All this and more at ...

In addition to all the information you see here, we have even more at our website and tax news feed.

You can check out the newest posts by clicking the picture below.

How to determine your “real” yield- a free spreadsheet

Things are rarely what they appear to be in the financial markets.
Sometimes your real yield is what is left after the taxes have been paid.

E-mail us for the free spreadsheet below to determine the effective yield of
a tax-free investment vs one that is fully taxable.

Can your tax cost ever change?

Surprising the answer is yes! Here's how. Clients are welcome to E-Mail us if questions.

How we see Government vs. how the elite see Government

This gives new meaning to the phrase that "beauty is in the eye of the beholder."
But since we're paying the bills, our vision is much better than those in DC.

If your stockbroker sounds like this . . .

. . . you may need to be more careful with your investments.

Need to get your files to us quickly? We're here to help.

All existing clients now have their own secure portals to send us tax or financial files. Here's an instructional video on how to upload your data. 

Link to training video

Government is very predictable ...

. . .and that is the problem!

Putting things into perspective by removing 8 zeros

It's amazing what simple math can show:

 -Why S&P downgraded -

• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000
Let's remove 8 zeros and pretend it's a household budget:

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385

Who is for more Federal Debt?

Thanks to this article in the Wall Street Journal we have an overview of which Congressmen approve of giving your children additional debt. Details by state are available via the link.

It only takes room temperature intelligence to figure out that ...

this just might be part of the reason American business has a hard time competing with our European counterparts.

If you're about to file bankruptcy ...

do you go out and apply for a line of credit??

I wish Washington had as much sense as the average homemaker.

Now mobile enabled

Our blog is now optimized for mobile devices as well as your regular browser.

A relaxing movie after tax season?

Ding Dong the wicked witch is . .

Remember this headline about the 1099 requirement for 2012?

"As reported in our last newsletter, a sleeper provision in the healthcare bill has imposed a draconian requirement on every small (and large) business in America. [see the link for details]"

We're happy to report that the wicked witch law is dead. Here's the good news.

From accountingweb.com 
Senate repeals 1099 provision; bill goes to President Obama for signature!

The Senate voted on Tuesday, April 5, by a vote of 87 to 12, to repeal the provision in the Patient Protection and Affordable Care Act (aka ObamaCare) that would have required businesses to file 1099 tax forms beginning in 2012 for all purchases over $600. The measure now goes to the president, who is expected to sign it. The measure was sponsored by Senator Mike Johanns (R-NE).

The measure also repeals a requirement passed in the small-business lending bill in that required recipients of rental income to distribute and file 1099 forms on annual payments in excess of $600.

The 1099 repeal is expected to be paid for by requiring people to return overpayments of health-insurance subsidies when their income becomes greater than the threshold used to calculate the subsidy. That threshold is reached when people make more than 400 percent of the federal poverty limit over the course of a year. This premium assistance provision in the health care act is not effective until 2014.

Some Democrats in the Senate opposed the way the repeal is funded. An amendment offered by Sen. Robert Menendez (D-NJ) that would have instructed the secretary of Health and Human Services (HHS) to study the repeal and determine if it would cost small businesses more than it would save them was defeated 41 to 58; it needed 60 votes to pass.

"This is a big win for small business and, more importantly, I hope it's the first of many successful repeal votes related to the disastrous healthcare bill passed by Democrats last year," Senate Minority Leader Mitch McConnell (R-KY) said Tuesday before the vote, according to the Hill.com

April 15 humor

My thanks to The Onion for their great (although tongue in cheek) headline on how General Electric made 19 billion in profit and paid no US income tax.

Tax analysis of how GE paid no taxes the top 7 methods:

• Saved all receipts from aggressive lobbying efforts
• Purchased TurboTax Corporate Max Edition
• Wrote off bankruptcy of sister company Abstract Electric
• Brought a few hundred million good things to life; claimed them as dependents
• Somehow managed to locate a loophole in the transparent, ironclad U.S. tax code
• Claimed entire NBC prime-time lineup as a loss (that's believable)
• Claimed cash as a spouse, earned marriage tax credit

Advice from a successful business owner

The Heritage Foundation provides insightful views on the effect of Obamcare on business.

