AN UNWELCOME INCOME TAX SURPRISE FOR MANY TAXPAYERS

Talk about unfair. Even though, on average, investments have plummeted by over 35%, many taxpayers are receiving 1099’s from the brokerage companies for taxable distributions and dividends. How can that be? Even though a fund’s value has declined, it may have realized capital gains over the course of the year. This comes from profits from selling specific securities before the decline in value.

Many mutual funds sold off holdings in September and October, which caused the paper gains. Even if you did not actually cash out of the fund, the fund cashed out of the security and those unfortunate investors are left holding a tax bill.

THE LAW OF BIG NUMBERS

The papers have abounded with big numbers. The bail out - $700 billion dollars, the deficit - $1.2 trillion dollars, Madoff uses a Ponzi scheme to rip off investors of $50 billion dollars.

Million, Billion, Trillion

The only difference between the words is one letter and sometimes people get those things confused. I think there should be a law of big numbers so people really understand the difference between a million, and a billion, and a trillion. Everett Dirksen once said, “a million here, a million there, pretty soon we’re talking big numbers.”

Being a math guy, I like to explain it like this:

If you were going to count to a Million, and you counted one count per second, it would take you a little bit over eleven and one half days of counting non-stop.

Now lets go to a Billion, mostly when I ask people this, they usually guess 100 days. Well actually, to count to a billion, would take you 31 years and 8 ½ months. Remember, a billion is a thousand millions.

Then we can talk about a Trillion. How long would it take to count to a trillion? Do the math. Again you move the decimal point but it would take you 31,709 years plus 8 months to count to a trillion.

Another way I like to explain this is if you started a business the day Jesus was born, and your business worked non-stop seven days a week, you and your business made a million dollars a day and there were no taxes, how much money would you have? You would not even have a trillion dollars; you would only have $732,920,000,000. That’s about $733 billion for those of you that have problems with too many zeros. That was our first bail out amount and now they're talking even more.

Larry Kopsa CPA

TOP 10 EMPLOYEE TERMINATION MISTAKES

DISCLAIMER - I want to make sure you realize that I am not an HR specialist. Furthermore, there are different laws depending on your state, so make sure that you are educated about your particular circumstances.

Having said that, the following is an article from an e-commerce web site that I thought you might be interested in.

There is a right way and a wrong way to let employees go. Writes media and e-commerce Web site AllBusiness.com: “While terminating employees is one of the more unpleasant tasks that owners and managers have to carry out, it is a necessary part of business. Mistakes committed during the firing process can come back to haunt you by way of legal action, if you're not careful.” Here are 10 common mistakes made in the termination process, according to AllBusiness.com:

1. Failing to have a signed employment agreement or offer letter with each employee. It's always to your advantage to have an agreement that essentially states that the employee understands the hiring terms and the "at-will" nature of employment, meaning either the employer or the employee can terminate employment at any time.

2. Not having standard policies in writing. Whether it's in the form of an official handbook or several pages stapled together, you should have clear policies in place so that employees know exactly what is and is not expected of them while employed.

3. Not having proper appraisal documentation. If someone is performing poorly or there is any indication that you may need to terminate an employee, you should keep records of warnings or discussions regarding poor performance or failure to abide by company policies. You will want documentation in the event the employee takes legal action after being terminated.

4. Not having a legitimate job-related reason. In many states you do not have to provide a reason for firing someone. However, whether you tell the employee or not, you should always have a legitimate reason for terminating an employee if you do not want to get hit with a discrimination lawsuit.

5. Failing to prepare for termination. Know what you're going to say, and have all paperwork prepared ahead of time. If there is severance pay or anything else owed to the employee, such as vacation pay, you should have a check cut to give the employee. In addition, you need to be knowledgeable about state and company policies. If you are unsure, read up on them in advance, or even call the state unemployment office for clarification.

6. Taking too long. If you are planning to terminate someone and continue to wait for the right time, you can run into several problems. First, the employee may get wind of the situation and become disruptive, slack off completely, or begin to set up a lawsuit situation. Second, other people in the department may become aware that something is up, and morale will drop quickly. If the decision has been made, act promptly.

