analyzing whether this option is a tax-smart move for you, give us a call.

New Business: Age 50-plus is fastest growing group of new business owners

According to the Small Business Administration, the fastest-growing category of new entrepreneurs are people aged 50 to 62. About half of all small business owners are age 50 or older.

For individuals of any age interested in going into business, the Small Business Administration’s Web site is an excellent resource that provides a wealth of useful information. Check it out at www.sba.gov.

If you would like assistance with your business concerns, please contact us.

Do a midyear review of your business tax planning

1. Establish a retirement plan if you don’t already have one. Examining the choices now gives you time to select the best plan for your business and to get the paperwork completed. Then you’ll be set to make contributions as your cash flow allows — and to take the deduction on your 2007 tax return.

Another plus: You may be able to claim a credit on this year’s tax return for the costs of establishing the plan.

2. Hire your kids. If your child is under age 18 and works for your unincorporated business, there are no social security or Medicare taxes on the child’s pay. Wages paid to the child are also deductible. Just make sure the compensation is reasonable for the work actually performed.

3. Track your business driving. For 2007, the rate for business-related mileage is 48.5 cents per mile, and you can deduct actual costs for parking fees and tolls in addition to mileage. Keep detailed records to substantiate your deduction.

4. Deduct equipment purchases. You can expense up to $125,000 of business equipment purchased this year.

5. Check your benefits. If you offer health benefits to your employees, look into tax-advantaged plans such as health savings accounts, flexible spending accounts, or health reimbursement arrangements. These plans can reduce your taxes and help control your benefit costs.

6. Start a business. Planning to acquire or start a business this year? Keep good records of your costs to get the business off the ground, including advertising costs, legal fees, and accounting expenses. Up to $5,000 of these expenses could be deductible on your 2007 tax return.

To discuss the tax-saving ideas best suited for your business, give us a call.

What's New: New survey shows most have no will

A recent survey conducted for the legal profession by Harris Interactive showed that the majority of Americans do not have a will.

55% of all adults have no will, and the percentage of those without wills is even greater among minority groups. 67% of African American adults and 74% of Hispanic American adults have no will.

The survey also revealed that living wills, also known as medical directives, have become more popular. 41% of adults now have a living will, compared with about 30% in 2004.

Protect yourself from identity theft and scams

Scams are everywhere. However, identity theft and its evil twin, phishing, have become major problems. Strictly, identity theft occurs when someone literally steals your identity. They set up bank accounts, take out credit cards, and borrow money in your name. But related scams include someone using your credit card number illegally, or stealing your PIN and looting your bank account.

Phishing occurs when someone pretends to be a legitimate business or government organization and convinces you to give up personal or financial information. They often use phone calls or e-mail messages and even set up fake Web sites.

The number of these scams is exploding. If you fall victim, you’ll spend countless hours sorting out the mess. Follow these tips to help protect your identity.

Your physical property. Thieves love to go through newly delivered mail looking for credit cards and bank statements. They’ll also sort through garbage for discarded bills and statements that show account numbers. Protect yourself with a locking mailbox and a shredder. Shred all financial data before you throw it out. Don’t carry PIN numbers or your social security card in your purse or wallet.

Your computer. Many phishing attempts come via the Internet. Never give out your social security number or account numbers unless you’ve initiated the transaction. Never reply to e-mail requests to "update your information." If in doubt, telephone the company or organization. Install software to screen out junk mail and protect against viruses and spyware. These can be used to steal your personal data or direct you to bogus Web sites. Update your protection regularly.

Your telephone. Never give out personal information in response to an unsolicited call. Don’t fall for calls claiming to be from your bank’s security department. Reduce unwanted calls by listing your number on the national "do not call" list. If a telephone solicitor calls, ask to be put on their "do not call" list and then hang up.

Your accounts and credit report. Reconcile your bank accounts and credit card statements regularly. Report unusual activity immediately. Consider online access so you can review activity frequently. Every four months, go to www.annualcreditreport.com and order a free copy of your credit report from one of the three major agencies. Look for mistakes, accounts you don’t recognize, or strange credit inquiries. Report suspicious items immediately.

