tag:blogger.com,1999:blog-22243426445960859692024-02-07T10:08:45.319-08:00G. R. ReidNews Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.comBlogger100125tag:blogger.com,1999:blog-2224342644596085969.post-6158628731445481402012-06-28T09:31:00.000-07:002012-06-28T09:31:27.251-07:00Accounting & Tax News<span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP
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<span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">Household Employees: </span></b></span><br />
<span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">What You Need To Consider</span></b></span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Many families hire household help, either of house work or for childcare. There are many issues to consider when deciding to hire an individual to work in your home.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The responsibility of an employer does not start with the first paycheck. It’s a daunting and grueling process which will require the assistance of a professional to ensure that you are following the right procedures when it comes to the hiring and firing employees. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">When it comes to your employees there are numerous issues to be addressed. With the proper planning and preparation, you, as the employer should start protecting your family even before allowing the help into your home. This does not only apply to domestic help, but also the hiring of independent contractors. Procedures and practices for employees who operate in your home should be established to maintain your safety and security.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">There is a long list of responsibilities associated with being a household employer, as well as the fear of subjecting the family to personal and financial risk. Employers need to educate themselves on the process for hiring, maintaining and firing employees.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">When hiring an employee it is very important the position be clearly outlined and detailed expectations provided. In order to make the work arrangement effective, a written and agreed upon job description should be signed by the employee.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Another important document to consider would be a confidentiality agreement. Each employee should be asked to sign one. Signing of a confidentiality agreement prevents the employee from using the family’s personal and financial information for profit.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In addition to the written job description, the employer should identify and confirm the qualifications of the employee. The hiring process should include a comprehensive background check performed by a professional. This should be done even though the employee has provided documents that prove they are a US citizen, etc. This investigation process will help verify references, previous employment records, education, criminal records, credit, etc, in order to alleviate the concerns of the employer and help ensure your family’s safety.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Many families, especially those with more than one home in more than one location and extremely busy lifestyles, have turned over the management of their household to a professional search firm. As with the hiring of an employee, the client needs to do an equal amount of due diligence in order to make sure that their personal information is not exposed. The family’s privacy must be protected until the employee is hired. The client should review all of the new hire’s documents that the search firm has compiled before the interview. If this route is taken, the staffing service acts like the employer and is responsible for the payment of taxes and processing of payroll.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Once the employee is hired there is also the need to make sure that your “home” is secure. Valuable personal and financial information could very easily be stolen off your own computer. Allowing your employee to have online access could also lead to identity theft. It would be wise to speak with a security/risk consultant to make sure that your computer systems have the highest level of encryption to protect the family’s personal information.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Now that the employee has been hired, the employer has to consider the paying of payroll taxes, of which there are various types which the employer is directly responsible for remitting. The employer is responsible for various types of payroll taxes. There are required Federal withholdings from the employee and taxes to be paid by the employer. Depending on the state in which you employ, there may be state and local payment and filing requirements.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In addition to the Federal and State withholdings, an employer also has to consider Worker’s Compensation and Disability Insurance. Worker’s compensation is a form of insurance that provides compensation medical care for employees who are injured in the course of employment. It is required by law for employers to have in place for employees. Disability insurance is also a form of insurance that provides policyholders with coverage that replaces a portion of an employee’s income if he or she becomes too sick or disabled to return to the job. Each state has its own Disability insurance requirements and should be reviewed when hiring.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-75524231999951260202012-06-28T08:41:00.000-07:002012-06-28T08:41:46.669-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">
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<b><span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">New York Youth Works Program</span></span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">On December 9, 2011, Governor Andrew M. Cuomo signed into law "The New York Youth Works Program" in an effort to combat excessively high unemployment rates among inner city youths. This statewide initiative is designed to encourage businesses to hire disadvantaged and unemployed youth by allowing tax credits of up to $4,000 for hiring eligible individuals during 2012. To be eligible, employees have to be between ages 16 to 24, certified to participate in the program and live in one of the following areas of New York State:</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Cities of:</span></b><br />
