Accounting & Tax News

Congress Passes Temporary Payroll Tax Cut Extension

G.R. Reid Associates, LLP
631.425.1800

The reduced 4.2% Social Security tax rate will remain in effect at least through February.

The Senate and the House of Representatives on Friday both agreed by unanimous consent to extend the reduced rate, and President Barack Obama signed the bill—the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765)—the same day. The reduced rate had been scheduled to end after Dec. 31.

In the new year, a conference committee of representatives and senators will be appointed to discuss extending the reduced rate for the rest of 2012.

The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to  4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. The employer portion remained at 6.2%. Under the law enacted Friday, the 4.2% rate is extended through Feb. 29, 2012.

The act provides special rules for 2012 so that taxpayers with self-employment income and income from employment in excess of $18,350 (one-sixth of the 2012 Social Security wage base of $110,100) do not receive an extra benefit. If a full-year extension of the payroll tax cut is not enacted, taxpayers with income from employment for January and February that exceeds $18,350 will be required to recapture the excess benefit they receive. The recapture provision was included instead of a cap on the amount of employment income because of the compliance difficulties that would cause employers.

Because the extension affects withholding and was enacted only a little over a week before the higher payroll tax was scheduled to go into effect, it is not clear how well employers and payroll companies will be able to handle that change. The IRS on Friday notified employers that they should implement the lower payroll tax rate as soon as possible in 2012, but not later than Jan. 31 (IR-2011-124). The IRS also said that if an employer overwithholds during January, it should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2012. The IRS also said that it will issue more guidance on implementing the provisions of the two-month extension, including revised employment tax forms and information for employees who may be subject to the recapture provision.

The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors.

Congress’ use of unanimous consent to approve the extension allowed it to send the bill to the president without requiring lawmakers who had left the capital to return to Washington.

Published in the Journal of Accountancy on December 23, 2011.

Financial & Wealth Services News

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC 

How Should I Manage My Retirement Plan?

Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax-deferred until it is withdrawn at retirement. Distributions from a tax-deferred retirement plan, such as a 401(k) plan, are taxed as ordinary income and may be subject to an additional 10-percent federal tax penalty if withdrawn prior to age 59 ½. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.

Conventional wisdom says if you have several years until retirement, you should put the majority of your holdings in stocks. Stocks have historically outperformed other investments over the long term. That has made stocks attractive for staying ahead of inflation. Of course, past performance does not guarantee future results. The stock market has the potential to be extremely volatile. The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Is it a safe place for your retirement money? Or should you shift more into a money market fund offering a stable but lower return? And will the instability in the markets affect the investments that the sponsoring insurance company uses to fund its guaranteed interest contract?
If you’re participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace. 

Here are a few guidelines to help you make this important decision.

Consider Keeping a Portion in Stocks

• In spite of its volatility, the stock market may still be an appropriate place for your investment dollars — particularly over the long term. And retirement planning is a long-term proposition.
• Since most retirement plans are funded by automatic payroll deductions, they achieve a concept known as dollar cost averaging. Dollar cost averaging can take some of the sting out of a descending market.
• Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of the fluctuating prices of such securities. You should consider your financial ability to continue making purchases through periods of low price levels. Dollar cost averaging can be an effective way for investors to accumulate shares to help meet long-term goals.

Diversify

• Diversification is a basic principle of investing. Spreading your holdings among several different investments (stocks, bonds, etc.) may lessen your potential loss in any one investment.
• Do the same for the assets in your retirement plan.
• Keep in mind, however, that diversification does not guarantee against investment loss; it is a method used to manage investment risk.

Find Out About the Guaranteed Interest Contract

• A guaranteed interest contract offers a set rate of return for a specific period of time, and it is typically backed by an insurance company. Generally, these contracts are very safe, but they still depend on the security of the company that issues them.
• If you’re worried, take a look at that company’s rating. The four main insurance company rating agencies are A.M. Best, Moody’s, Standard & Poor’s, and Fitch Ratings. A.M. Best ratings are based on financial conditions and operating performance; Fitch Ratings, Moody’s, and Standard & Poor’s ratings are based on claims-paying ability. You should be able to find copies of these guides at your local library.

Periodically Review Your Plan’s Performance

• You are likely to have the chance to shift assets from one fund to another. Use these opportunities to review your plan’s performance. The markets change. You may want to adjust your investments based on your particular situation.
• The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

 

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.
This material was written and prepared by Emerald.

Commercial Insurance News

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC
 
Five Ways to Avoid OSHA Penalties

In a one-week period in September 2010, the U.S. Occupational Safety and Health Administration announced eight citations against employers; penalties totaled close to one million dollars. The agency fined a picture frame manufacturer for not protecting workers' hearing, allowing combustible dust to accumulate, and blocking exit routes. An excavating contractor is paying a six-figure fine for failing to protect workers against cave-ins. A painting contractor's scaffolding was missing railings, bracing and access ladders. Because OSHA had cited the company for these violations before, it levied a fine exceeding $200,000.
Clearly, failing to comply with OSHA regulations can be costly for employers. However, by implementing a few new procedures and attitudes, a company can reduce the chances that its name will end up in an OSHA news release.

Keep in mind that insurance does not cover many of the costs resulting from workplace accidents, such as time spent on investigating the incident, reduced employee morale, productivity lost because of the disruption and the absence of a worker, reporting costs, and the cost of OSHA penalties. 