These steps won’t guarantee protection, but they’re a good start.

O say, can you sing our national anthem?

Apparently, more than 60% of Americans don’t know the words to our national anthem. The National Anthem Project is going to cities across the country to reteach the words to people.

If you tried to sing The Star Spangled Banner and got a bit muddled in the middle, here’s how the first stanza goes:

   O say, can you see, by the dawn’s early light,
   What so proudly we hailed at the twilight’s last gleaming?
   Whose broad stripes and bright stars, through the perilous fight,
   O’er the ramparts we watched, were so gallantly streaming?
   And the rocket’s red glare, the bombs bursting in air,
   Gave proof through the night that our flag was still there.
   O say does that star spangled banner yet wave
   O’er the land of the free, and the home of the brave?

Happy Independence Day! And if you would like to sing the other stanzas in our national anthem, go to www.thenationalanthemproject.org.

JUNE 2007

Major Tax Deadlines

For June 2007

	June 15	Second quarter 2007 individual estimated tax is due.

	June 15	Due date for calendar-year corporations to pay second installment of 2007 estimated tax.

	June 15	Due date for calendar-year trust and estates to pay second installment of 2007 estimated tax.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

What's New: Five new tax scams included in 2007 "dirty dozen"

Each year, the IRS publishes its list of top tax scams known as the "dirty dozen." The 2007 list includes five new scams uncovered by IRS auditors and criminal investigators.

New to the list this year are the following scams:

Telephone excise tax refund abuses. Taxpayers request large, obviously improper amounts for the telephone tax refund.

Abusive Roth IRAs. This scam involves shifting under-valued property to a Roth IRA. In one variation of the scam, promoters suggest moving under-valued common stock into a Roth IRA, circumventing the annual contribution limit and allowing otherwise taxable income to go untaxed.

American Indian employment credit. Taxpayers claim an American Indian employment or treaty credit which is not allowed.

Domestic shell corporations. These entities are formed for the purpose of underreporting income, nonfiling of returns, money laundering, financial crimes, and possibly even terrorist financing.

Structured entity credits. Promoters of this scheme set up partnerships to own and sell state conservation easement credits, federal rehabilitation credits, and other tax credits. Once the credits are used, investors in the partnerships get a K-1 claiming a loss to be deducted on their tax returns. The investment in the partnerships are not valid, and the losses are not deductible.

The IRS reminds taxpayers that falling for any illegal tax scheme promoted by con artists can result in penalties and even criminal prosecution.

Taxes and your child's summer job

Your son, Jake, a junior in high school, announces that he's found himself a job for the summer. How will that affect his tax situation and yours?

Jake will owe taxes on his earnings, just like any employee. But in practice, he might end up paying zero or very little tax. He can use his standard deduction to offset the first $5,350 he earns for this year. After that he'll pay taxes at a 10% rate on the next $7,825 of earnings.

Usually, Jake will have income tax withheld from each paycheck. He'll fill out a Form W-4 when he starts work. That will determine how much tax is taken out. If he doesn't plan to work the full year, he might want to claim an extra withholding allowance on the form to reduce the taxes withheld.

He'll also have payroll taxes (social security and Medicare) taken from each paycheck. These will count towards his lifetime social security earnings record.

Generally, you can still claim Jake as a dependent on your tax return even if he takes a standard deduction for himself. That assumes he still meets the usual tests for a dependent, including age (under 19 or under 24 if he's a full-time student), living with you for at least half the year, and you providing at least half his support.

Jake can't claim a personal exemption for himself if you are entitled to claim him as a dependent on your return.

Jake should file a tax return for 2007. That will ensure that he receives a refund of any excess taxes that were withheld. There are limited exceptions; contact our office for details.