7. Not having a follow-up plan. Terminating someone may be the best way to solve a problem, but there remains a need to have the work completed. You should be prepared to address your next course of action, which may be dividing the work among other employees, hiring someone new, or outsourcing the work.

8. Talking too much. Too often employers talk too much and say the wrong thing. Don't make promises you can't keep, such as to help the employee find another job. Don't make excuses or pass the blame. Keep the conversation to a few minutes. There's nothing wrong with saying that you are sorry, but be careful regarding anything else.

9. Letting the word out. A slip of the tongue can be a big mistake. Nobody else should know about the impending termination except those involved in the decision process.

10. Arguing. A common mistake is getting into an argument with the employee being terminated. You should not let this happen. If he or she is angry, let them vent.

ECONOMIC TIMES

For owners, now is the time to be leaders. For workers, now is the time to pay close attention to serving the clients. In talking to the businesses that we work with, we have found that those owners that have good dialog with their staff seem to be weathering the economic storm quite well. The others, they seem to just like to complain. Remember... this down economy will eventually pass. Today never feels like it will be history, but it will. And more likely than not, we will look back and realize that we should have known…

During World War II, the UK was facing not only a suffering economy, but also a daily pounding of heavy explosives from the enemy. In an attempt to quell the public anxiety, the British government posted signs around the city with the sage advice, “Keep Calm and Carry On.” Perhaps another reason to carry on is that, like all previous calamities, this too shall pass. And, if we keep calm, we may actually look back and gain confidence from the proof that history provides for us.

This is the time to hunker down and send a similar message.

SOMETHING TO THINK ABOUT...

Seven blunders of the world according to Mahatma Ghandi.

1. Wealth without work
2. Pleasure without conscience
3. Knowledge without character
4. Commerce without morality
5. Science without humanity
6. Worship without sacrifice
7. Politics without principle

STUDY SHOWS THE ADVANTAGE OF KEEPING MONEY AT HOME

(Grand Island Independent) -- A study examining the way businesses reinvest their revenue into local economies suggests not all businesses are created equal. Researchers compared locally owned businesses with national chains. They found that, for every $100 spent in a chain store, $14 went back into the local economy. For a locally owned business, it was $45, according to researchers from the Institute for Local Self-reliance, an organization established to provide strategies, models and information to support community development.

These numbers aren’t surprising, a local economic development expert said. “There is a commitment to the community that comes from a local owner,” said Cindy Johnson, president of the Grand Island Area Chamber of Commerce. “While we’re thrilled anytime there is growth or a new business, we’re especially fond of those locally owned businesses that are growing or new. If they are successful, those business owners understand it’s because of the community.”

While there are some exceptions, locally owned businesses tend to be more community minded, said Marlan Ferguson, president of the Grand Island Area Economic Development Corp. Still, others say consumers are king. Business is shaped by what they want, for better or worse. “Whichever business consumers choose, it might be giving them a better mix of products and better prices. There is a fundamental benefit there of improving quality of life,” said Dr. Eric Thompson, director of the Bureau of Business Research at UNL. “When people make decisions on where to spend, they make those decisions on what’s best for them. They might not consider the community impact.”

HOW TO GET A COPY OF YOUR TAX RETURN FROM THE IRS

Larry, I can't seem to find a copy of my old tax return. Is there a way to get this from the IRS?

Ida

Ida, we keep copies of all of the returns that we prepare, so if Kopsa Otte prepared the return for you we most likely have a copy. If you need a copy from the IRS, here is information from their website on how to either get a transcript (that is key information from your return) or how to order an actual copy. Let me know if I can be of further assistance.

Larry Kopsa CPA

"Getting a Free Transcript of My Tax Return Information - Actual Copies $57 Each

There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts — by phone or by mail.

A tax return transcript shows most line items from the tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions such as those offering mortgages and student loans. You should receive your tax return transcript within 10 working days from the time the IRS receives your request.

A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data, including marital status, type of return filed, adjusted gross income and taxable income. The IRS does not charge a fee for transcripts, which are available for the current and past three years. Allow 30 calendar days for delivery of a tax account transcript.

To request either transcript:

Phone: Call 800-829-1040 and follow the prompts in the recorded message.Mail: Complete IRS Form 4506-T, Request for Transcript of Tax Return.

