Take a Break....
A dandy derivation
Do you know where the expression "POSH" came from?
It originated when the ticket agents in England marked the tickets of travelers going by ship to the Orient. Since there was no air conditioning in those days, it was always better to have a cabin on the shady side of the ship as it passed through the Mediterranean and Suez area. Since the sun is in the south, those with money paid extra to get cabins on the left, or port, traveling to Asia, and on the right, or starboard, when returning to Europe. Hence, their tickets were marked with initials for "Port Outbound Starboard Homebound" or POSH.
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OCTOBER 2007 NEWSLETTER
WHAT'S NEW......
Don’t fall for the latest IRS e-mail scam
The Internal Revenue Service is warning taxpayers about yet another e-mail scam. In this latest scam, the taxpayer receives an e-mail that appears to come from the IRS. The e-mail contains a link to an online "Member Satisfaction Survey," and the taxpayer is told he or she has been selected to participate in this survey. In return for completing the survey, the taxpayer will receive an $80 credit to his account. On the survey, the taxpayer is asked for information that the scam artists will later use to steal the victim’s bank account, incur charges on his or her credit card, etc.
The IRS reminds taxpayers that it does not send unsolicited e-mails. Taxpayers who receive e-mails purporting to be from the IRS should forward them to phishing@irs.gov, the electronic mailbox set up to help catch these identity thieves. And watch for variations on the IRS e-mail scam; more than 400 separate scams have been reported in the past year.
Employer's tip credit isn't reduced
As of July 24, 2007, the new federal minimum wage increased from $5.15 an hour to $5.85. By the summer of 2009, the minimum wage will increase to $7.25 an hour.
Employers can claim a credit for their payments of FICA taxes paid on tips that exceed the portion of tips treated as part of the minimum wage. This credit will continue to be based on the old $5.15 wage even though the actual minimum wage increases. Allowing employers to continue using the old lower minimum wage to compute this credit means their tip credit will not be reduced as the minimum wage increases. This rule applies to tips received for services performed after December 31, 2006.
Health insurance costs outpace inflation
According to the annual survey of employers conducted by the nonpartisan Kaiser Family Foundation, the cost of health insurance rose 6.1% this year. That's more than double the annual rate of inflation (measured in July) of 2.4%. The increase in health insurance premiums since 1999 has outpaced both wages and inflation for the same time period.
According to the Kaiser survey, the average annual cost for a family's insurance is $12,106; the cost for an individual is $4,470.
MONTHLY ARTICLES
If you can, plan for coming payroll tax increases
Many Americans pay more payroll taxes than federal income tax. That’s the FICA tax you see on your W-2 wage statement - a combination of 6.2% social security tax and 1.45% Medicare tax. The social security tax is assessed on up to $97,500 of earnings in 2007, and the Medicare tax has no earnings limit. Your employer matches the FICA tax you pay.
Self-employed taxpayers pay an equivalent self-employment tax of 12.4% on net earnings up to $97,500 and 2.9% Medicare tax on all earnings (with a deduction for 50% of the tax paid).
The Social Security Administration is projecting that for 2008, the wage base for social security taxes will increase to $102,300. So if you’ll meet or pass the 2007 taxable wage base of $97,500, you might consider accelerating additional income into this year. That income would not be subject to social security tax. Employees generally have few opportunities to move income between years, but self-employed individuals may be able to do some planning.
The Social Security Administration has projected that the wage base will increase to $141,900 by 2016. As significant as the payroll tax bite can be, doing what you can to minimize this tax is advisable. For guidance in this area, give us a call.
A business consultant can give useful feedback
Is there an especially baffling problem in your business? Or do you have problems you have identified but do not have the time to address? Perhaps you should consider hiring a good business consultant.
Are your sales sagging? Are your costs getting out of control? Are you having problems hiring qualified staff? The average business manager has so many hats to wear that it is difficult to be good at all the management tasks. Good consultants will have specialized knowledge of your problems, and they will be able to work full-time on problems until a solution is fully implemented.
One of the first concerns many managers have about consultants is the fee they will be charged. This is a valid concern. But if you have done a good job of selecting your consultant, the benefits should far outweigh the cost. A qualified consultant should be able to identify where the limits of the engagement should be. He or she should be able to clearly communicate to you what is to be done, how much time it should take, what is to be achieved, and what the total cost is likely to be.
You can request an initial interview. Consider asking questions of the consultant much the same as if you were hiring an employee. Ask for some past performance documentation. A good consultant should have satisfied clients to whom he or she can refer you. You can interview these prior clients to see if they got what they paid for.
With planning, the time and expense of using a qualified consultant should lead to a profitable conclusion.
Choosing your executor: A critical estate planning decision
An executor is the person or legal entity that you appoint in your will to settle your estate after your death. It is common practice to name your spouse or one of your children (often the first born) to be the executor of your estate. Such a choice may be entirely appropriate. However, there are circumstances where you should consider other possibilities.
Your executor will be required to gather your assets and pay debts, taxes, and expenses. The executor may be called upon to liquidate assets and will need to distribute money and assets under the direction of your will, with the appropriate legal and tax considerations.
If you do not appoint your spouse or some other family member to be your executor, what other choices have you? You could use a corporate executor, such as a bank or trust company, or you may want to choose an accountant, attorney, investment advisor, or a business associate.
Do not pass up a nonfamily executor simply because there is a fee involved. Often the conflict of interest or the contests that result by naming a family member can be far more costly to the estate than the fees charged by an outsider.
Selecting an executor for your estate is as important a decision as naming your heirs. Give some thought to the complexity of your estate and select an executor accordingly. For more details, give your attorney a call.
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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