New Business: IRS announces 2007 vehicle deprecation limits

The IRS has issued the depreciation limits for business cars first placed in service in 2007. For passenger cars, the limits are —

$3,060 for 2007
$4,900 for 2008
$2,850 for 2009
$1,775 for each year thereafter.

For light trucks and vans first placed in service in 2007, the limits are $3,260 for 2007, $5,200 for 2008, $3,050 for 2009, and $1,875 for each year thereafter.

How to put the right price on your products

In business, making pricing decisions is always tough. At times you may be tempted to cut prices hoping to generate higher sales volume. But sometimes that just produces lower margins on a low volume. What do you do if you’re being squeezed by cost increases? How do you respond if your customers complain? Can you justify holding prices steady if your competitors cut their prices?

There are no easy answers, but running through a three-step process can help you make the right decision.

1. Know your strengths. How does your product or product range stack up against the competition? Are your products higher quality, lower quality, or indistinguishable from your competitors’ products?

How about all the other elements that make up your total service package? Do you provide a bigger inventory, faster delivery, better payment terms, wider product line, better service on returned items? If not, can you change your operations to gain an edge in any of these areas?

2. Put yourself in your customers’ shoes. Try to understand your customers’ needs. Are they under profit pressure? What changes are occurring in their industry? How can you adjust your products or service to add value for them — value that they might be willing to pay for? What are their alternatives if you raise prices?

3. Know your competition. Run through the same questions you asked about yourself and apply them to your competitors. What are their strengths and weaknesses? What can they offer your customers that you can’t? How will they respond if you change prices?

When you’ve worked through these three steps, you should have a much better idea of the likely competitive effect of a price change. Run some profit scenarios and then review your pricing decision with your salespeople. Make sure they understand the rationale, and jointly rehearse how they’ll present the change to customers.

For assistance with pricing issues in your business, give us a call.

What's New: New rules on inheriting a 401(k)
For surviving spouses, inheriting a 401(k) is relatively painless since the 401(k) can be rolled over into an IRA in the spouse’s name. For others, however, inheriting a 401(k) plan can trigger significant tax. That is, until the passing of the Pension Protection Act of 2006. Now, nonspouses may get a break as well.

Nonspousal heirs who receive a 401(k), 457, or 403(b) plan may roll over the funds into what is called an "inherited IRA." Although nonspouses must begin receiving taxable distributions from the inherited IRA in the following year, the payments may be spread over their expected lifetime.

There are certain traps to avoid. The timing of the rollover is critical, and the rules must be followed precisely. Also, the money must transfer directly from the 401(k) to the inherited IRA without passing through your hands.

For details and assistance in benefiting from the new rules, give our office a call.

Stocks: Deciding when to sell is as critical as deciding when to buy
If you are serious about managing your stocks, it's important to have a selling strategy. What is yours? Investors tend to give a lot of thought to the buying decision, but little consideration to the sell decision. Here are some situations that may indicate it's the right time to sell.

To offset some gains. If you have some losing positions, you might want to use them to offset taxable gains.

When there are no tax consequences. If you hold stock in a retirement fund, you may want to cash in some gains without any tax impact.

To take some money off the table. If a stock has had a nice run, you might want to sell a portion to recoup part of your investment. You can continue to invest in the stock but with locked-in gains.

A shift in the fundamentals. If the economy changes quickly, an industry becomes vulnerable, or negative news can affect a specific stock. It might be time to sell.

When you've given up on a stock. If a stock has been declining or flat-lining for an extended period, it might be time to get out. Sometimes you have to sell low in order not to sell even lower later on.

To take a contrarian position. If the market has gotten a little frothy and all the news is optimistic, it might be time to harvest gains.

When something else catches your eye. You might want to take advantage of another opportunity by selling one stock to buy another.

When cash becomes attractive. If the economic outlook is gloomy, it might be time to increase your cash reserves.

When you hit your target price. If the fundamentals are the same at this point, it might be time to sell.

The wise investor knows it's important to have a disciplined stock selling strategy. Be sure you give as much thought to selling a stock as to buying it.

Too many messages?