How Congress defines the "Evil Rich"- Now you know

Provisions of 2010 Tax Law

Here's a summary of some of the new tax provisions from the Tax Relief Act and the Small Business Job Act of 2010. Too bad that passing a law called a job act isn't the same as creating a job. Only the businessman can do that.

The most asked questions about Roth-IRAs

Q & A session - To Roth or not to Roth? Here are the answers to the questions clients ask.

TRUE OR FALSE? 1. Starting in 2010, there are no income limitations to make regular contributions to a Roth IRA. 2. Roth IRA investment income is always tax-free if received after age 59½. 3. A 10% penalty never applies to a Roth IRA distribution if the owner is over age 59½. 4. Dividing an individual retirement account (IRA) into various IRAs, each holding a different investment asset class, before converting them to Roth IRAs is a strategy that allows taking advantage of market volatility. 5. The deadline for a 2010 Roth conversion is April 15, 2011. 6. The deadline to recharacterize a Roth conversion is Oct. 15 of the following year. 7. A client who has only made nondeductible contributions to a sole IRA can convert it to a Roth IRA and pay no taxes on the conversion of earnings. 8. The first distribution taken from any Roth IRA is considered to come from regular contributions, even if contributions were made to a different Roth IRA. 9. An inherited IRA cannot be converted to a Roth IRA, while an inherited employer plan can be. 10. The original owner of a Roth IRA can always choose to take the money out, but is never required to. 11. A Roth conversion cannot be done in a year when the taxpayer has no compensation income. 12. A traditional IRA converted to a Roth IRA with a trustee-to-trustee transfer automatically transfers the beneficiary designation to the Roth IRA. 13. Distributions from a Roth IRA are not counted as income for the calculation of taxes on Social Security benefits. 14. Assets recharacterized can be reconverted at the later of (1) the beginning of the year after the year of recharacterization, or (2) the end of the 30-day period beginning on the day of the recharacterization.

One of the more frequent questions for tax year 2010 is, "should I convert my IRA to a Roth?" There is no "one size fits all" answer, but knowing about how a Roth works can help you determine if you're a good candidate for this. Take this quiz and test your Roth I.Q. ANSWERS 1. False. Income limitations no longer apply to conversions, but still apply to regular contributions. 2. False. A second requirement is that it is received after a five-year period beginning Jan. 1 of the year the client first established a Roth IRA. Some exceptions apply. 3. True. Age is one of several exceptions to the 10% penalty. 4. True. The idea is to keep the accounts that go up in value and recharacterize others. 5. False. The deadline is Dec. 31, 2010. Therefore, a conversion (unlike a contribution) cannot be evaluated when a tax return is being finalized. 6. True. A conversion can be made by Dec. 31, and then recharacterized (even partially) before Oct. 15. 7. False. Taxes are due on the conversion of earnings from nondeductible contributions. 8. True. The complex Roth IRA distribution rules apply to the aggregate of the client’s Roth IRAs. 9. True. However, a surviving spouse can roll over to a spousal IRA, then convert to a Roth IRA. 10. True. Taxes and a penalty may apply, but the option to take the money out is always available. Required minimum distributions (RMDs) apply to beneficiaries, with a possible exception for a surviving spouse. 11. False. Unlike a contribution, a Roth IRA conversion can be made regardless of compensation income. 12. False. Remember that beneficiary designations should be made on all new IRAs. 13. True. 14. False. Assets recharacterized can be reconverted at the later of (1) the year after the year of conversion, or (2) more than 30 days after recharacterization.

Here's the best of all productions- one where you get the starring role and a free gift from us! Whether you agree or disagree, we're always glad to get your comments. Log into our blog and post your tax comment or question. We can help you minimize your governmental footprint, legally keep more of what's yours, and gain the ability to measure your financial performance. To help you reach the above goals, we're beginning a new service free of charge to all existing clients. This will be unique among accounting firms. For an advance preview, click here.

