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Wednesday, October 10, 2012

October Online Advisor

We have posted the October 2012 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this e-mail.


A recent poll by the Pew Research Center revealed that 58% of those surveyed felt the rich don't pay enough in taxes. 26% said the rich pay their fair share, and 8% said the rich pay too much.


Divorce is a sad experience for all concerned. The last thing you want to think about is taxes, but tax issues are important.


If you extend credit to your customers, some losses are inevitable. So unless you are willing to forgo the credit part of your sales, you have to figure out ways to control your bad debt losses.


Your child is approaching 16 years old and for the past several years, he or she has reminded you (daily, it seems) of this inevitability. You, on the other hand, have been trying to expunge the thought that a teenager -- a teenager! -- will soon be driving one of your vehicles.

Just click on the link to read the full articles.

September Online Advisor

Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this e-mail.


Here's an important reminder for small nonprofit organizations: If your organization had its tax-exempt status revoked for failing to file an annual return from 2007 through 2009, the IRS is giving you a chance to get reinstatement.


The end of the year is the traditional time for securities investors to "harvest" capital losses for federal income tax purposes. But there's an added wrinkle in 2012: Due to pending tax law changes, you might try to reap more capital gains than losses.


Getting a bank loan for your business may be more difficult than usual in today's economy. However, if you give your bank a thorough, organized, and well-supported loan proposal, you'll increase your chances of getting the money your business needs.


Would your family be financially secure if tragedy struck? Before you answer, consider the following areas.

Just click on the link to read the full articles.

July Online Advisor

Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this e-mail.


On June 28, the Supreme Court ruled that the "Patient Protection and Affordable Care Act of 2010" was constitutional, including the provision in the law requiring individuals to have health insurance coverage starting in 2014.

CANCELLED DEBT MAY BE CONSIDERED TAXABLE INCOME BY THE IRS With the recent economic downturns experienced by many taxpayers, there is a tax concept that is very important: cancellation of debt.  You would think that the cancellation of debt by a credit card company or mortgage company would be a good thing for the taxpayer. And it can be, but it can also be considered taxable income by the IRS.

STARTING A BUSINESS? DON'T MAKE THESE MISTAKES According to the Small Business Administration, a third of small businesses fail within the first two years. Over half fail in the first five years. So if you're thinking about starting a small business, it pays to take an honest look at yourself, your business idea, and the marketplace.


When should you start taking social security? If you're approaching retirement and are eligible for social security, you have three broad options for drawing your benefits: start early, wait until your "full" retirement age, or hold out a few years longer to qualify for the monthly maximum.

Just click on the link to read the full articles.

Wednesday, February 3, 2010

New Law Provides Early Deduction for Haiti Relief Contributions

On January 22nd, President Obama signed a law that could give you an early tax deduction for contributions you make for earthquake relief in Haiti.

If you itemize deductions on your return, you may elect to take a charitable deduction on your 2009 return for contributions you made for qualified Haiti disaster relief. The contributions must have been made after January 11, 2010, and before March 1, 2010.

The law also provides another way to substantiate these charitable contributions. Normally, you would need a bank record or written communication from the charity to back up your deduction. However, under the new law if you make a monetary contribution through your cell phone via a text message, you may use your telephone bill to substantiate your contribution. The telephone bill must show the name of the charitable organization, the date of the contribution, and the amount of the contribution.

If you claim a Haiti relief deduction on your 2009 return, you may not also claim it on your 2010 return (which you will be filing in 2011). You should compare the tax benefit of a 2009 deduction or a 2010 deduction. For 2009, higher-income taxpayers have a limit on their total itemized deductions. This limit is eliminated for 2010, so the deduction may actually provide a bigger tax break if taken on your 2010 tax return.

If you need additional information or filing assistance, please contact our office.

Sunday, December 13, 2009

Season's Greetings

This is the time of year to pause and reflect on our blessings and to express our appreciation to the many people who enrich our lives.

May we take this opportunity...
  • To wish you and yours the happiest of holidays and a healthy and prosperous 2010
  • To thank you for your business in 2009
  • To remind you that we welcome your referrals. We would be pleased to have you mention our name to friends and associates who may need our services.

Wednesday, August 19, 2009

Are You Ready for this Year’s New 403(b) Regulations?

By Barry Wechsler, CPA
(reprinted from his article in July/Aug 2009 Nonprofit World)

Many nonprofits lack the accounting records they need. But there’s still time to prepare.

For years, 403(b) retirement plan sponsors led a charmed life, exempted from the detailed paperwork and rigid Department of Labor regulations of 401(k) plans. But those days are over. Since January 1, 2009, not-for-profit organizations that provide 403(b) plans covered by the Employee Retirement Income Security Act of 1974 (typically plans offered by educational, health care, and charitable nonprofit institutions) have to be as diligent and methodical in their recordkeeping as 401(k) plan sponsors have been.

This has proved a daunting task for many not-for-profit plan sponsors that have never kept 403(b) plan documents or financial records before. (A “plan sponsor” refers to an organization, or its leaders, that offer employee retirement plans.)

Why the sudden urge to regulate? Policy makers realize that most Americans will depend on 403(b) and 401(k) plans to fund their retirement nest eggs. According to the Employee Benefit Research Institute, these tax-free employee savings plans constitute the sole employer provided retirement benefit for 63% of American workers. Regulating the way the plans are administered is expected to safeguard an employee’s retirement savings. The new requirements make you, as the plan sponsor, accountable. If a prohibited transaction occurs, the employer may be subject to monetary penalties.

What may be an administrative nightmare for you will be a boon for plan participants, who now will be assured of the plan’s operational integrity. The new rules will aid policy makers, too, who will have 403(b) plan data available to them for the first time. For decades, the Department of Labor has mined data on 401(k) plans to track employee benefit trends and find opportunities for improvement. Officials can now perform similar analyses for 403(b) plans.