Do e-mails and text messages add to worker efficiency and productivity? Not according to a survey of British workers. The survey showed that —

Almost two out of three people check their electronic messages outside of office hours and when on holiday.

Half of all workers respond to an e-mail within 60 minutes of receiving one.

One in five will break off a business or social engagement to respond to a message.

Nine out of ten people thought colleagues who answered messages during face-to-face meetings were rude, while three out of ten believed it was not only acceptable, but a sign of diligence and efficiency.

According to Dr. Glenn Wilson, a psychiatrist who monitored the effects of all this messaging in clinical trials, "...this obsession with looking at messages, if unchecked, will damage a worker's performance by reducing their mental sharpness." His research showed the IQs of those who tried to juggle messages and work fell by 10 points. The IQ drop was even greater in the men who took part in the tests.

MAY 2007

Major Tax Deadlines

For May 2007

May 15 Deadline for calendar-year exempt organizations to file 2006 information returns.

May 31 Deadline for IRA, SEP, SIMPLE, Roth IRA, MSA, and education savings account trustees to file annual statements (Form 5498) with the IRS, with copies to participants.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

What's New: IRS warns taxpayers about phony e-mails

The IRS is warning taxpayers about Internet scams and fraudulent e-mails that appear to be from the IRS. The e-mails direct the taxpayer to a Web link that looks like the genuine IRS site and requests information such as the individual’s social security number and bank account or credit card numbers. This information is then used by the scammers to steal from the victim’s bank account and run up charges on his or her credit card.

The phony Web sites use images and content taken from the official IRS site and can appear quite legitimate. But the IRS reminds taxpayers that it never sends out unsolicited e-mails and never asks people for PINs, passwords, or other private access information for financial accounts. Also the IRS reminds taxpayers that the official IRS Web address is www.irs.gov. If the site is .com, .net, .org, or any other designation than .gov, it’s not the IRS site.

The schemes have several variations, including notification that the taxpayer is eligible for a refund, a claim that the taxpayer’s credit card has been used to pay another person’s taxes, and instructions to send money to claim a large lottery winning. None of these schemes has anything to do with the IRS; they are all scams to snare the unwary taxpayer.

If you receive an e-mail claiming to be from the IRS, you should not open any attachments or click on any links in the e-mail. Instead, forward the e-mail to the IRS at phishing@irs.gov so that it can be investigated.

Time for midyear planning

Filing your 2006 tax return might signal the official end of 2006, but for tax-savvy individuals, it’s also the kick-off for saving taxes in 2007. Getting an early start on your 2007 tax planning will help you take maximum advantage of the latest tax breaks, inflation adjustments, and retirement options.

First, commit to maximizing your retirement plan contributions. This will lower your 2007 taxable income and enhance your nest egg to boot. If you have an IRA, consider making contributions earlier in the year to reap extra tax-deferred earnings.

Second, minimize any surprises next year by examining your paycheck withholdings now. Are tax withholdings on track with your current financial situation? A large tax refund or amount due on your 2006 return might require an adjustment to your Form W-4 for 2007. Additional factors to consider include recent changes to family income, a new home, or children no longer qualified as dependents.

A law enacted last year extends the age threshold for taxing children’s unearned income at the parent’s higher tax rate. Now the "kiddie tax" applies until the child reaches age 18. This might be a good year to consider a 529 college savings plan as an alternative to transferring funds directly to a child’s account.

And don’t forget to take advantage of available energy tax credits this year. Qualified home improvements can trim your utility bills and lower taxes at the same time.

Staying abreast of new tax laws is always a good idea, and this year is no exception. For instance, taxpayers age 70½ and older can now make charitable donations directly from their IRA without paying tax on the distribution. In addition, the payments satisfy the required minimum distribution obligation. So if you are charitably inclined and don’t need your IRA distributions to live on, this might be a winning strategy.

The most common tax-related resolution — and the hardest to keep — is a vow to maintain better tax records. The deductions for higher education expenses and teacher’s out-of-pocket expenses have been reinstated for 2007. These and other deductions and credits could be lost if you don’t have a satisfactory recordkeeping system.