If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current and past six years. Forms 4506-T and 4506 can be found on the IRS Web site at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Links:

Form 4506-T, Request for Transcript of Tax Return (PDF 45.3K)

Form 4506, Request for Copy of Tax Form (PDF 42.3K)"

I SELL DRUGS. ARE MY SALES TAXABLE?

I frequently get asked "what is taxable?" The MSN link below serves as a good summary.

http://articles.moneycentral.msn.com/Taxes/Advice/BribesTheftsAndOtherTaxableIncome.aspx?page=all

TAKE THE TIME TO RUN YOUR BUSINESS

It is extremely difficult to develop new ideas amidst the burdens of the every day. Phones ringing...Deadlines looming...Email boxes overflowing...For many of us, a successful day is simply completing as many action steps as we can to keep the ball rolling.

Progress ultimately starts with taking action. So, action-packed days are our best hope for pushing our ideas to fruition. However, it can also be argued that revolutionary achievements start with great insights - insights that require time, deep thought, and a certain degree of peace.

If Thomas Edison was right when he said that genius is “1% inspiration and 99% perspiration,” then we should question how we spend our time. When do you jump fully into “action mode,” and when do you take time to dream up new ideas?

As I have shared before in other posts, taking time to think about business is very important. With the sour economic news now more than ever, we need to run our business. You are most likely getting all kinds of advice on how to deal with the economy, but are you doing anything about it?

Here is my recommendation. Book yourself out. Get out of the workplace; find a place to just think about your business; what you need to accomplish; steps that you need to take. Give yourself some time to consider and then reconsider.

Personally, when I do this I like to find a nice hotel lobby. For some reason, the activity that goes on keeps me thinking. That works for me. Go to a place that works for you.

The next step is important! Make a list of what you want to do and set a timeline to get your tasks completed. Do this. I guarantee that it will help your business.

Larry Kopsa CPA

WORKPLACE LAWS BRING CHANGES FOR EMPLOYERS

(Denver Business Journal) -- For employers, 2009 is likely to be a historic year for workplace law. Merrily Archer, an attorney in the Denver office of Fisher & Phillips LP, a law firm that represents employers, noted several major measures are taking effect this month and in February. Among them:

• The Americans with Disabilities Amendment Act of 2008. In the 18 years since the Americans with Disabilities Act (ADA) became law, several Supreme Court rulings narrowed the definition of a disability, making it easier for employers to defend themselves from discrimination cases. This measure rejects those decisions. It broadens the scope of what’s considered a disability and requires employers to ignore most mitigating measures — such as prosthetic limbs, medications or hearing aids — when determining disability. The Congressional Budget Office has estimated that the new rules will lead to a 10% increase in annual discrimination complaints. “We think that’s low,” Archer said.

• Military Family Leave. This change in the Family Medical Leave Act permits employees to take up to 26 weeks of leave to care for an ill or injured serviceperson. They must be a spouse, child, parent or next of kin of the employee. Additionally, Guard members or reservists, as well as their family members, are eligible for up to 12 weeks’ leave to deal with issues related to deployments.

• Mandatory use of E-Verify. E-Verify, an online system operated jointly by the Department of Homeland Security and the Social Security Administration, lets employers enter a Social Security number and check the immigration status of an employee or prospective new hire. Use of E-Verify is voluntary, but President Bush signed an executive order last year making it mandatory for federal contractors beginning in 2009. In early January, the government delayed the rule until Feb. 20. Francesca Cheroutes, an attorney at Shughart, Thomson & Kilroy PC in Denver who specializes in labor and employment law, said: “The statutes that cover this also prohibit discrimination. … Trying to do what the government wants you to do, in terms of making sure that your work force is authorized, and not [incurring] a discrimination suit is very difficult.”

Those new rules already have been signed into law. But other workplace measures either have been, or are expected to be, introduced in Congress in 2009. They include:

• The Employee Free Choice Act. The measure would eliminate the secret ballot system used to organize unions in workplaces, and replace it with union representation based on a simple card check. A Senate filibuster defeated it in 2007, but many expect it to re-emerge in 2009 now that Democrats control Washington.