Improve record keeping. 
Think of good documentation as your first defense against an OSHA inquiry. Inspectors who find information gaps in the OSHA 300 log (the record of work-related injuries and illnesses) may initiate a full-scale safety audit of the business. If your business has deficiencies in its logs for the past three to five years, devote some time to correcting them. Personnel files and workers' compensation loss records can provide much of the missing information.
Focus on ergonomics. OSHA has announced that it will pay special attention to musculoskeletal problems. Businesses that seek out ways to prevent repetitive motion disorders will avoid citations and penalties. They will also pay lower workers' compensation insurance premiums in the long run. Analyze how workers are performing their tasks and look for ways to reduce the strain on their joints, necks and backs.
 
Fix the routine violations first. 
Some safety issues are simple and cost little or nothing to correct. 
For example:

• Blocked exits
• Lack of protective equipment, such as gloves and safety goggles
• Poor housekeeping
• Improper storage of materials such as flammable liquids

These problems can accumulate over time if management is not paying attention. Operations with large numbers of these violations have paid substantial penalties to OSHA, so monitoring and correcting them is essential.

Have a plan for disasters. 
Hurricanes in recent years and 9/11 have taught us that all organizations need to have emergency procedures in place for sudden events like storms and terrorist attacks and gradual events like flu pandemics. 

Disaster plans should include:

• Training for employees on what to do in the event of an emergency
• Procedures for safe evacuation from the building
• Workplace hygiene
• Stockpiling of emergency supplies such as first-aid kits
• Arrangements for operating from remote locations
• Communications with employees, their families, customers and vendors

Although OSHA will not be concerned with some of these aspects of the plan, having them in place will help the business survive the event.

Look at safety as a profit driver, not a cost center. 
Preventing workplace injuries costs money, but it also saves money and can improve a business's profitability. Some project owners and general contractors will consider bids only from contractors with workers' compensation experience modifications lower than 1.0. Firms with a reputation for safe operations will attract better workers. 

Money saved on accidents that never occur goes straight to the bottom line.
Some workplace injuries may occur despite an employer's best efforts to prevent them. However, taking reasonable steps to improve safety in the workplace will reduce the frequency and severity of those injuries, make the business more competitive, and avoid problems when an OSHA inspector visits.

Information Technology News

G.R. Reid Consulting Services, LLC  
Information Technology Services
631.923.1595


Microsoft's Internet Explorer Plans For  'Silent' Updates That Will Help Reduce The Risks That Come From Running Outdated Software

Ryan Gavin, General Manager, Internet Explorer Business and Marketing recently posted on the IE blog that IE will Start Automatic Upgrades across Windows XP, Windows Vista, and Windows 7 so that users will benefit from an up-to-date browser. Gavin writes that "This is an important step in helping to move the web forward. We will start in January for customers in Australia and Brazil who have turned on automatic updating via Windows Update. Similar to our release of IE9 earlier this year, we will take a measured approach, scaling up over time. As always, when upgrading from one version of Internet Explorer to the next through Windows Update, the user’s home page, search provider, and default browser remains unchanged."

Good for Consumers, Developers and Enterprises

Gavin continues that "The Web overall is better – and safer – when more people run the most up-to-date browser. Our goal is to make sure that Windows customers have the most up-to-date and safest browsing experience possible, with the best protections against malicious software such as malware.For consumers, the safety benefits are one of the key reasons that the industry has been moving towards automatic updates. This is increasingly important since the biggest online threat these days is socially engineered malware, which typically targets outdated software like Web browsers. The latest Microsoft Security Intelligence Report, which is based on data from over 600 million systems in over 100 countries, is good reading to give you a sense of risks that stem from outdated software."

IE is how millions of Windows customers still connect to the Web, so keeping that part of Windows updated at all times is critical to keeping them safe online. With automatic updates enabled through Windows Update, customers can receive IE9 and future versions of Internet Explorer seamlessly without any issues. Wider deployment of the most up-to-date browser benefits the Web in other ways as well. Developers and online businesses can rely on better browsers to deliver richer and more capable Web experiences. We built IE9 with a focus on modern web standards ... so that developers could spend less time coding for specific browsers and spend more time building the next big thing on the Web. More of the web running an HTML5 capable browser, vs. something built ten years ago is a great thing for developers and the businesses they support."

Respecting Customer Choice and Control

Microsoft recognizes that while the benefits of upgrading are numerous, some organizations and individuals may want to opt-out and they will have choice and control of update their browsers on their schedule. The Internet Explorer 8 and Internet Explorer 9 Automatic Update Blocker toolkits prevent automatic upgrades of IE for Windows customers who do not want them. Microsoft's belief that IE9 "is the most compelling browser from business customers"  they are committed to giving consumers the ability to make the decision to upgrade at their convenience. "Customers have the ability to uninstall updates and continue to receive support for the version of IE that came with their copy of Windows. And similar to organizations, consumers can block the update all together and upgrade on their own. Finally, future versions of IE will provide an option in the product for consumers to opt out of automatic upgrading," Gavin says.