New Business: Wellness programs are in the news again
With ever-increasing health care costs, businesses are taking another look at wellness programs for their employees. Typically, a wellness program pays employees for engaging in healthy activities — exercising, losing weight, quitting smoking, for example. In return for paying employees to be healthier, companies generally see a decline in health care costs and an increase in productivity. One large corporation says it has saved $225 per employee in medical costs each year due to its wellness programs. Another reports $2 to $3 in health care savings for every dollar spent on health improvement programs.

Many wellness programs offer a range of benefits to employees. Some include assessments for health risks, with annual physicals that emphasize prevention and early detection of disease. Some offer healthier food choices in the company cafeteria and on-site exercise facilities.

A wellness program may be worth another look for your business, too, especially if health care costs and productivity are issues that concern you.

Avoid the #1 mistake when buying a business

There are many mistakes one can make in buying a business. But if there's any one which could be given top billing, it would be buying too quickly.

Many potential buyers fall in love with a business before they know all they need to know for an intelligent purchase decision. Once you have "stars in your eyes," it's very hard to be objective about the areas that need reviewing.

Before you sign any agreement or put any money on the line, seek professional assistance. Your accountant, your banker, your insurance agent, and your attorney should all be consulted before you commit yourself to purchasing a business. The people who work in these four areas of business see numerous business transactions and assist many buyers and sellers. They are well-equipped to identify problem areas for you.

About 70% of all new businesses fail before they are two years old; about 80% fail before they are five years old. Established businesses also fail. Investigate before you buy. Are you buying a dying business? Why does the present owner want to sell?

How was the asking price determined? Many sellers feel that their business (their brainchild) is worth more than the net profit will substantiate. When you buy a business, you are buying the right to "future income." The price you pay should be determined at least in part by the future income stream.

Even if you're well-acquainted with the type of business you're about to buy, you can still benefit from outside assistance. An individual who owned a restaurant on a busy boulevard in a large city will find that a restaurant in a seasonal tourist area has a completely different set of challenges.

The need for professional assistance when buying or selling a business cannot be overemphasized. Please contact us before you buy. We are here to help.

What's New: Stamps will cost more beginning May 14
The U.S. Postal Service announced that the cost of mailing a first-class letter will go up 2 cents to 41 cents, effective May 14.

The Postal Service will be offering something new as well — a "forever" stamp that can be used indefinitely no matter what increases occur. To begin with, the forever stamp will sell for 41 cents. Stamps purchased at that price can be used "forever" even when prices increase in the future. Stamps purchased in the future will be sold at whatever the prevailing first-class stamp rate is.

The forever stamp offers customers the benefit of never having to buy small-value stamps to get the right postage amount when prices increase and the customer has some of the older stamps left over. Customers can also stock up on stamps and use them "forever," avoiding price increases until their supply runs out.

Use compounding to build your wealth

There are several ways to earn income on investments, but compounding may be your most reliable path to wealth. If you put $1,000 under your mattress, it will still be $1,000 a year later, but it probably will buy you a little less due to inflation. If you lend the money to a friend at 12% simple interest, at the end of the year you’ll receive $1,000 plus $120 of interest, since simple interest is computed only on the principal.

Compound interest is computed on both the principal and the interest earned. If you invest the $1,000 in a bond that earns 12% interest compounded monthly, in the first month it will earn 1% (1/12 of 12%), or $10. Now you have $1,010, which will earn 1% interest in the following month, only now the earnings will be $10.10. At the end of the third month, you’ll earn 1% interest on $1,020.10 ($1,000 plus $10 plus $10.10), and so on. By the end of the year, you’ll have $1,126.83, or $6.83 more than you would earn if you loaned out the money at the same rate but at simple interest.

