CONSIDERING A REVERSE MORTGAGE

Larry, I am thinking about doing a reverse mortgage. I think I understand all of the positive sides. Are there any negative sides to doing this?

Abe

Abe, as you know there are some positives to a reverse mortgage. They are a very good vehicle for certain individuals that are retired that have built up a lot of equity in their home, but are not ready to sell their house. You say that you know the positives so I will just tell you some of the things that we watch out for:

• Expect to pay some hefty fees. Many times we see an origination fee for as much as 2% of the mortgage and then additionally some fees on the balance.
• If you are a younger borrower, there are some big risks. If you live longer than you participate, you could possibly run out of money and won’t have any home equity to fall back on. Over the last decade, the average age of the risk mortgage borrower has fallen from 76 to 72. At age 62 this could cause a problem.
• There are other options that might work better for you. Even though you’ll have some counseling, which is required for first mortgages, taking out a home equity line of credit or downsizing your home might be an answer.
• You may not be able to borrow as much as you think. You will not be able to tap your home for its full price. There is a formula on the amount that you can take on depending on your age and other factors.

Before you determine if a reverse mortgage is right for you, we really would have to know your exact circumstances. You should discuss this with your financial counselor. If you are a client of the firm, please get in touch with me. If you are not a client of the firm, you should discuss this with your representative.

RECOVERY.COM IS SPOT ON IN TRACKING STIMULUS FUNDS

If you're interested in finding out where the stimulus money is going, click on www.recovery.com.

Recovery.com, a Web site run by government-procurement researcher Onvia in Seattle, is seen to be faster at providing information on how stimulus funds are being spent than Recovery.gov, the federal government's Web site for that purpose. Information on Recovery.com is more up to date, and it tracks local contracts in real time. Onvia's data show that stimulus spending is slow, perhaps because of excessive caution about results, but businesses are eagerly awaiting funds to get started on projects.

REPAIRS OR IMPROVEMENTS

Larry, I hope that you can help me. I am doing some work on my building. At one of your programs you mentioned that repairs are better than improvements, or vise verse. What is the difference?

Carmina

Carmina, when it comes to taxes, talking about repairs versus improvements can be tricky.

The cost of repairs made by your business is currently deductible. However, the cost of improvements must be capitalized and written off over time via depreciation deductions.

What To Do:

Separate repairs from improvements when work is done on the building. For example, don't lump standard repairs with a major renovation. If that occurs, it will take longer to write off the cost of the repairs. It is up to you to show that renovation expenses should be deducted currently instead of being capitalized.

Sometimes it's hard to tell the difference between a repair and an improvement. If you're having trouble telling the difference, remember these rules:

• A repair keeps the property in good operating condition.
• An improvement extends the useful life of the property.
• If the cost of the work amounts to 25% or more of the original cost, it will probably be classified as an improvement.

If you have any other questions, please let me know.

Larry Kopsa CPA

STAFF RETREATS

If you are going to own a business, there are certain expenses that are necessary. Can you imagine running a business without paying rent or utilities or having employees? It would be nice if we did not have to pay these bills, but we all know that if you did not make these investments you would not be in business.

Another expenditure that I feel is just as important is incurring the cost and the time to have staff retreats. Our accounting firm just had a one-day retreat and I have to share with you that it was well worth the time and cost.

A staff retreat can be a source of great unity and inspiration. During the retreat we learn many things. During our retreat we focused on how each of the members of our organization had different strengths and how we can utilize these strengths to be a better team. We also developed deeper understandings of who we are as individuals and as a group.

Spending time with coworkers in a way that is fun, relaxed, and reflective can be nourishing as well as productive. Rarely in this culture do we take the time to simply pause from the frantic pace of our actions. A commitment to pausing on an organizational level can lead to the manifestation of an entirely different and powerful orientation toward work, vision, community, and self.

I urge you to keep in mind this important tool for running a successful business.

BEWARE: ANOTHER SCAM

Watch out for this scam. I have had a client that received the following email. Remember, the IRS never sends notices by email.

See www.snopes.com for more information.

Taxpayer ID: name-00000174073547US
Tax Type: INCOME TAX
Issue: Unreported/Underreported Income (Fraud Application)

Please review your tax statement on Internal Revenue Service (IRS) website (click on the link below):

review tax statement for taxpayer id: name-00000174073547US

Internal Revenue Service

DOCUMENTATION IS THE KEY

Occasionally I get asked about the deductibility of conventions and meetings to foreign countries. Attached is an article that provides a good summary. You will note that there is a list of the countries that have preference. Don’t forget, the key to “audit proofing” your records is Documentation... Documentation... Documentation!

http://www.bizactions.com/index.cfm/ba/e100/fa/117057430G1603J2842411P8P1402T1/

EXIT INTERVIEWS MAY DELIVER IMPORTANT INFORMATION

The way a departing employee sees your company may be the way it really is. For this reason, it may be beneficial to conduct an exit interview with staff members before they leave.

The following link will take you to an exit interview questionnaire on our website. You may use the responses you receive from this questionnaire to help your company improve upon its current practices.

Exit Interview Questionnaire