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<li><span style="font-family: Arial,Helvetica,sans-serif;">Albany</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Buffalo</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">New York City</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Rochester</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Schenectady</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Syracuse</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Mount Vernon</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">New Rochelle</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Utica</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Yonkers </span></li>
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<b><span style="font-family: Arial,Helvetica,sans-serif;">Towns of:</span></b><br />
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<li><span style="font-family: Arial,Helvetica,sans-serif;">Brookhaven </span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Hempstead</span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;">To participate in this program, businesses must have certification from NYS Department of Labor, which can be obtained at www.jobs.ny.gov/youthworks. To qualify for certification, businesses must satisfy eligibility requirements which include:</span><br />
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<li><span style="font-family: Arial,Helvetica,sans-serif;">to be in good legal standing</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">situated within a reasonable commuting distance for youth who live in specified areas and</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">fill job openings that meet one of three conditions: </span></li>
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<li><span style="font-family: Arial,Helvetica,sans-serif;">Considered an in-demand occupation,</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Located in a regional growth sector,</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Deemed a priority for the area's Regional Economic Development Council.</span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;">Tax credits vary depending on the type of position. For full-time employees, (35 hours or more a week) eligible businesses may be entitled to credits up to $4,000 as follows: $500 per month for the first six months of the year and additional $1,000 if the youth is employed for the remaining six months. For part-time employees, (20-34 hours per week) the maximum tax credit allowed is $2,000, which consists of $250 per month for the initial six months and $500 more if the youth is employed beyond first six months of the year.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Businesses interested in participating in the program, should keep in mind that NYS has set aside only $25 million in available tax credits for this program. Those considering applying should act quickly in order to meet the deadline which is set for November 30, 2012.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-34275865300076135672012-06-28T08:17:00.000-07:002012-06-28T08:17:04.334-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">
<span style="font-size: small;"><span>G.R. Reid Associates, LLP
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<b><span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">Tax Consequences of Short-Selling Stock</span></span></b><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">An Individual investor who engages in the practice of short-selling stock encounters several complex reporting issues when it comes time to prepare their individual income tax return. Investors who sell short stock believe the price of the underlying security value is going to decline. Typically, a brokerage firm lends the investor the underlying stock and it is then sold and converted to cash. The investor is charged margin interest on the value of the borrowed securities. If the stocks pay a dividend, the investor is required to pay over the dividend to lender or broker.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">For example, 100 shares Company XYZ, Inc. are sold short at $60 per share, the investors borrows the shares and immediately sells them for $6,000. As hoped, the shares decline to $40 per share resulting in a profit a $20 per share. The investor covers the position by buying the shares at $40 and delivering the securities back to lender for a gain to the account of $2,000. The short seller loses money when the price of the shares goes up and is open to potentially unlimited losses until the position is closed.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The holding period of the securities used to cover determines whether the gain or loss is reportable as short-term or long-term. However, special holding period rules apply to prevent taxpayers from using short sales to convert short-term gains into long-term gains and long-term losses to short-term losses. If on the date of the short sale the investor owns or acquires substantially identical property before closing the short any gain is deemed short-term regardless of how long the underlying securities used to cover the position have been held. If on the date of the short sale the underlying security used to cover was held more than one year any loss from the short sale will be deemed to be long term regardless of the holding period of the securities used to cover.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">When the short-sale transaction is closed, the sale is reported on Form 8949, Sale and Other Disposition of Other Assets, If the 1099-B issued by the broker shows the short sale proceeds in a tax year other than the year gain or loss is properly recognized it is necessary to reconcile the difference between amounts reported on the Form 1099-B and the proceeds shown on Form 8949.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The margin interest paid on the loan is a deductible as an itemized deduction as investment interest expense reportable on Form 4952, Investment Interest Expense Deduction, subject to the limit of investment income.