Time matters

An additional $6.83 doesn’t sound like much, but things change over time. After 10 years at 12% simple interest, your $1,000 would be worth $2,200, which is the original $1,000 plus 12%, or $120, multiplied by 10 years. At 12% interest compounded monthly for 10 years, your $1,000 would be worth $3,300, or half again as much as it would without monthly compounding. After 30 years, your $1,000 would be worth $35,950!

Rate of return is also important. Since after 10 years your $1,000 would be worth $3,300 at 12% interest compounded monthly, it would have earned $2,300. At 6%, after 10 years the $1,000 would be worth $1,819, earning only $819 rather than $2,300.

Now suppose the $1,000 came from your net wages. If you’re in a 25% income tax bracket, you earned $1,333 to get $1,000 after taxes were withheld. But what if you could have invested the entire $1,333 for 10 years? Then you will have an additional $1,100.

Compound benefits

The above examples suggest the following ways to use compounding to increase your earnings:

Start saving and investing now. Time is your most powerful multiplier.

Shop for the best rates of return, consistent with your risk tolerance.

Set up your investments to automatically reinvest interest and dividends earned.

Use tax-deferred programs like IRAs and 401(k) plans to the fullest possible extent.

If you’d like to learn more about compounding, just give us a call. We’ll be happy to review the numbers that apply to your business and investment decisions.

United States trivia. . .

In Alaska, one out of every 64 people has a pilot's license.

Missouri is the birthplace of the ice cream cone.

North Carolina is the home of the Krispy Kreme doughnut.

Oregon has the most ghost towns in the country.

South Dakota is the only state that's never had an earthquake.

Virginia is the home of the world's largest office building — the Pentagon.

Wyoming was the first state to give women the right to vote.

April 2007

Major Tax Deadlines

For April 2007

April 2 - Deadline for taking your first required IRA distribution if you turned 70½ in 2006. Unless you're still working, this deadline also applies to your other retirement accounts (except for Roth IRAs).

April 2 - Deadline for payors who file electronically to file 2006 information returns (such as 1099s) with the IRS.

April 2 - Deadline for employers who file electronically to send copies of 2006 W-2s to the Social Security Administration.

April 17 - Individual income tax returns for 2006 are due.

April 17 - 2006 calendar-year partnership returns are due.

April 17 - 2006 annual gift tax returns are due.

April 17 - Deadline for making 2006 IRA contributions.

April 17 - Deadline for employers to make contributions to certain retirement plans.

April 17 - First installment of 2007 individual estimated tax is due.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

What's New in Taxes: New $5,000 penalty for making "frivolous" tax claims

In a March 2007 notice, the IRS specified forty tax positions that will be treated as frivolous. Taxpayers who make these arguments in order to keep from paying taxes will be subject to a new $5,000 penalty. Four IRS Revenue Rulings were issued to accompany this IRS warning. The rulings targeted the major frivolous positions taxpayers (and often unscrupulous tax preparers) take, including the following claims:

* Wages are not taxable income.

* Filing returns and paying taxes are voluntary.

* The IRS must provide taxpayers with a "summary record of assessment" before it can collect overdue taxes.

* The government cannot impose federal income taxes on those claiming to be a citizen of a state rather than of the United States, or who claim not to be a "person" as defined by the tax code.

IRS Commissioner Mark Everson cautioned taxpayers not to fall for schemes claiming to eliminate tax liability. He pointed out that people are "ultimately responsible for what is on their tax return even if some unscrupulous preparer has steered them in the wrong direction."

Stop lending money to the IRS

Will you be among the thousands of taxpayers who get a big tax refund this year? While most Americans happily accept their tax refund checks, smart taxpayers understand that refunds actually cost them money. Here’s why:

* The government pays no interest on refunds. Kept in your hands, those dollars could have been productive. For example, you could have invested the money or used it to pay off your debt during the year. If the money had been added to a 401(k) plan, tax would have been deferred on both the investment and its earnings. Even better, your employer might have matched all or part of your investment, adding to your retirement savings.

* Refunded cash is not available for use until actually received. Even though most taxpayers get their checks promptly, circumstances or errors can delay (or stop) a refund.