• The Paycheck Fairness Act. This bill, which the U.S. House of Representatives passed this month and which was headed to the Senate at press time, makes it easier for workers to sue for discrimination and allows them to collect punitive and compensatory damages, instead of just back pay.

• The Lilly Ledbetter Fair Pay Act. This bill also passed the House and is now pending in the Senate. It would overturn a 2007 Supreme Court ruling, in Ledbetter v. Goodyear Tire & Rubber Co., that requires workers to sue within 180 days of a discriminatory action, such as a hiring, promotion or raise. The Fair Pay Act would begin a new 180-day statute of limitations with each paycheck.

HIRING YOUR CHILD

Larry, I know you have answered this question before, but I can't seem to find it on your blog anywhere. How much can I pay my 2 kids a year for odd jobs around the shop and not have to pay taxes on them? They do odd jobs such as folding towels, dusting and cleaning. Also, how do I go about doing the tax forms on them, do I just leave the Social Security and Medicare spots blank on the W2's? Thank you for any info you can give me.

Shannon

Shannon, money that you give to your children, grandchildren, or even parents is a deductible business expense if you pay them to perform bona fide work for your business, and pay them reasonable compensation for that work.

Would I rather give my 12 year old son Ryan an allowance or a wage?

Let’s do the math. If I am in a 33% bracket I need to make $30, give the government $10 which leaves me $20 to give to my son. On the other hand, if I give him a wage of $20, I have a $6.60 tax deduction so effectively I only am paying him $13.40 after taxes. It is a no brainer.

At that point, it isn’t allowance. It’s wages. If you’re hiring your kids, they might even learn not to treat you like “The First National Bank of Mom and Dad”:

• Your child can earn up to the standard deduction for single taxpayers ($5,700 for 2009) before they owe tax on their income. The next $8,350 is taxed at just 10%. Earned income isn't subject to the “kiddie tax” for children under 19 (or dependent full-time students under age 24). Other family employees pay tax at their regular rate.
• The Tax Court approves wages for children as young as 7.
• Your family employee’s work should be directly related to your business.
• Pay your employee (child) a reasonable wage for their age and the service they perform. Their wages should be similar to amounts paid for similar services by similar businesses under similar circumstances—with adjustments made for their age and experience.
• To verify your deduction and audit-proof your return, keep a time sheet showing the dates, hours, and services performed. The more you pay, the better time records you should have.
• Pay your child by check, and deposit the check in an account in the child's name. This can be a Roth IRA, Section 529 college savings plan, or custodial account.
• You can’t use custodial assets for your obligations of parental support; however, parental support doesn’t include “extras” like providing a bike, saving for a car, prom dresses, summer camps, and similar expenses.
• If your business is taxed as a proprietorship or partnership, you don’t owe Social Security or Medicare taxes on your child’s wages until they reach age 18. You don’t owe unemployment tax until they reach age 21.
• Hiring family members to help work in your business also lets you establish employee benefit programs such as a medical expense reimbursement plan, education assistance plan, and retirement plans.
• The IRS always scrutinizes year-end transactions so I always recommend paying the child monthly to avoid IRS questions.

In summary, by paying your children for working you are able to effectively deduct expenses that might be considered personal. If you have any further questions let me know.

Larry Kopsa CPA

WHERE IS OUR ECONOMY HEADED?

1099 NOT NEEDED

Larry, I paid a painter $1,575 to paint my house. Do I need to send a 1099?

Ryle

Ryle, you only need to send a 1099 for business expenses. I presume that your house is your personal residence, so you do not need to send a 1099. I hope this helps.

Larry Kopsa CPA

DON'T FORGET THOSE 1099'S

Did you know that we actually audit each other? That is really what the 1099 reporting requirements are all about. The IRS matches the 1099's that are sent to them, to the tax returns of the recipients to see if all income is reported. In a IRS audit, the auditor has a copy of all of the 1099's that were sent with your name on them, and reconciles those amounts back to your books and tax returns. You can see why the government has stiff penalties if you do not send 1099's - we are helping them to audit.

It is that time of year again to determine who should receive a Form 1099. The IRS requires that you send a Form 1099 to all individuals (not corporations) to whom you paid $600.00 or more for services, interest or rent. There is one exception to this. Any payments to a corporation for legal fees in excess of $600.00 are reportable on Form 1099-MISC. The due date in sending the 1099 to the recipient is January 31st, and the due date for sending the copy to the IRS is the end of February.