What’s being Regulated?

The new regulations require 403(b) plan sponsors to adopt a written plan document and file a Form 5500 Annual Report/Return. Additionally, large 403(b) plans, which cover 100 or more participants, will have to include an audited financial statement with their Form 5500 filings.

Plan sponsors also are obligated to report indirect as well as direct compensation paid to service providers. This new requirement is designed to increase the transparency of indirect compensation, which previously has not been brought to light.

The Form 5500 Annual Report/ Return and the audited statement don’t have to be filed with the Department of Labor until July 31, 2010, but the work needs to begin in 2009. Here’s how to start:

1. Adopt a written plan document. Your organization has until December 31, 2009, to adopt a document showing that your retirement plan is operating in accordance with “a reasonable interpretation” of Internal Revenue Code section 403(b) and subsequent regulations. If you don’t have a written plan document, you’ll need to have one drafted. But even if a written plan exists, it should be reviewed and revised, since regulations may have changed since it was created. These tasks are jobs for your professional advisors.

2. Get your financial records in order. Beginning with plan year 2009, you’ll have to file a Form 5500 Annual Report/Return with the Department of Labor. Form 5500 reveals the financial condition of your organization’s retirement plan. It will require a wealth of financial information that you may not have at your fingertips, since previously there was no reason to track it. Necessary records include employee contribution and benefit payment records, individual participant account balances, and total plan assets. You must also account for ‘‘missing” participants who have left the organization but are still covered by the plan. Gathering all that information is going to be a real challenge. It can be made easier by consulting with an experienced employee benefit plan auditor.

3. Determine if an audit is needed. If your 403(b) plan has 100 or more participants, you, as the plan fiduciary, are responsible for having your plan audited. The auditor will select a sample of individual participant accounts to see if the employer is deducting the proper amount from the participant’s paycheck and depositing contributions on a timely basis.

The auditor will also check that documentation is accurate and that total plan assets reflect the sum of all individual accounts. Additionally, the auditor will test internal controls of processes such as investment selection, which has become a serious concern in light of a February 2008 U.S. Supreme Court ruling that allowed an individual plan participant to sue the plan sponsor to recover losses because investment instructions were not executed. Although this pertained to a 401(k) plan, it can easily be applied to 403(b) plans. In these tumultuous economic times, experts expect the number of such lawsuits to increase.

It’s important to note that even though the filing deadline for the first audit isn’t until July 31, 2010, the audit pertains to transactions during the current year. Furthermore, auditors are required to measure 2009 figures against comparable information from the prior year. For example, the audit staff will need to know the 2008 yearend plan value, what the employer owes to the plan, and accrued expenses, among other things. If this information isn’t available, then the accounting team will need to extract it. This task should be done as soon as possible.

Filing a timely and complete audit is a serious fiduciary duty of the executives who administer the retirement plan. If the Department of Labor finds the audit to be deficient, executives may be personally liable for penalties that will accrue until an acceptable audit is filed.

Since the methodology of an employee benefit plan audit is vastly different from the procedures used to audit a not-for-profit organization’s financial statement, the Department of Labor recommends using experienced employee benefit plan auditors. This increases the likelihood that the audit will meet Department of Labor standards.

4. Establish proper internal controls. As a plan sponsor, you must implement practices, procedures, and policies to safeguard the plan’s assets from fraud or error and ensure accurate recordkeeping. A plan audit includes an evaluation of your internal controls. Your auditor should be able to spot operational weaknesses and recommend corrective actions. Although the new regulations will increase your organization’s reporting and compliance responsibilities, the rules will help protect your employees’ retirement savings. Loose regulation of Wall Street has eroded the economic security of many Americans. Increased oversight of 403(b) plans may prevent similar disasters for nonprofit retirees.

Sunday, June 14, 2009

Mom, Dad, We Need To Talk

Welcome to our new Blog!

While everyone is concerned about business these days... we felt our first blog post should be on a topic about one of our greatest treasures... our parents.

Excerpt from our June/July 2009 Newsletter

Why it’s necessary to discuss finances with aging parents...

Talking with aging parents about their finances can be emotionally taxing for them — and you. They’re likely grappling with tough decisions that force them to confront their own mortality, such as who will receive their assets when they’re gone and who will be in charge of their estate. You’re likely grappling with the same thoughts. But with some advance planning — and a lot of sensitivity and respect — you can help your parents manage their emotions and their finances.

To help ensure your parents’ financial stability, take time to discuss: Long-term care insurance. These policies help cover what your parents’ health insurance policies and Medicare won’t, such as assisted living arrangements, nursing home residence and long-term home care.

Reverse mortgage. Under this arrangement, a lender makes payments to your parents for their home’s equity, and the proceeds generally are tax free. The loan isn’t due until they sell the home or die. The bank obtains ownership only through foreclosure.

Medicaid. This is a government-assisted, welfare-like program for individuals with a low net worth. To qualify, your parents must have depleted virtually all of their assets. Ownership interests. If your parents have ownership interests in a family business, there are several options available to transfer those interests to their heirs, including a gifting program or an installment sale. Or they can do more sophisticated planning, such as setting up a grantor retained annuity trust, which allows them to receive annuity payments and offers potential tax benefits.

While your parents are of sound mind, encourage them to appoint a trusted individual as their power of attorney to make decisions about their finances when they’re unable. Although your parents may initially think of appointing you or one of your siblings to fill the role, that may not be the wisest path to take. Many families can attest to the fact that asking one child to take on the power of attorney can pit otherwise loving brothers and sisters against each other. Although it may be more costly to have a professional advisor to fill the role, it may be the safest route to take.