To prevent losing money on tax refunds, consider reducing your withholding or estimated tax payments. For most taxpayers, withholding must equal either the prior year’s tax or 90% of the current year’s liability. If your annual income changes little, it’s relatively easy to avoid overwithholding. You should consider filing a revised Form W-4 withholding statement with your employer if you’re having too much withheld.

For taxpayers with fluctuating income or multiple sources of income, the problem is more complex. The IRS provides a worksheet with Form W-4, but many people find the form complicated. If you’d like assistance adjusting your withholding, contact our office.

New Business: Tax refund is good news. Now the bad news. . .

Businesses are being reminded that the telephone tax refund they received this year may be taxable income on their 2007 income tax returns.

The refund results from the IRS having charged excise tax on long-distance telephone services during the period of March 2003 through July 2006. The courts have determined that the tax should not have been collected, and the IRS has been issuing refunds to both individuals and businesses.

Businesses that deducted the telephone taxes as part of their deductions for telephone bills will owe income tax on the refunds they receive in 2007.

Your business can choose a retirement plan that fits

Mention the words “employee benefits” to a small business owner and you might hear the groans of someone burned by sky-rocketing costs and mind-numbing complexity. But one type of benefit — a retirement plan — need not be a stress-inducing perk. In fact, it might just be the powerful tool you’ve been looking for to save taxes and retain employees.

While choosing a retirement plan can be complicated, the underlying concepts are not. The best plan for you will depend on your personal retirement needs, the size of your business, and how you wish to motivate your employees. Here are a few of the most popular plans available.

* 401(k) plan. The 401(k) is the workhorse of the retirement world, offering attractive flexibility to both owners and employees. Up to 25% of compensation or $45,000 ($50,000 if over 50) can be paid into an employee’s account. The owner has the option to match employee contributions and specify when the benefits are vested. The downside to all this flexibility is high cost. Those with fewer than 20 employees may find other plans more economical. An exception to this is the one-person 401(k) for the self-employed, which has simpler filing requirements and lower costs.

* Simplified employee pension plan (SEP IRA). The SEP IRA was designed to give small businesses a low cost alternative to the 401(k). Unlike the 401(k), however, employees cannot contribute a portion of their own pay. What’s more, vesting is immediate, and the same percentage of salary that is contributed to the owner’s account must be paid to each eligible employee’s account. On the plus side, the maximum contribution limit is the same as a 401(k), and contributions can vary from year to year. So, if you have a lean year, you can reduce your contributions accordingly.

* SIMPLE IRA. Another option is the SIMPLE IRA. Designed for businesses with 100 or fewer eligible employees, the SIMPLE IRA permits worker contributions of up to $10,500 ($13,000 if over 50), plus a mandatory employer match of up to 3%. The SIMPLE IRA is often viewed as a good entry-level retirement plan. One drawback is the lower contribution limits compared to a SEP IRA or 401(k), which may hinder the business owner’s own retirement needs.

So which retirement plan is best for you? The answer will require careful analysis. But whether your time frame is near or far, or your business large or small, the good news is that more retirement options are available today than ever before. Give us a call to find the plan best suited for you and your business.

What's New in Finances: Recent scams target debit cards

According to the Federal Reserve, debit card use has now surpassed credit card use. Unfortunately, debit card fraud has also grown, reaching $662 million in 2005, a 21% increase from the previous year.

Though debit cards are convenient to use, they put consumers at greater financial risk for two reasons: (1) the cards directly access an individual’s bank account, so your money can be withdrawn by scam artists, and (2) debit cards don’t provide the same legal protection against fraud that comes with credit cards.

To help protect yourself when using a debit card, heed the following tips:

* Check the ATM or card-reader for signs of tampering (tape, loose connections, etc.).

* Check for hidden cameras before entering your PIN, and shield your fingers on the keypad.

* Check your bank and credit statements carefully.

* If you suspect fraud, close the account immediately.