The penalty's range for not complying with the filing of Form 1099 is normally $100.00 for each form not properly completed and timely filed.

In addition, you are also required to have a W-9 on file, for non-incorporated businesses that you pay over $600.00 during the year for tax deductible services. If you do not have a W-9 on file, it is possible that the IRS could fine you as much as 28% of the amount paid.

WHAT RECORDS SHOULD I KEEP?

Larry, I am getting ready for my tax appointment and I have all of these piles of information for 2008. That's not all, I have a storage room of boxes from years and years. Can you help me? What do I need to keep?

Irma

Irma, now is a good time to get started having organized records. You probably already keep records in your daily routine. This includes keeping receipts for purchases and recording information in your checkbook. Good record keeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Good record keeping will help to "Audit Proof" your return. Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.In most cases, the IRS does not require you to keep records in any special manner. However, you should keep any and all documents that may have an impact on your federal tax return:

• Bills


• Credit card and other receipts


• Invoices


• Mileage logs


• Canceled, imaged or substitute checks or any other proof of payment


• Any other records to support deductions or credits you claim on your return.

For more information on what kinds of records to keep, you can look at IRS Publication 552, Record keeping for Individuals, which is available on http://www.irs.gov/.We have a detailed record retention checklist. If you would like a copy, email Carrie at ckadavy@kopsaotte.com and we will send you a free copy.

Larry Kopsa CPA

NEBRASKA LEGISLATIVE BILLS INTRODUCED THAT MAY IMPACT BUSINESS

Below are a few bills that have been introduced into the Nebraska legislature that would have an impact on business. These are just proposals but may be acted on by the legislature.

I am the chairman of the Small Business Committee of the Nebraska State Chamber of Commerce. If you have any comments on these or other business matters let me know and I will pass on to our representatives at the chamber.

Larry Kopsa CPA


Nebraska bill would require employers to explain firing

(Lincoln Journal Star) -- Lincoln Sen. Ken Haar believes workers need to know why they’re being fired. To that end, he introduced a bill (LB107) on Friday that would require an employer to give a specific reason for termination. It would also give employees getting pink slips meaningful opportunities to present their responses to the reasons for the termination. Haar said the proposal came out of the education arena, and is aimed at workers not covered by contracts. Haar said he doesn’t know how often it happens that people aren’t given reasons for losing their jobs, but he knows it happens. The bill has been tried before but hasn’t gotten too far, he said.


Bill would make Nebraska businesses pay for sales tax holiday

(AP) — A three-day break for consumers from the state sales tax is on the table, but the bill would let the state collect the same amount of money. That’s because retailers would be forced to pay the sales tax, under the bill (LB161) introduced Monday by Sen. Rick Pahls of Omaha. Stores could choose whether to participate. And they could advertise the sale as a sales tax holiday. It would occur during the first weekend of August. Pahls proposed a similar law last year, but it went nowhere. Pahls and others say Nebraska is missing out because some nearby states have sales tax holidays. Critics say the bill is misleading because stores aren’t saving money and will likely adjust their prices to pay the sales taxes.


Get out of jail free card for small business

Lincoln Sen. Tony Fulton thinks small businesses should be able to make one mistake a year on the numerous state regulations they must follow. Businesses would be able to avoid one fine a year, under Fulton’s bill (LB191). Like the game Monopoly, businesses would get one “get of jail free” card, he said.

MOST COMMON NEW YEAR'S RESOLUTIONS APPLIED TO YOUR BUSINESS

If “The Most Wonderful Time of Year” is behind us, what does January bring? For some, there are those nasty post-holiday blues. But for many, we design our New Year’s Resolution chart to plaster around the house. For small businesses, you can do the same thing, too.

Here are some thoughts from Randy Vaughn, author of Duct Tape Marketing. He took 7 of the most common resolutions and applied them to your business. I thought this would be a good reminder.

Even as we face a long road ahead, we find renewed vision to start off right!