Accounting & Tax News

G.R. Reid Associates, LLP 
631.425.1800

 Standard Mileage Rates for 2012


The IRS recently released standard mileage rates for use in 2012 (Notice 2012-1). Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile. For business use of an automobile remains at 55½ cents per mile. For medical or moving expenses, it is 23 cents per mile (a half-cent decrease from the second half of 2011). For services to charitable organizations, the rate (which is set by statute) is 14 cents per mile.
Rather than using the standard mileage rates, taxpayers may instead use their actual costs if they maintain adequate records and can substantiate their expenses. The rules for substantiating these amounts appear in Rev. Proc. 2010-51. For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 23 cents per mile for 2012 (it was 22 cents per mile for  2011).

Health Benefit Services News

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC




2012 HSA & FSA Changes to Know About

Health savings accounts and flexible spending accounts are growing in popularity. Many people aren't aware of the changes that take place in these plans from year to year. It's important to discuss account details with an agent each year to be fully aware of the current rules or upcoming changes.

Flexible Spending Accounts

These accounts are sometimes called flexible spending arrangements. They are tax-advantaged accounts that let employees automatically deposit a specific amount of each paycheck into them. After funds accumulate, they can be used to pay for qualified medical expenses. These accounts are different from HSAs and HRAs in the respect that they are usually offered with traditional medical plans. They also differ from HSAs in the respect that the unused funds in the account may not be carried over to the next year. Debit cards or forms are used to access funds from the account if money is needed. Flexible spending accounts allow account holders to contribute to the FSA for any costs that aren't covered by insurance. Some examples of such expenses include coinsurance, copay amounts and deductibles. If a health insurance won't cover a treatment or related health expense, FSA funds can be used to pay for it. The specified limits saw some changes from 2011 to 2012.

Contribution Limits

It was decided that 2012 would be the last year for no limits on FSA contributions. While there may not be limits in place, plans must specify a maximum percentage of compensation to be contributed to the FSA or a maximum dollar amount. The changes from 2010 to 2011 included over-the-counter medicines being eliminated from coverage if they weren't prescribed by a doctor. The year 2013 will likely see one of the biggest changes: FSA contribution limits of $2,500 annually with yearly inflation increases.

Health Savings Accounts

HSAs are medical savings accounts that also have tax advantages. Taxpayers who are enrolled in HSA-qualified health plans with high deductibles are able to obtain them. At the time of deposit, the funds contributed to these accounts are not subject to federal income tax. Any unused funds that remain in the account at the end of the year are carried over to the next year and added to further contribution amounts. Since contribution also change with these plans each year, it's important to be aware of the changes. The changes from 2011 to 2012 include an increase in out-of-pocket HDHP maximums and HSA contribution limits. However, there are no changes with the HDHP required minimum deductibles.

HSA Contribution Limits

Family: $6,250

Individual: $3,100

Catch-Up Contributions: $1,000
The individual amount of $3,100 reflects an increase of $50 from 2011s limit. 
The $6,250 limit for families is an increase of $100 from 2011. 
Catch-up contribution limits, which are for people over the age of 55, remain the same between 2011 and 2012.

HDHP Minimum Required Deductibles

Self: $1,200

Family: $2,400

HDHP Out-Of-Pocket Maximum - Family: $12,100

HDHP Out-Of-Pocket Maximum - Self: $6,050
The HDHP limit increased by $100 between 2011 and 2012 for singles and by $200 for families. 

Another change between 2011 and 2012 is eligibility of over-the-counter medicines. Insulin is the only OTC medicine approved for reimbursement in 2012 under a health FSA, HSA or HRA without a prescription. In addition to this, it was decided that the penalty of 10 percent for ineligible expenses paid for using HSA funds would increase to 20 percent in 2012.

Accounting & Tax News

Tax Breaks Soon To Expire

:: Jonathan Cohen, CPA, Partner
631.425.1800 ext. 308
G.R. Reid Associates, LLP
 
Business owners currently face many uncertainties regarding present and future economic conditions. While certain soon-to-expire tax provisions may be extended for another year or so in an effort to kick start the economy, there is no guarantee that will be the case. Prudent business planning entails taking advantage of any available tax breaks while they are still "on the table." Following are some of the major business tax breaks that are slated to expire December 31, 2011.
 
100% Bonus Depreciation

Generally, a 100% bonus depreciation allowance may be claimed for qualified property acquired and placed in service after September 8, 2010, and before January 1, 2012. For qualified property acquired and placed in service in 2012, a 50% bonus depreciation allowance is generally scheduled to apply.

Section 179 Expensing Allowance

For 2011, the maximum allowable amount of a qualifying asset purchase that may be expensed in full by a business is $500,000. (This amount is scheduled to be reduced to $125,000 after 2011). The maximum annual expensing amount for 2011 is reduced dollar for dollar by the amount of qualifying property placed in service in excess of $2,000,000 ($500,000 for 2012). For 2011, up to $250,000 of qualified real property (that is, qualified leasehold-improvement, restaurant, or retail-improvement property) may be expensed under IRC Sec. 179.
Note that the bonus depreciation and section 179 expensing rules together offer significant tax-planning opportunities for business taxpayers.

Research Tax Credit

Generally, this credit applies to amounts paid or accrued before January 1, 2012, and is equal to 20% of the excess of qualified research expenses for the tax year over a base amount.

