EDITORIAL - WHAT WOULD IT BE LIKE IF THE GOVERNMENT RAN EVERYTHING?

Recently I was in Philadelphia speaking at the Raylon Art of Business Conference. Philadelphia is a great and historic city. I have always wanted to walk where Ben Franklin and the framers of our Constitution walked. I was touched by my visit to Independence hall where the Declaration of Independence and the Constitution were signed.

I was not disappointed with my historic tour of Philadelphia.I did have a problem though; it was ‘off season’ so everything closed exactly at 5:00 p.m. Independence Hall, the Liberty Bell exhibit; Franklin’s court; the grave yards; Betsy Ross’s house; all of the historic locations. I was not the only tourist that was disappointed by this. I talked to at least 20 to 30 visitors that, like me, were left disappointed standing at the door.

As I thought about the ‘business practice’ of closing early, I could only think about my my talk to small business owners at the conference where I had pointed out that many of our clients are expanding hours in reaction to the economy.

Then it hit me- all of these great historical exhibits were managed by the US Park Service – a branch of the Federal Government. The workers, managers, and those making the decisions were all government workers... bureaucrats. Realizing that the government was running the show it made sense that they didn’t care, they just followed the bureaucratic rules.

Then it really hit me! “Would I want the Federal Government running my health care and the banks?” That seems to be the way we are going.

Scary- really scary… I hope that if they do take over our financial institutions and our health care system that they do a better job taking care of their customers.

Larry Kopsa CPA

A MESSAGE FROM ABRAHAM LINCOLN

"You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage by taking away people's initiative and independence. You cannot help people permanently by doing for them, what they could and should do for themselves."

Abraham Lincoln

FYI - JUST HOW IMPORTANT IS THE INTERNET?

The Internet is very important to our accounting business. We do so much with the Internet, from on-line meetings to filing forms to tax research. In addition in our meetings with distance clients the we use the Internet. It is just like we are at the clients location.

We would really be lost if we did not have cyber space technology.But that is nothing compared to the Germans. A new study found that 84% of Germans in their 20’s would do without their significant other before they gave up the Internet. They explain that they could always find another partner to love, but life without the Internet was unthinkable. WOW!

Larry Kopsa CPA

SBA OFFERS ONLINE RESOURCES ON SURVIVING IN A DOWN ECONOMY

If you are interested, the Small Business Administration is offering free online training and other resources to help small businesses during these challenging economic times.Available Free Courses:

1. Strategic Marketing: How toWin Customers in a Slowing Economy
2. Down-Shifting in a Slowing Economy:Business Planning Guide
3. How to Prepare a Loan Package

Larry Kopsa CPA

ELIMINATION OF ALL NEBRASKA SALES TAX EXEMPTIONS CONSIDERED

(Unicameral Update) -- The Legislature's Unicameral Update reports that on March 20, the Revenue Committee heard a bill that "would sunset every sales tax exemption offered by the state of Nebraska, eventually eliminating the entire sales tax system by 2016."

LB385 has been prioritized by Omaha Sen. Rich Pahls. "Ron Sedlacek, representing the Nebraska Chamber of Commerce & Industry, testified in opposition to the bill. He said it would create uncertainty and potential disruptions for businesses operating in Nebraska." The Nebraska Power Association is also opposed LB385, since "taxes on fuel used to generate electricity would be passed on to consumers." "Jay Rempe of the Nebraska Farm Bureau also opposed the bill," saying "the bill would result in substantially higher taxes for consumers, because animal sales would be taxed “four or five times … before it gets to the end consumer.

The committee took no immediate action on the bill.

See the story at <http://unicameralupdate.blogspot.com/2009/03/elimination-of-all-sales-tax-exemptions.html>

COMMENTARY FROM EDITORS ON PRESIDENT OBAMA'S PLAN TO HELP SMALL BUSINESS

On Monday, March 16, 2009, President Obama announced a new plan to help small businesses. The plan is mainly centered around easing SBA loans. The plan calls for the government to buy up SBA loan securities to free up the secondary markets so banks can sell their SBA loans; it cuts SBA loan fees; and it increases the Federal guarantee on SBA loans to 90%. It also calls for the 21 largest banks getting Federal funding to report on their volume of small business loans each month. The rest of the announced provisions for the most part were already included in the Stimulus package and not new.

So: thumbs up or thumbs down?
I’d say the plan is mildly positive, but mostly it’s just not relevant to the majority of small businesses. Here’s why:

To the extent small businesses actually want SBA loans, this could help. However, not every small business wants or needs a loan. Demand for small business loans is down significantly, according to the U.S. Treasury. As Dawn Rivers Baker noted, lack of loans is not what ails many small businesses. In times when the economy is down, going into debt doesn’t necessarily look all that attractive. Battening down the hatches to get through to better times in the economy, does.

The Small Business and Entrepreneurship Council makes a similar point — saying the President’s focus on SBA lending merely helps on the margins: “While these may help some small businesses that are in a position to borrow money, many small firms are not in sound financial shape or don’t feel it is prudent to increase their debt during the rough economic period.”