Poking fun at CPAs

Time to poke some fun at CPAs We've made some strong (but extremely accurate) comments about the politicans so, in the interest of equal time, let's see what Hollywood says about your friendly neighborhood CPA. I know this is hard to believe, but there actually is a Hollywood movie with a CPA as a leading character! In this 1950 Joan Crawford movie, a handsome, dashing, and clever accountant is the auditor for Joan's company. Mrs. Crawford is obviously fascinated by his explanation of what a CPA does and invites him to an expensive restaurant that evening. Alas, our tax hero sabotages his own date by ordering the cheapest item on the menu and then bragging about it (hence the astonished look on Joan's face at left). Of course, even when accountants write the TV ad, we don't fare well. Here's a TV clip from an accounting firm that purports to make the tax preparer seem like Rocky Balboa. We've condensed the best 90 seconds of Joan's date with a CPA for your viewing; just click the play button.

CPAs get alarmed at these numbers.

Are you better off today than you were two years ago? 
Numbers don't lie, and here is the data on the impact the economy has had on the lives of Americans:

What's the lesson? Restructure to investments that perform well in a high inflation environment.

	January 2009	TODAY	% chg	Source
Avg. Retail price/gallon gas in U.S.	$1.83	$3.104	69.6%	1
Crude oil, European Brent (barrel)	$43.48	$99.02	127.7%	2
Crude oil, West TX Inter. (barrel)	$38.74	$91.38	135.9%	2
Gold: London (per troy oz.)	$853.25	$1,369.50	60.5%	2
Corn, No.2 yellow, Central IL	$3.56	$6.33	78.1%	2
Soybeans, No. 1 yellow, IL	$9.66	$13.75	42.3%	2
Sugar, cane, raw, world, lb. Fob	$13.37	$35.39	164.7%	2
Unemployment rate, non-farm, overall	7.6%	9.4%	23.7%	3
Unemployment rate, blacks	12.6%	15.8%	25.4%	3
Number of unemployed	11,616,000	14,485,000	24.7%	3
Number of fed. Employees, ex. Military (curr = 12/10 prelim)	2,779,000	2,840,000	2.2%	3
Real median household income (2008 v 2009)	$50,112	$49,777	-0.7%	4
Number of food stamp recipients (curr = 10/10)	31,983,716	43,200,878	35.1%	5
Number of unemployment benefit recipients (curr = 12/10)	7,526,598	9,193,838	22.2%	6
Number of long-term unemployed	2,600,000	6,400,000	146.2%	3
Poverty rate, individuals (2008 v 2009)	13.2%	14.3%	8.3%	4
People in poverty in U.S. (2008 v 2009)	39,800,000	43,600,000	9.5%	4
U.S. Rank in Economic Freedom World Rankings	5	9	n/a	10
Present Situation Index (curr = 12/10)	29.9	23.5	-21.4%	11
Failed banks (curr = 2010 + 2011 to date)	140	164	17.1%	12
U.S. Dollar versus Japanese yen exchange rate	89.76	82.03	-8.6%	2
U.S. Money supply, M1, in billions (curr = 12/10 prelim)	1,575.1	1,865.7	18.4%	13
U.S. Money supply, M2, in billions (curr = 12/10 prelim)	8,310.9	8,852.3	6.5%	13
National debt, in trillions	$10.627	$14.052	32.2%	14

Sources:

(1) U.S. Energy Information Administration;
(2) Wall Street Journal;
(3) Bureau of Labor Statistics;
(4) Census Bureau;
(5) USDA;
(6) U.S. Dept. Of Labor;
(7) FHFA;
(8) Standard & Poor's/Case-Shiller;
(9) RealtyTrac;
(10) Heritage Foundation and WSJ;
(11) The Conference Board;
(12) FDIC;
(13) Federal Reserve;
(14) U.S. Treasury

Can government really stimulate the economy?