Work Opportunity Tax Credit

Employers who hire individuals from certain targeted groups are allowed to claim a credit against income tax in an amount equal to a percentage of first-year wages of up to $6,000 per employee ($12,000 for qualified veterans). Generally, the percentage of qualifying wages is 40% of qualifying first year wages (25% for employees who have completed at least 120 hours of service, but less than 400 hours of service for the employer).
 
Differential Wage Payment Credit

Eligible small business employers who pay differential pay may claim a credit equal to 20% of up to $20,000 of differential pay made to an employee during the tax year. Differential pay is generally defined as payments made to employees for periods during which they are called to active service in the U.S. uniformed services for more than 30 days. Such payments represent all or part of the wages that they would have otherwise received from the employer. An eligible small business employer is one who, on average, employs fewer than 50 employees and provides eligible differential wage payments to each of its qualified employees under a written plan.

Charitable Contribution Deductions

Through December 31, 2011, a regular "C" corporation's so-called enhanced charitable contribution deduction is equal to the lesser of: 

• The property's tax basis, plus half of the property’s appreciation, or 
• Twice the property's tax basis for contributions of food inventory that is "apparently wholesome food."

A similar deduction applies to qualified contributions of book inventory to certain public schools, as well as computer technology or equipment to schools or libraries. Contact G.R. Reid Associates if you have any questions regarding the above information.

Commercial Insurance Services

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC


Never Cut Corners When it Comes to Safety in The Workplace

Some employees are happy to take chances when it comes to safety. They take needless risks in an effort to save time or cut their work load. In reality, all they're doing is subjecting themselves and others to hazards that could cause a serious injury. Workers form bad habits when they repeatedly perform their jobs in an unsafe way and don't get injured. They become convinced that because of their skills they are incapable of being hurt. It's this attitude that usually ends up doing them in, because they take even more chances until eventually a serious accident does occur. Unfortunately, that one accident can turn out to be fatal.

Most of a chance-taker's careless acts can be broken down into one of the following categories:

• Failing to follow proper job procedure
• Cleaning, oiling, adjusting, or repairing equipment that is moving, electrically energized, or pressurized
• Failing to use available personal protective equipment such as gloves, goggles, and hard hats
• Failing to wear safe personal attire
• Failing to secure or warn about hazards
• Using equipment improperly
• Making safety devices inoperable
• Operating or working at unsafe speeds
• Taking an unsafe position or posture
• Placing, mixing, or combining tools and materials unsafely
• Using tools or equipment known to be unsafe
• Engaging in horseplay

Although OSHA does not cite employees for safety violations, each employee is obliged to comply with all applicable OSHA standards, rules, regulations, and orders. Employee responsibilities and rights in states with their own occupational safety and health programs are generally the same as for workers in states covered by Federal OSHA.

Employees should follow these guidelines:

• Read OSHA notices at the jobsite
• Comply with all applicable OSHA standards
• Follow all lawful employer health and safety rules and regulations, and wear or use prescribed protective equipment while working
• Report hazardous conditions to a supervisor
• Report any job-related injury or illness to the employer, and seek treatment promptly
• Exercise these rights in a responsible manner

If you are working with a risk-taker, ask him to stop and consider what jeopardy he is putting himself and others in. Then buddy up with him to find a safer way to perform the task. Remember, unsafe actions don't result in saving time if a worker gets injured in the process. 

Financial Services News

G.R. Reid Consulting Services, LLC


Retirement
A Recent Survey Revealed That Many Affluent Retirees Would Go About Saving for Retirement Differently If They Had To Do It Again.

Most notably, these wealthy retirees expressed a desire for more professional help in preparing for retirement. In fact, 55% of survey respondents regretted that they didn’t start talking to a financial professional earlier.1 Savvy investors can learn from the mistakes of others. With the uncertainty surrounding income taxes, capital gains taxes, and the estate tax, the value of a professional opinion may be more important now than ever.

Retirement Wake-Up Call
According to the survey, the most recent recession gave many affluent retirees pause to reconsider their approach to retirement. About half of the retired respondents wish they had spent more time thinking specifically about the lifestyle they wanted in retirement. Furthermore, they recommended that those nearing retirement take the time to consider exactly how they would like to live out their later years. 2

Have You Thought About Your Ideal Retirement Lifestyle?
Think about the specifics. Will it be in the same house and town? What activities will fill your days? Golf? Travel? Now consider what it’s going to take financially to get you there. A review of your situation can help connect the dots between your current situation and the retirement lifestyle you desire. About half of the retirees surveyed said they wish they had concentrated more on “the numbers.” 3 A focus on the details of preparing for retirement can be an eye-opening exercise.
Remember also that retirement planning is not a fix-it-and-forget-it proposition. It might be appropriate to take a second look periodically as life changes could necessitate modifications to a retirement strategy. How has your vision of retirement changed over the years? Is it time to run “the numbers” again?

You’ve Already Gone Pro
What’s the takeaway from all of this, given that you are already working with a financial professional? There is no assurance that working with a professional will improve your investment results. But by focusing on your overall objectives, a financial professional can provide education, identify strategies for taking control of many situations, and help you consider options that could have a substantial effect on your long-term financial goals.

Please call G.R. Reid Consulting LLC for a retirement evaluation, 631-923-1595.


The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.
 1–2 Investment News, January 18, 2010  3 The Wall Street Journal, January 15, 2010
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security. The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.