Larry Kopsa CPA


1. EXERCISE The most successful weight-loss strategies typically involve muscle building. Businesses engage in strength training by first assessing their talent base. Look for ways to rotate some employees to various positions in your company. Give them exposure to new areas of responsibility. It’s easier to let everyone stick to what they do best, but by strengthening across the board, you eliminate the vacuum that remains if one employee leaves her post or if one guy just happens to be sick for a week. Learning other jobs also broadens the employee’s perspective and usually improves morale as employees learn to walk in one another’s shoes. A team with greater diversity of understanding and experience makes for a strong force when times are lean.

2. EAT BETTER Small businesses must consume healthier options. The most demoralizing product your employees consume is the feast of silence from the top. Our human nature gravitates to boss-bashing, quarreling with other co-workers, and griping about wages. This is a buffet of disaster and makes businesses sluggish. Feed your employees praise and positive reinforcement. Acknowledge the good efforts and don’t just criticize the mistakes. Provide opportunities to learn new skills. There are many low-cost webinars that can empower and encourage. Don’t forget the power of surprise rewards, the unexpected financial recognition that every employee loves. Even year-end bonuses over time become expected and lose their intended purpose (just ask Clark Griswold of “Christmas Vacation”).

3. STOP HARMFUL HABITS Many commit personally to quit smoking or stop excessive drinking. But what about those harmful habits destructive to our business? One of the grossest areas of abuse is in the area of self-promotion. Yes, that’s right, quit promoting your services and products! The most common marketing error is saying, “if they only knew more about X, they’d buy it!” People don’t care about your products, but they do care about how those products will benefit them. Consumers are self-focused - that’s why they dispense their hard-earned dollar to whichever company offers the better price. Spend your marketing words on talking about the consumer - speak in their language and in ways that benefit them. Harley-Davidson has long been recognized for not selling motorcycles, but for the way it makes their loyal customers feel.

4. SMARTER FINANCIAL DECISIONS Small business must make better financial choices. In your marketing, look for ways to stop putting down a lot of money for little ROI. Make sure you have strong measurables for that ad you’ve been placing in your local yellow directory. Reduce your advertising space in the local paper and direct them to your website where you have unlimited space to tell about all the benefits. Quit sending out those same direct mail pieces if you can’t account for its success (TIP: set up unique phone numbers and web landing pages for each venue in which you advertise - this helps quantify the leads).

5. ORGANIZATION I started my year already by cleaning the garage, our bedroom closet and my office (well, it’s a work-in-progress!) But we also decided as a family to make some family goals, plans and intentional efforts toward what results we really didn’t see last year. Don’t even begin to think of squeaking quietly through 2009 without a comprehensive yet simple marketing plan.

6. CONNECTING Plenty of people start the new year committed to joining a networking group, signing up for their local Lion’s or Rotary Club, or even attending and volunteering more in their local church. We satisfy our desire to connect with those whom we can help and from whom we receive benefit as well. Your business has got to break down the impersonal barrier and connect with your customers and prospects. The web is ridding the world of formalities, walls, and sales pitches. People need to know your values, the things that are important to you. They must hear your story, your journey of challenge and reward. Again, social media tools like Facebook and Twitter may be a way to allow your target market to become aware of you, have more likability toward your business, and ultimately trust you enough to become your advocates and champions in the community.

7. GIVING MORE I believe that most of you in small business are not in it just for the money. If so, in a recession, you’d walk out in a heartbeat. No, most of us went down the entrepreneurial path because we wanted a better quality of life: more time with the family, control over vacation schedules, ability to influence the community and world through charitable giving, and putting us in the driver’s seat of our own destiny. I call them “greater things” - the often intangible, but clearly identifiable when you ask a small business owner why they continue to endure daily challenges and hardships. In a recent article, I talked about how charitable giving needs to be an essential element of how you present yourself to the community. This passion for influence and involvement is something often robbed of people sitting in a corporate cubicle. Rediscover your passion and recommit to making 2009 all about the greater things!

Randy Vaughn, Duct Tape Marketing Authorized Coach located in Fort Worth, TX.

WATCH OUT FOR FRAUDULENT IRS EMAILS

I don't think that there is anything scarier for a taxpayer than a letter, call or email from the IRS. Knowing this, crooks use the fear of the IRS to illegally get personal information or cash. As a reminder...