* Don’t let your card out of your sight, especially at gas stations, restaurants, or convenience stores where your card’s data could be copied and used by scam artists.

* Report errors, no matter how small, to the financial institution that issued the card.

Don’t overlook renters insurance

Do you rent an apartment or condo? If so, do you have renters insurance to protect your belongings and to cover you against liability claims? A surprising number of renters don’t bother with insurance. Some assume they’re covered by their landlord’s policy. Wrong! Usually that covers only damage to the building and liability claims against the landlord. Others say that their belongings aren’t worth enough to justify the cost. But add up how much it would cost you to replace everything you might lose in a fire and you’ll be surprised. In most cases, the cost of insurance is a small price to pay for the protection you’ll receive.

Typical protection. Renters insurance, sometimes called a tenant policy, typically protects against three things:

* loss or damage to your personal belongings from fire, theft, etc.

* liability claims from someone injured in your apartment.

* the cost of temporary living expenses if your apartment is made uninhabitable by some catastrophe.

When you buy renters insurance, you’ll have to decide the amount and type of coverage. Your agent can help you estimate the value of your belongings. You can either choose "actual cash value" coverage or "replacement value coverage." The first pays you the estimated value of items at the time of loss, based on their age and condition. The second pays the cost of replacing items with equivalent new items, up to the maximum value of coverage. The second method will pay you more, but obviously the premium will be higher. Be sure to identify anything of special value, such as expensive jewelry or electronic equipment. You may need a policy rider to cover the full amount of these items.

A few final tips. You may receive a discount if you buy your renters insurance and car insurance from the same company. If you have a long-term roommate, ask whether you can take out a joint policy instead of two separate ones. And if you have children living away at college, check whether they’re covered under your homeowners policy. Once they leave college, though, they’ll need their own insurance.

Once you have your policy, there’s one last step to take. Make a thorough inventory of your belongings, recording the model and serial number of any equipment. Take plenty of photos too. This could be invaluable to support your claim if you ever have a loss.

Take a Break

Sharing the wealth

Remember reading about Warren Buffett’s $43.5 billion donation to charity? In 2006, the rich not only got richer, they followed Buffett’s lead and donated a record amount to charitable causes.

According to The Chronicle of Philanthropy, there were 21 donations of $100,000,000 or more made by individuals in 2006. The 60 most generous givers (excluding Buffett) donated $7,000,000,000 (yes, seven billion) in 2006.

March 2007

For March 2007

March 1 - Farmers and fishermen who did not make 2006 estimated tax payments must file 2006 tax returns and pay taxes in full.

March 11 - Daylight Saving Time begins. (The energy bill passed in 2005 extends Daylight Saving Time by one month. Beginning this year, Daylight Saving Time starts the second Sunday in March and ends the first Sunday in November.)

March 15 - 2006 calendar-year

corporation income tax returns are due.

March 15 - Deadline for calendar-year corporations to elect S corporation status for 2007.

For April 2007

April 2 - Deadline for payors who file electronically to file 2006 information returns (such as 1099s) with the IRS.

April 2 - Deadline for employers who file electronically to send copies of 2006 W-2s to the Social Security Administration.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Monthly depositors are required

to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

What's New in Taxes

IRS gets tough on abusive telephone tax refund claims

Special IRS agents served search warrants to tax preparers in several cities, seeking evidence of fraudulent claims for refunds of excise taxes paid on long-distance telephone service. This tax is being refunded to taxpayers for the period of March 2003 through July 2006. However, unscrupulous promoters and tax preparers are filing refund claims for taxpayers requesting thousands of dollars of refunds where the individuals are entitled to only a tiny fraction of the claimed amount.

The IRS is urging taxpayers to stay away from those who suggest they can get hundreds of dollars or more under the telephone tax refund program. Taxpayers who request excessive refunds will have their refunds held and be subject to an audit.

At the same time, the IRS is reminding taxpayers not to overlook the telephone tax refund when they file their tax returns. Many early filers are failing to claim the refund even though it requires only a one-line entry on th