Accounting & Tax News

:: Jason Saladino, CPA, PFS, Partner
631.425.1800 ext. 309
G.R. Reid Associates, LLP

The Benefits of Cost Segregation

Increase Your Return On Investment
Over 300 rulings, letters and IRS Memoranda have provided documentation and significant case law for the support of Cost Segregation Studies. Hospital Corporation of America vs. The Commissioner is one of the landmark decisions which gave support to the way we review and analyze properties to determine the tangible personal property that may qualify for depreciated lives of 5, 7, or 15 years rather than 39 years (if non-residential real property) or 27.5 years (if residential real property).

Even If You Are Presently Depreciating Certain Property In An Accelerated Manner, You May Still Be Leaving Money On The Table.
A cost segregation study is a federal income tax tool that increases your near term cash flow, in the form of a deferral, by utilizing shorter recovery periods to accelerate the return on capital from your investment in property. Whether newly constructed, purchased or renovated, the components of your building may be properly reclassified, through a cost segregation study, into shorter recovery periods for computing depreciation deductions.

Engineering-Based Report
G. R. Reid is aligned with a professionally licensed engineering firm with experience in engineering-related tax services. We meet all of the criteria and qualifications required by the IRS. We are confident in our understanding of the tax ramifications that must be considered when performing cost segregation or energy tax studies as they relate to the issues of recapture, passive activity limitations and the intricate steps involved in 1031 exchanges. We provide the highest quality cost segregation studies, with full audit defense, professional insurance and comprehensive reporting and full warranty of all reports in the event of an IRS audit.

Personal Insurance Services

: : Neal B. Patel, Managing Director,
Personal Insurance Services | G.R. Reid Agency, LLC
631.923.1595 ext. 303

Keep Your Home Safe During Holiday Travel Time

 
Whether you're planning a Caribbean vacation getaway, or a trip to visit relatives for the holidays, keep in mind that an empty house is a tempting target for a burglar. But with a little common sense and some careful planning, you can reduce the possibility that your home will be broken into while you're gone.

Prepare your first line of defense:

• Use sturdy locks on all doors and windows and secure before you leave
  Repair any broken windows or locks. Never operate under the assumption that a burglar won't find the one that's faulty.
  
• Enlist the help of a trusted neighbor
  Tell one neighbor your itinerary and your estimated time of arrival and return. That person should have a key to your front door to periodically check on the house, and a telephone number where you can be reached in an emergency.
  
• Don't broadcast your plans
  Especially in the era of social media, never post your travel plans on Facebook or Twitter. According to a recent article in the New York Times, tech-savvy thieves are taking advantage of the detailed information provided by unsuspecting social media users.
  
• Never let the house appear empty from the street
  Stop your newspaper delivery, and have your neighbor pick up your mail and any packages left on the front porch. Arrange for someone to mow the lawn, rake leaves and clean the yard if you'll be away for an extended period. Ask your neighbor to place garbage cans at the curb on normal pickup days and put them back after the garbage pickup. If you leave your car at home, park it where you normally would. However, be sure your neighbor moves it occasionally so that it appears the car is being driven. If you're driving your car, have your neighbor periodically park in your driveway or in front of your house.
  
• Your home shouldn't seem empty on the inside either
  Plug in timers to turn lights and even a television on and off at appropriate times. Turn the ringer on your telephone down. If a burglar is around, and hears a call that goes unanswered, they'll know you're away. Don't leave a message on your answering machine notifying everyone you're on vacation. Leave your blinds, shades and curtains in a normal position. Don't close them unless you would normally do so while at home.
   
• Don't give thieves alternate ways to enter your home
  Lock garage doors and windows. You should also secure storage sheds, attic entrances and yard gates.
  
• Don't leave valuables in plain sight
  Consider locking valuables in a bank safety deposit box. If you do leave valuables at home, make sure they are engraved. This simple precaution will allow stolen property to be easily identified and returned to you if recovered later.
   

Financial Services News

What is Diversification?

G.R. Reid Consulting Services, LLC
 

Virtually every investment has some type of risk associated with it. The stock market rises and falls. An increase in interest rates can cause a decline in the bond market. No matter what you decide to invest in, risk is something you must consider.

One key to successful investing is managing risk while maintaining the potential for adequate returns on your investments. One of the most effective ways to help manage your investment risk is to diversify. Diversification is an investment strategy aimed at managing risk by spreading your money across a variety of investments such as stocks, bonds, real estate, and cash alternatives; but diversification does not guarantee against loss.

The main philosophy behind diversification is really quite simple: “Don’t put all your eggs in one basket.” Spreading the risk among a number of different investment categories, as well as over several different industries, can help offset a loss in any one investment.

Likewise, the power of diversification may help smooth your returns over time. As one investment increases, it may offset the decreases in another. This may allow your portfolio to ride out market fluctuations, providing a more steady performance under various economic conditions. By potentially reducing the impact of market ups and downs, diversification could go far in enhancing your comfort level with investing.

Diversification is one of the main reasons why mutual funds may be so attractive for both experienced and novice investors. Many non-institutional investors have a limited investment budget and may find it challenging to construct a portfolio that is sufficiently diversified.

For a modest initial investment, you can purchase shares in a diversified portfolio of securities. You have “built-in” diversification. Depending on the objectives of the fund, it may contain a variety of stocks, bonds, and cash vehicles, or a combination of them.