Here's what usually happens !

Where do rebates come from? These folks know the answer.

Punishing folks with more children?

Punishing folks with more children? It may not be deliberate, but that is exactly what Congress will do by letting the Bush tax cuts expire. As you'll see in our next newsletter, the numbers are not even close to the real effect.

Selected highlights from the new tax bill

The President signed the new tax bill on September 27,  2010.
Here's are just a few selected highlights for our clients.


Will it inject some life into the economy? We'll see.


E-mail us for a full analysis.

 The Small Business Lending Fund Act of 2010

Extension of 50% Bonus Depreciation:  The bill extends – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investmentstoday and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.

A New Deduction of Health Insurance Costs for Self-Employed:  The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.

An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses:  The bill temporarily increases the amount of start-up expenditures entrepreneurs can deductfrom their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.

Tax Relief and Simplification for Cell Phone Deductions:  The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.

Zero Taxes on Capital Gains from Key Small Business Investments:  Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.

Learning from experience

Did we get the IRS' attention or what?

Mere hours after this post, I found that the IRS is "requesting" comments and input on the most onerous and draconian requirement every foisted on US business owners.

(See the above link and this article for full details.)

Clients and fellow business owners - we have their attention, it's time to make your voice heard.

Be sure to read this summary of the IRS Notice 2010-51. For maximum effect, respond in the format described and sent to

 notice.comments@irscounsel.treas.gov, with “Notice 2010-51” in the subject line, or by postal mail to IRS, CC:PA:LPD:PR (Notice 2010-51), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Comments are requested by Sept. 29, 2010.

US Senate says tough luck to small business and 1099 requirement

As reported in our last newsletter, a sleeper provision in the healthcare bill has imposed a draconian requirement on every small (and large) business in America. [see the link for details}

Hidden in Section 9006 of the healthcare bill is a potential requirement that will cause every business to issue 1099s to all vendors. Presently, 1099s are required for individuals and partnerships but not to corporate vendors. Under current law, 1099s are issued only for rents, services, and financial-based transactions. Section 9006 would require 1099s to all vendors for all transactions over a set amount, creating a cost accounting nightmare for businesses both small and large. 

Two separate amendments to repeal or reform the most onerous reporting requirement in IRS history were defeated by the Senate this week.

The Wall  Street Journal demonstrates just how harmful this bill in going to be in this recent article.

Think about a midsized trucking company. The back office would have to collect hundreds of thousands of receipts from every gas station where its drivers filled up and figure out where it spent more than $600 that year. Then it would also need to match those payments to the stations’ corporate parents.

A solution is obtainable if enough clients voice their opinion. See the article A Nightmare on Main Street for an explanation.

Answers to your questions about the new health care bill

A lot of folks thought that they would have more freedom and options under the new healthcare law.

Nothing could be further from the truth. Instead of expanding the use of private tax-sheltered health savings accounts (HSA), Flexing Medical Spending Accounts (FSA), and Medical Savings Accounts (MSA), the new law actually restricts their use. What used to be legal won't be in a few months.

Taking a tax concept that was helpful and working and restricting its use - that's our Congress.


Here's a list of what of what's changed from the IRS Website.

Q. How are the rules changing for reimbursing the cost of over-the-counter medicines and drugs from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)?

A. Section 9003 of the Affordable Care Act established a new uniform standard for medical expenses. Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted, even if purchased without a prescription. 

Q. How are the rules changing for distributions from health savings accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs) that are used to reimburse the cost of over-the-counter medicines and drugs?

A. In accordance with Section 9003 of the Affordable Care Act, only prescribed medicines or drugs (including over-the-counter medicines and drugs that are prescribed) and insulin (even if purchased without a prescription) will be considered qualifying medical expenses and subject to preferred tax treatment.