Consider, also, how few small businesses actually get SBA loans. For instance, as this Washington Post article reports, SBA loans counted for just 4% of loan volume for small businesses in 2006.

More SBA loans are not a cure-all for every small business — although you would hardly know that based on some reports. For instance, this article on Forbes.com is bizarrely titled “Small Business Loves Obama’s Plan.” However, there are no small business owners interviewed in the article. The title makes it sound as if small business owners spontaneously erupted in applause in favor of the plan. Wishful thinking perhaps … but not what the article says … nor the real-world reaction.

We will just have to wait and see what happens.

I THOUGHT THIS WAS INTERESTING. UNION ENGAGES IN LABOR DISPUTE WITH ITS OWN EMPLOYEES

(Washington Post) -- The Washington Post reports that even "as it helps push for legislation that would make it easier for workers to organize, the country's fastest-growing union is engaged in its own labor dispute with employees it is seeking to lay off." The Service Employees International Union "has notified the union that represents about 220 of its national field staff and organizers that 75 of them are being laid off. ... In return, the workers' union (the Union of Union Representatives) has filed unfair labor practices charges against SEIU with the National Labor Relations Board."

The staff union's leaders say that SEIU is "laying off workers without proper notice, contracting out work to temp firms, banning union activities and reclassifying workers to reduce union numbers." Staff union President Malcolm Harris said the direction the SEIU seems "to be moving in is union-busting."

HAPPY SAINT PATRICKS DAY

It's no use boiling your cabbage twice.--
Irish proverb

COMMON QUESTIONS ON THE STIMULUS TAX PROVISIONS

If you don't already have the tax provisions of the Stimulus Bill figured out, the American Institute of Public Accountants has prepared a Q&A on individual and business tax-related provisions in the American Recovery and Reinvestment Act of 2009. This is only a couple pages and answers many questions that we have been receiving. Among the subjects covered for individuals are the first-time home-buyer credit, college-funding tax credit, unemployment benefits, benefit for use of public transit and the alternative minimum tax exemption. For businesses, the Q&A highlights depreciation, expensing, capital gains, work opportunity credit and penalty relief from underestimating taxes.

WHAT HAPPENS IF I HAVE MORTGAGE DEBT FORGIVEN?

Thanks for all the information you send out. I have a question. A relative of mine had a portion of their mortgage forgiven. I told him that he would have to pay tax on the forgiveness. He said I was wrong. Who is right?
Eagle

Depends. If a mortgage debt is partly or entirely forgiven during tax years 2007 – 2012, you may be able to claim special tax relief and exclude the debt forgiveness income. You are correct in that normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

Here is the catch. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion. However, proceeds of refinanced debt used for other purposes (for example, to pay off credit card debt) do not qualify for the exclusion.

Also, debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.

SMALL BUSINESS DAY AT THE CAPITOL

On March 31, spend a morning at the Unicameral with fellow small-business owners, employees and supporters to learn about key legislative issues before the Legislature. The 2009 Nebraska Small Business Day at the Capitol will feature State Chamber President Barry Kennedy and NFIB State Director Bob Hallstrom, as both will provide insider information on what issues and legislation to keep your eye on.

From taxes and health care and government regulations, this is your opportunity to ask your state senators about the important issues. Top issues will include Workers’ Compensation, mandated benefits, state spending, employment issues, taxes and union service fees. Highlights include talks from Governor Heineman and several state senators. The event is presented by the NFIB/Nebraska, the State Chamber, the Lincoln and Omaha Chambers of Commerce, and the Lincoln Independent Business Association. Cost for the program is $15, which I will personally pay for the first 10 people that email me at lkopsa@kopsaotte.com.

For more information let me know.

WHAT TO DO IN THESE ECONOMIC TIMES

We have been spending a lot of time advising clients on strategies to weather the economic storm. We call our meetings "Survival Strategy Meetings." Below is an article that summarizes steps that small businesses are taking. I thought you might be interested.


Hey, where is the silver lining on my economic storm cloud?

FOUR CREDITS THAT CAN REDUCE YOUR TAX BILL

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes. Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child (under age 17). This credit can be claimed in addition to the credit for child and dependent care expenses.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply.

If you need more information let me know.

UPDATE ON COBRA CREDITS FOR EMPLOYERS

Last week, the IRS provided information that under the federal economic stimulus package, employers need to claim credit for COBRA health insurance premiums they pay for former employees. The information is posted on the IRS website and includes answers to 20 frequently asked questions. The information also includes an updated version of Form 941, the quarterly payroll tax return that employers must use to claim credit for the COBRA subsidy.

The stimulus law, the American Recovery and Reinvestment Act (ARRA), authorizes a 65% federal subsidy for continuing health care coverage under COBRA for employees who are laid off between September 1, 2008 and December 31, 2009. ARRA was enacted February 17 and the IRS notes additional forms are being revised to implement the COBRA subsidy. More information may be found at http://www.irs.gov/newsroom/article/0,,id=204505,00.html