Whether you are investing in mutual funds or are putting together your own combination of stocks, bonds, and other investment vehicles, it is a good idea to keep in mind the importance of diversifying. The value of stocks, bonds, and mutual funds fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

G.R. Reid Consulting Services, LLC and AAM  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc.and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.


The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.

Accounting & Tax News

Green and LEED Standards for Energy Efficiency and Tax Incentives on Commercial Properties


:: Jonathan Cohen, CPA, Partner
631.425.1800 ext. 308
G.R. Reid Associates, LLP

G. R. Reid Associates, LLP is now in aligned with LEED Accredited Professionals, the American Institute of Architects’ (AIA) Executive Leadership, the United States Green Building Council Executive Leadership, and the Internal Revenue Service (IRS) to give clarity and awareness to the engineering processes involved in certification of public and private buildings.  The science of engineering and the principles of tax and accounting will allow us to arrive at financial solutions that result in increased cash flow, minimized tax payments and maximum return on investment and energy for our commercial clients. These IRS-sanctioned services include Energy Tax Credits, Energy Policy Act Certifications (179D Studies), Cost Segregation Studies, Research and Development Studies, Repair and Maintenance Studies,  Historic Tax Credits Studies, Engineering Insurance Appraisals, Energy and Carbon Audits. Without an engineering-based cost segregation study, taxpayers are unable to take full advantage of the tax law; therefore, they surrender significant cash flow to the IRS. Our alliances with a unique combination of experience and professional talent has enabled G.R. Reid to develop unique ways to identify and qualify commercial properties for energy accreditation and related tax benefits. Form more information, contact us.

Commercial Insurance Services

The Pros and Cons of Employee Leasing

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Employee leasing firms earned $68 billion in gross revenues in 2008, according to the National Association of Professional Employer Organizations. Their clients, primarily small businesses with fewer than 20 employees, outsource to leasing firms the responsibilities for payroll administration, employee benefits, workers' compensation claim management, human resource management, and related operations. Businesses trying to reduce costs and focus on growth may find employee leasing to be an attractive option. It is an option, however, that comes with advantages and disadvantages for both employer and employee.

The NAPEO cites a number of benefits from employee leasing. The benefits for employers include:

• Access to professionals with expertise in human resources, payroll, risk management, and employee benefits.
• Assistance with labor law compliance.
• Professional claim management.
• Reduced and controlled administrative costs.
• Professionally written employee handbooks, policies, and procedures.
• Relief from some employment-related liabilities.
• Reduced workers' compensation costs resulting from improved workplace safety.

Employees may also benefit from leasing in several ways.

• Access to benefits that might not have otherwise been available, such as 401(k) plans, cafeteria plans, insurance, and credit union membership.
• Timely and accurate paychecks.
• Protection under federal labor laws.
• Improved communication among and between employees.
• Employees who move from one leasing client to another do not lose eligibility for benefits.
• Efficient and timely claim processing.
• Assistance with employment-related issues.

Employee leasing carries some risks. A poorly managed leasing firm may mishandle payroll and benefits or may go out of business, leaving the client with its obligations. The employer may also be legally liable for the actions or inactions of the leasing firm. For example, if the leasing firm fails to comply with regulations, it may be the employer who bears ultimate responsibility. Also, the employer is ceding control of its workforce to a third party who may or may not do things the way the employer would. Employee relations may suffer during the transition to leasing.
From the employee's standpoint, the employer will have to fire and the leasing firm will have to re-hire him. Also, there is no guarantee that the leasing firm's benefits will be as good as those the employer offered. Some employers have also used leasing as a means to avoid dealing with unions, though federal rules may limit their ability to do this.

Employers who decide to lease their employees should carefully evaluate the leasing firms it considers. The financial stability of the firm and of the insurance companies providing its benefits are a major consideration, as the failure of either may leave the employer with unfunded obligations. The firm's experience in the employer's industry, track record of success, and safety record are also important. Another consideration is the range of benefits the firm offers; a plan that does not meet the employer's needs will not be worth the expense of hiring the leasing firm.

Employee leasing is a big step and not one to be taken lightly. Employers must weigh the upsides and downsides of leasing and make decisions that is best for their employees and their businesses.

Human Resource Services News

W2 Reporting Requirements

:: Deidre Siegel
Director, Human Resource Services
G. R. Reid Consulting Services, LLC
Read about G.R. Reid Human Resource Management Tools


The W2 reporting requirements for large employers will change for the 2012-year, filed in 2013. Employers with more than 250 employees will be required to report the cost of group health care coverage provided to employees. Employers with less than 250 employees will be required to report health care coverage costs in the 2013-year, filed in 2014.  In addition to the small employer exception for 2012, the following additional exceptions will be in effect:

• An employer that contributes to a multi-employer plan is not required to report any coverage costs for such plan
• Indian tribal governments are not required to report
• A self-insured church plan that is exempt from federal health continuation requirements is also not required to report the amount of coverage on the W-2
• The cost of coverage provided by a government entity for the benefit of military members and their families is not subject to reporting.  

If a large employer is not exempt from filing based on the aforementioned exceptions, the system requirements should immediately be examined to ensure compliance. If an employer does not comply, a penalty of $200 per return to a maximum of $3 million per year will be imposed.