Be aware of e-mail scams that fraudulently use the IRS name or Logo as a lure. The goal of the scam is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft and steal your money.

The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information. Additionally, the IRS never asks people for their PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

In addition, Snopes had the following article about criminals phishing for information.

http://www.snopes.com/fraud/phishing/irsrefund.asp

DEDUCTING A BUSINESS CRUISE

Larry, one of my suppliers is sponsoring a cruise. During the cruise there will be business meetings for over 7 hours per day. I know that if my wife goes along I cannot deduct her costs because she is not an employee of my business. I also know that if I don't take her I will have severe issues at home. Anyway, is the cruise deductible?

Bill

Bill, you can deduct up to $2,000 per year of your expenses for attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

1. The convention, seminar, or meeting is directly related to your trade or business.

2. The cruise ship is a vessel registered in the United States.

3. All of the cruise ship's ports of call are in the United States or in possession of the United States.

4. You attach to your return a written statement signed by you that includes information about:

a. The total days of the trip (not including the days of transportation to and from the cruise ship port),

b. The number of hours each day that you devoted to scheduled business activities, and

c. A program of the scheduled business activities of the meeting.

5. You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:

a. A schedule of the business activities of each day of the meeting, and

b. The number of hours you attended the scheduled business activities.

Let me know if you have any other questions. It is a pleasure serving you.

Larry Kopsa CPA

MORE INFORMATION ON FIRST TIME HOMEBUYER CREDIT

Larry, thanks for the information on the home credit. I am trying to buy a house but do not have the down payment that the bank is wanting. This $7,500 may be just what I need. Could you get me the details. Thanks.

Adam

Adam, here are the details. Let me know if you need more information.

Larry Kopsa CPA

Available for a limited time, the credit:

• Applies to home purchases after April 8, 2008, and before July 1, 2009.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar. Is fully refundable, meaning that the credit will be paid out to you, even if you owe no tax or the credit is more than the tax that they owe.
• The credit operates much like an interest-free loan because it must be repaid in equal installments over a 15-year period.
• You claim the credit on new IRS Form 5405, First-Time Homebuyer Credit.
• Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible.
• For a home that you construct, the purchase date is the first date you occupy the home.
• If you owned a main home at any time during the three years prior to the date of purchase you are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
• If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return.
• If you make an eligible purchase in 2009, you can choose to claim the credit on either your original or amended 2008 return, or on your 2009 return.
• The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return.
• In most cases, the maximum credit will be available for homes costing $75,000 or more.
• The credit normally must be repaid over a 15-year period starting the second year after the year the credit is claimed.
• The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income. In general, for a married couple filing a joint return the phase-out begins at $150,000 and is completely phased out at $170,000. For other taxpayers, the phase-out range is between $75,000 and $95,000.

Not everyone will qualify for the credit. There are other rules that may impact your eligibility and decision to claim the First-Time Homebuyer Credit.

FIRST TIME HOMEBUYER CREDIT

I have received several questions about the new homebuyer credit that was made available by the recently passed Housing Tax Act. With banks now requiring a down payment, this is a good way for people that qualify to get an interest-free loan from the government.

Those who bought a main home recently, or are considering buying one, may qualify for the first-time homebuyer credit. Normally, a taxpayer qualifies if he or she didn't own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only — on homes bought from April 9, 2008, to June 30, 2009. It can be claimed on the new Form 5405, and is repaid each year as an additional tax. Income limits and other special rules apply.

If you would like form information contact me at lkopsa@kopsaotte.com.

A KINDER IRS? - MAYBE

The IRS just announced that they have recognized that there is an economic slowdown, and they are changing their collection procedures. Here is a summary of their announcement from their website.

Larry Kopsa CPA

IRS Help for Financially Distressed Taxpayers

If you are facing financial difficulties and struggling to meet your tax obligations the IRS can help. As the 2009 tax filing season begins, in addition to new credits, deductions and exclusions, the IRS is taking steps to help people who owe back taxes. Here are some areas where IRS can help:

Added Flexibility for Missed Payments: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.

Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.

Prevention of Offer in Compromise Defaults – Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.

Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation. For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.

More information is available on the IRS web site at www.irs.gov.