Take a Break....
Some food trivia:
* A can of Spam is opened every four seconds.
* Olives are fruits.
* Pineapples are berries.
* A New York carpenter invented Jell-O in 1897 and sold the idea for $450.
* The most popular Domino pizza topping in Japan is squid.
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MARCH 2007 NEWSLETTER
WHAT'S NEW......
IRS gets tough on abusive telephone tax refund claims
Special IRS agents served search warrants to tax preparers in several cities, seeking evidence of fraudulent claims for refunds of excise taxes paid on long-distance telephone service. This tax is being refunded to taxpayers for the period of March 2003 through July 2006. However, unscrupulous promoters and tax preparers are filing refund claims for taxpayers requesting thousands of dollars of refunds where the individuals are entitled to only a tiny fraction of the claimed amount.
The IRS is urging taxpayers to stay away from those who suggest they can get hundreds of dollars or more under the telephone tax refund program. Taxpayers who request excessive refunds will have their refunds held and be subject to an audit.
At the same time, the IRS is reminding taxpayers not to overlook the telephone tax refund when they file their tax returns. Many early filers are failing to claim the refund even though it requires only a one-line entry on the tax return. The standard refund amount ranges from $30 to $60 depending on the number of exemptions a taxpayer has, and no recordkeeping or substantiation is required.
Government survey gives wage and benefit costs
As you review your company’s outlay for employee wages and benefits, you may find it useful to compare your spending with national averages.
According to a recent government survey, employer costs for wages and benefits average $26.86 per hour. Wages make up 70% of that amount averaging $18.80 an hour, with benefits making up 30% or $8.06 an hour. Included in benefits were social security, Medicare, unemployment insurance, workers’ compensation, health and other kinds of insurance, vacation and sick leave, and retirement plan benefits.
For details on the survey, go to www.bls.gov/ect and search for Employer Costs for Employee Compensation.
2007 brings changes to 401(k) plans
Last year's pension law made some important changes to 401(k) plans, changes you should pay attention to if this type of retirement savings plan is available to you.
The first change is that companies are now permitted to automatically enroll workers in their 40l(k) plans. You have the opportunity of opting out of the plan, but you should think seriously before doing so. Saving for retirement has never been more important, and a 401(k) is a great way to build a retirement nest egg.
Another change is the requirement that companies advise plan participants about the need to diversify investments in their 401(k) and not overload on company stock (remember the Enron collapse). You can also expect to see some form of investment advice or recommendations with your 401(k) statements.
Also changed in 2007 is the maximum amount you can stash into a 40l(k): $15,500 if you’re under age 50 and $20,500 if you’re 50 or older.
Smart strategies for your tax refund
Are you eagerly awaiting a 2006 tax refund? Hopefully you’ve given some thought to how you can put the money to good use. While “good use” may be in the eye of the beholder, you should really consider the following:
* Pay down debt. If you have high interest credit card balances, consider using your refund to pay them down. By doing so, you are essentially investing the funds at a significant guaranteed rate of return. Put another way, paying off a credit card with an 18% interest rate is equivalent to earning 18% on your money.
* Invest in an IRA. If you’re debt-free, you can use the refund to invest in either a traditional IRA or a Roth IRA. Not all taxpayers will qualify for either type of IRA, but if you do, making such an investment might save you tax dollars currently and build a nest egg for your future.
* Invest in an education account. It’s never too early to plan for your children’s education. Why not use your refund to start a Coverdell or “529 Plan” education savings account? Both types of accounts are tax-savers in the long run.
Here’s the real issue with refunds: Why receive a big refund at all? Why give the government an interest-free loan? Instead, consider adjusting your payroll withholding to put more money in your pocket on a monthly basis. You can then use those funds to begin an automatic investment plan, such as an IRA or other savings plan, paying interest to yourself instead of to the government. For assistance in adjusting your withholding, give us a call.
Five things every business owner should do this year
If you own or manage your own business, you’re probably busy monitoring operations and dealing with everyday problems. But there are a few things that you should make time to do every year. These are important for your longer term business and personal success.
1. Review your business insurance coverage. Don’t just automatically write a check to renew your insurance policies when they come due. Instead, you should sit down with your insurance agent every year. Review your business operations, focusing on any changes. Discuss types of risk that could arise. Ask about new developments in business insurance. Use your agent’s expertise to identify risk areas and suggest suitable coverage.
2. Review your business tax strategy. A month or so after you’ve filed your tax return, make an appointment with your tax advisor. Go over your return together and identify opportunities for tax savings. Question everything, starting with whether you’re using the right form of business entity. Ask about recent changes in the tax code and how they might benefit your business. Make your advisor a “partner” in your business strategy.
3. Update succession planning for your business. Review your succession planning annually. You should have a specific plan for each key manager position, including yourself. Be prepared for a short-term absence or a permanent vacancy. Your plan might mean promoting from within or recruiting externally. An up-to-date plan can be invaluable if you have an unexpected vacancy.
4. Review your business banking relationships. Annually, you should go over your cash balances and banking relationships with your controller or CFO. Then both of you should meet with your banker. Ask about new products or services that could help your company. Address any service concerns or problems you might have had. Look for ways to reduce idle cash, boost interest earned, and improve cash flows.
5. Review and update your personal estate planning. If you’re a business owner, your company is likely to be a significant part of your estate. A good estate plan is essential if you hope to pass your business on to your heirs. But your company, your personal circumstances, and the tax laws are continually changing. You should take time each year to make sure your plans are current.
We can assist you with the reviews and planning necessary to your business’s long-term success. Give our office a call.
Avoid these retirement blunders
If your goal is to enjoy a long and financially secure retirement, try to avoid these four major blunders.
* Not saving enough. If you’re approaching retirement age and are in reasonable health, you could expect to live well into your eighties or longer. Make sure your retirement savings will last that long, especially taking inflation into account. The secret is to save as much as you can as early as you can, so that power of compounding can work its magic. Make regular saving, no matter how little, a part of your lifestyle.
* Falling for investment scams. The surest way to ruin your retirement is to lose your savings in an investment scam. If an investment seems too good to be true, it almost certainly is. A good basic rule is never to buy any investment over the phone, and never to invest under time pressure. Always demand to see a prospectus, and take time to read it before you write a check.
* Making inappropriate investments. Even if you avoid the outright scams, it’s all too easy to end up with investments that are inappropriate for your age or financial situation. They may be too risky, too conservative, not properly diversified, or too expensive. Stay away from unscrupulous advisors. Don’t confuse salespeople with advisors.
* Leaving investing to your spouse. If you leave your spouse to do all the planning and investing for retirement, you’ll be at a loss if he or she dies first. To avoid this, you should jointly discuss and agree on your investment strategies, and you should both participate in meetings with your accountant, broker, or advisor.
This newsletter provides business, financial, and tax information to clients and friends of our firm. This general information should not be acted upon without first determining its application to your specific situation. For further details on any article, click here.
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