Employers are required to report the costs for the covered employee plus the employer cost for any covered dependent and the amount paid by the employee on a pre-tax or after-tax basis. This includes FSA as well if the employee’s health FSA for the plan year exceeds the salary reduction election for the plan year when an employer contributes to the FSA Plan. For example, if an employee elects to contribute $700 to the FSA Plan and the employer matches it, then the employer contribution of $700 must be reported.

The IRS notice also indicates that if the employer charges the same rate to all employees regardless of the scope of coverage, it can report that same cost for all employees. If the employer charges rates based on a coverage tier, the employer can report the same cost for each coverage tier.

In addition, if a former employee has continued coverage for the year under COBRA, this should also be reported on the W2. The IRS Notice states that the cost of coverage must be determined on a calendar year, therefore some COBRA rates will need to be converted to a calendar year amount for purposes of reporting the costs. If a former employee requests a W2 prior to the end of the calendar year, the employer is not required to include the cost of the coverage on the midyear W2.

Lastly, if dental and vision plans are separate coverages and not included within the health plan, these do not need to be reported on the W2. The reporting is solely for health plan coverage and FSA plans when applicable.

The aggregate employer cost is reported in Box 12, using code DD. This reporting is for information only and does not make such amounts taxable.

For further information on the W2 reporting notice, you may visit http://apps.irs.gov/pub/irs-drop/n-11-28.pdf

Life, Disability & Long Term Care Insurance Services

Uncovering the Mysteries of Whole Life Insurance



: : Roland A. Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC
                               
This article will focus on several factors which make Whole Life Insurance a dynamic asset to any family protection plan.  In the last discussion of Whole Life Insurance we glossed over the main benefits of A whole life insurance policy; now I will discuss the strengths of Whole Life Insurance that are not so obvious to the everyday American.

The growth of cash value inside of the life insurance policy is deferred from taxation while the funds remain in the policy, making whole life insurance a wealth protecting instrument.  During the insured’s life, cash values can be accessed under advantageous tax rules.  This means that dividend withdrawals are tax-free up to the amount cumulatively pain in premiums.  If a policy owner takes a loan against the life insurance policy, this will not create a taxable event, even if the policy may have a substantial gain in excess of paid premiums.  A policy owner may have the policy pay for itself by using dividends received to pay the premiums.  This is a tactic that can be used at any time by the policy owner and the policy owner can also choose to stop this option and continue making premiums payments themselves.  If a policy loan has been taken, the annual dividend can be used to pay back a policy loan.  By taking a loan from the policy, the policy owner is avoiding the use of loan applications and having to deal with lenders and interest payments.  That being said, a whole life policy may also be used as collateral to receive a loan with a favorable interest rate.  This increases the value of whole life insurance exponentially.

Whole life insurance loans are paid back on a flexible schedule decided by the policy owner.  If a policy owner wishes to pay back to the loan, then he may do so, and the death benefit will rise accordingly.  Furthermore the policy owner will be able to continue to borrow from the policy at any time and if dividends received are allowed to accumulate within the policy the policy death benefit will grow helping to resist the eroding effects of inflation.

Commercial Insurance Services

Review Your Business Interruption Coverage So You Can Stay in Business

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC 

 
Business interruption insurance is like disability insurance for a business. Disability insurance covers some of a person's lost income when she is sick and unable to work. Business interruption insurance covers a business's lost income when a fire, explosion, or some other peril causes it to shut down temporarily. A shutdown after a disaster may have more severe consequences for a business than the damage to the property itself. Therefore, it is vital that business owners know whether they need to update their coverage.
 
There are two reasons why reviewing business interruption coverage regularly is important:

• Economic conditions can change. When the economy is down, it is likely that a business's sales will either drop or flatten. Continuing expenses, such as utilities, mortgage payments, and payments on other loans, may not necessarily decrease; in fact, some may increase, particularly if there is a spike in energy prices. Conversely, a rapidly growing economy or one with high inflation may quickly drive anticipated sales much higher than what the owners expected when they bought the insurance.
  
• Regardless of the overall economy, businesses change. They introduce new products or services, expand into new markets, acquire new properties or other businesses, and invest in technologies that increase their productivity. All of these changes affect expected income and may change a business's coverage needs.
  

When a business owner reviews her business interruption coverage, there are several factors to consider:

• Is the market for the business's services expanding or shrinking? Cell phones, at one time seen as a luxury, over time came to be seen as a virtual necessity; millions of buyers entered the market. This increased sales for retailers and service providers.
  
• Has the business launched new products or services? In the year 2000, Apple, Inc. was solely a computer manufacturer. The next year, it introduced the iPod; later in the decade, it introduced the iPhone. These two products now account for a large share of the company's sales.
  
• If the business has coverage for income from dependent properties, how have those properties changed? For example, the business may depend on one major supplier for parts. If that supplier used to have two warehouses but has closed one of them, a fire that shuts down the remaining warehouse will have a significant impact on the business's income.
  
• Are competitors entering or leaving the market? A business that has increased competition will be under pressure to resume operations as quickly as possible to discourage customers from permanently going elsewhere. The business will want to pay whatever is necessary to minimize the shut down.
  
• Has the business's peak season changed? Suppose a company that provides payroll and benefits administration services decides to start offering tax preparation services to its clients. Much of the tax work and its associated revenue occur during the first quarter of the year. A loss that shuts down the business in March will have a much larger impact than it would have before the firm got into the tax business.
  
