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)"