Q. When will the changes become effective?

A. The changes are effective for purchases of over-the-counter medicines and drugs without a prescription after Dec. 31, 2010. The changes do not affect purchases of over-the-counter medicines and drugs in 2010, even if they are reimbursed after Dec. 31, 2010.

Q. How do I prove that I have purchased an over-the-counter medicine or drug with a prescription so that I can get reimbursed from my employer's health FSA or an HRA?

A. If your employer’s health FSA or HRA reimburses these expenses, you would provide the prescription (or a copy of the prescription or another item showing that a prescription for the item has been issued) and the customer receipt (or similar third-party documentation showing the date of the sale and the amount of the charge). For example, documentation could consist of a customer receipt issued by a pharmacy that reflects the date of sale and the amount of the charge, along with a copy of the prescription; or it could consist of a customer receipt that identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number.

Q. How does this change affect over-the-counter medical devices and supplies?

A. The new rule does not apply to items for medical care that are not medicines or drugs. Thus, equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits will still qualify for reimbursement by a health FSA or HRA if purchased after Dec. 31, 2010, and a distribution from an HSA or Archer MSA for the cost of such items will still be tax-free, regardless of whether the items are purchased using a prescription. 

Q. Will I need a prescription to use my health FSA, HRA, HSA or Archer MSA funds for insulin purchases after Dec. 31, 2010?

A. No. You can continue to use your health FSA, HRA, HSA or Archer MSA funds to purchase insulin without a prescription after Dec. 31, 2010.

Q. I use health FSA funds for my co-pays and deductibles. Will I still be able to reimburse those expenses with health FSA funds after Dec. 31, 2010?

A. Yes. Co-pays and deductibles continue to be reimbursable from a health FSA after Dec. 31, 2010.  Similarly, funds from an HRA can continue to be used for these expenses and a distribution from an HSA or Archer MSA for these purposes will be tax-free.

Q. My company gives me two extra months beyond the end of the year to submit claims for health FSA expenses incurred during the year. What happens if I purchase over-the-counter medicines or drugs without a prescription in 2010 but do not submit the claim for those expenses until January 2011? Will they qualify for reimbursement?

A. Yes. The new restriction on plan reimbursements for the cost of over-the-counter medicines or drugs without a prescription applies only to purchases that are made after 2010.

Q. My company’s health FSA includes a provision for a grace period, so that if I don’t spend all of the money in my health FSA by Dec. 31 in a given year, I can still use the amount left in my health FSA at the end of the year to reimburse expenses I incur during the first 2 ½ months of the following year.  If I buy over-the-counter medicines or drugs without a prescription during the 2 ½ month grace period of 2011, can I still use the amount left in my health FSA at the end of 2010 to reimburse those expenses?

A.. No. The change applies to purchases made on or after Jan. 1, 2011.  Thus, even if your employer’s plan includes the 2 ½ month grace period provision, the cost of over-the-counter medicines and drugs purchased without a prescription during the first 2 ½ months of 2011 will not be eligible to be reimbursed by a health FSA.

Q. If my plan issues a debit or credit card that I use to pay for over-the-counter medicines or drugs, will I still be able to use the card to purchase over the counter medicines or drugs after Dec. 31, 2010?

A. Generally, no.  The plan must ensure that the card is reprogrammed no later than Jan. 15, 2011, so that the card can no longer be used to purchase over-the-counter medicines or drugs. For further information, see IRS Notice 2010-59.  If your employer’s plan reimburses expenses for over-the-counter medicines and drugs, you can seek reimbursement for these expenses by presenting the information described above in the answer to the question “How do I prove that I have purchased an over-the-counter medicine or drug with a prescription so that I can get reimbursed from my employer's health FSA or an HRA?”

Q. If I use HSA or Archer MSA funds to reimburse the cost of over-the-counter medicines or drugs purchased after Dec. 31, 2010 without a prescription, what taxes will I incur?

A. If you have an HSA or Archer MSA, the amount of the distribution for expenses that are not qualifying medical expenses will be includable in your gross income and subject to an additional tax of 20%.