• Have building codes changed in the business's location? State and local governments are increasingly adopting "green" building codes that require environmentally-friendly construction materials and practices. Meeting these standards may lengthen the rebuilding period and lead to a longer suspension of business.
  
• What is happening to the business's costs? If labor or material costs are rising and the business must raise prices to cover the increases, sales volume may decrease and affect the amount of business interruption coverage needed.

Taking the time to review coverage and the firm's financial statements with a professional insurance agent will pay dividends after a loss. Proper business interruption coverage may make the difference between a business re-opening or closing forever after disaster strikes.

Financial Services News

“Dividends Stocks Posed to Rally”

G.R. Reid Consulting Services, LLC
 

Food for thought, in this volatile market there are opportunities for growth in dividend paying stocks.  In the daily blog from Mike Boyle from Advisors Asset Management, Inc., (AAM) dated September 21st, 2011 he stated it best….

“We have been discussing for quite some time, both in our writings and speaking engagements, that we thought the U.S. equity markets were attractive based on current valuations and earnings growth (both current and projected), and that is still the case. The S&P 500’s current P/E (price to earnings) ratio sits at 13.15, which is well below its long-term average. Its year-over-year actual earnings growth sits at 16.24%, which is well above its long-term average, and its year-over-year earnings are projected to grow by 17.96%. In addition, the S&P 500’s current yield of 2.17% is now above the 1.92% yield of the U.S. 10-year obligation which we believe is going to embolden a lot of income-focused investors to begin to up their equity exposure.

It should also be noted that the S&P 500’s yield of 2.17% understates the opportunity as the index includes stocks that don’t currently pay a dividend. If we take an equal-weighted look at only the dividend paying securities in the index, we see the average yield is 2.53%. In addition, there are 134 members (26.8%) in the index currently yielding over 3% and 57 members (11.4%) in the index currently yielding over 4%. Whenever we discuss stocks with attractive yields we usually hear a few grumblings that these securities are accidental high yielders or value traps. That is the case with some of them and that is why investors need to do their homework when picking dividend stocks (or any investment for that matter). However, we do show there are currently over 30 stocks in the S&P 500 that not only are yielding over 3%, but have also grown their dividend at least 10% year-over-year as well as their earnings 10% year-over-year. Thus there are many stocks offering the potential for quality growth as well as an attractive income stream.

Add it all up and we think the trifecta of valuation, growth and dividend yield make U.S. stocks very attractive for long-term investors. Dividends have historically provided a large portion of the total return of the equities market and over the last twenty years (8/31/91 – 8/31/11) that portion has been 42%.”

For more information, please visit on Mike Boyle’s blog.

G.R. Reid Consulting Services, LLC and AAM  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc.and American Portfolios Advisors Inc.
Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.

Life, Disability & Long Term Care Insurance Services

Disability Insurance: 

Owning Your Own Policy

: : Roland A. Vitanza, J.D.
Specialist in Life, Disability and Long Term Care Insurance
631.923.1595 ext. 342  
G.R. Reid Consulting Services, LLC 

: : Dr. Eric Studley *1

Managing Director, Long Term Disability Benefits
631.923.1595 ext. 340  
G.R. Reid Consulting Services, LLC

 

Disability insurance is a vital need for every American household. As consumers we
have many expenses, such as mortgage payments, lifestyle costs, or education funds; which are all funded through income. 

The average person’s most valuable asset is not their jewelry, their car, or even their home –  it is their ability to work and produce income. The question must be posed:  

How would my family and my lifestyle suffer if I was unable to generate an income?

The truth of the matter is that when Americans spend extended time on long term
disability leave from work, every aspect of their life becomes susceptible to lose. Without
having an income to pay monthly bills or to make mortgage payments, a person may stand to
lose all that he or she has acquired throughout their lives. Therefore, purchasing Disability
Insurance is one of the most responsible life decisions a person can make.
 

Individual Disability Policies Benefits
You may be asking yourself, "Why do I need to buy a disability policy? My job offers me
disability coverage through my employment.” This could be the case, however, there are
important differences between disability coverage offered by employers and owning your own
individual policy.
 

A. Portability
An individual policy is portable, meaning that if you switch companies, your
profession, or you decide to relocate; an individual policy will follow you to your
new job or your new life in a different city. A disability policy provided by an
employer will not. This is a problem that professionals often encounter when going
into private practice. After years of having group coverage through an employer, now
they must purchase their own policy and pay higher premiums or be denied entirely
because they are now older and, statistically speaking, most likely less healthy. By
purchasing an individual policy at a young age, this can be totally avoided.
 

B. Various Funding Mechanisms
Individual Disability Policies have many different riders and additional coverages that
are attractive to both seasoned employees and young people just entering the work
force. Disability policies may cover (i) student loan payments, (ii) overhead business
expense costs (iii) retirement protection- by replacing retirement contributions made
by you and your employer, and may provide (iv) Own Occupation Coverage, allowing
certain classes of professions to continue receiving benefits after they return
to work, if by returning to work they are forced to switch professions or job titles.

As always our G.R. Reid Consulting Service Life, Disability, and Long Term Care
Insurance team is available to assist you with any questions, to set an appointment please call us at 631-923-1595. 

1* Not practicing for Guardian or any subsidiaries or affiliates thereof.