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Investors also need to be careful to avoid constructive sale rules requiring the recognition of gain at the time of the short sale and not the time of the close of transaction.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">When a dividend is paid on a stock that is sold short, the short seller must make a payment in lieu of dividends to the lender. The payment is deductible investment interest expense to the extent of investment income. If the short position is closed within 45 days in lieu of dividend payment is not deductible, but is added to the basis of the stock used to close the short sale.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Wash sale rules also apply to short sale loss transactions when another short sale of the same security is entered into within 30 days after the closing of the sale given rise to a loss. The loss will be deferred and added to the basis of the second transaction. The wash sale rule is the same whether it is a short sale or long sale.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">When entering into short sale transactions, Investors need to pay close attention to complex tax reporting requirements. </span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-3646641307043921532012-06-21T15:45:00.000-07:002012-06-21T15:45:08.336-07:00Healthcare & Benefit Services<div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">
<a href="mailto:jseiden@grreidhealth.com" target="_blank">: : <b>Julie Seiden</b>,<b> </b>Managing Director,</a><br />
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631.923.1595 ext. 310</div>
<a href="http://grreidhealth.com/" target="_blank"><span style="color: #444444; font-weight: bold;">G.R. Reid Healthcare & Benefit Services, LLC</span></a><br />
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Big dogs play nice with reform</h1>
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UnitedHealthcare started it. Aetna and Humana soon followed.</div>
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Wellpoint’s waffling, holding out for the Supreme Court ruling.</div>
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What are they doing? Well, as we reported here,<span class="Apple-converted-space"> </span><a href="http://www.benefitspro.com/2012/06/12/other-carriers-jump-on-reform-bandwagon?ref=hp" style="-webkit-tap-highlight-color: rgb(255, 94, 153); background-color: transparent; background-position: initial initial; background-repeat: initial initial; color: #145675; font-size: 14px; margin: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;">("Other carriers jump on reform bandwagon"</a>) some of the largest insurers in the business have come out to say they’ll still abide by some of the aspects of PPACA regardless of what the court does.</div>
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Three of the top five insurers in the country plan to carry on with preventative care coverage – such as immunizations and screenings – without a copay. They also said they’ll keep covering those older children under their parents’ policies – until they hit 26, anyway. They’re also gonna maintain a more streamlined appeals process for denied claims.</div>
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United and Humana actually stepped out a little further, insisting they wouldn’t enforce lifetime dollar limits on claims.</div>
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All in all, it sounds like they’re playing nice even if they don’t have to. Because there’s still a real chance even these earlier regs could get tossed. We’ll find out soon enough.</div>
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But as we reported, these are the most popular provisions of the law, anyway, and the carriers have already done the math, lumping the extra costs into the last round of premium bumps. If anything, dropping these provisions might be a bigger headache at this point. So they can score a public relations win without taking a hit on their bottom line. Nothing wrong with that. Although it will be interesting to see if Wellpoint faces any backlash for dragging its feet on this while its competitors come out looking like humanitarians.</div>
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And, honestly, why wouldn’t they? Have we already forgotten how the carriers jumped on board this legislation early on – after the public option died, of course. And while I think it’s a stretch to say these carriers are “embracing” reform as a few mainstream media outlets are pointing out, it’s safe to say they’re simply accepting a new reality – something brokers need to start doing, as well.</div>
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I think this is a good move, though, and not just from a PR perspective. But what this really shows, is that, cynicism aside, while this legislation remains a convoluted mess, it does have its worthwhile provisions – even if they are buried under red tape and rampant spending. It also shows that no matter what happens to this particular law, some of the things it’s ushered in are here to stay, whether it’s as simple as coverage provision or as far-reaching as the state exchanges.</div>
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<span style="font-size: x-small;">Written by <span style="background-color: white; color: #444444; display: inline ! important; float: none; font-family: sans-serif; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"></span>Denis Storey</span></div>
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</div>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-84688038410498565152012-05-24T05:00:00.000-07:002012-05-24T05:00:12.314-07:00Accounting & Tax News<span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP
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<span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">Expanded Foreign Reporting Requirements for 2011 Tax Filings </span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Individual
taxpayers who own foreign financial assets should be aware that there
are new and updated filing requirements.Individuals who have financial
interests in foreign bank accounts, securities or other foreign assets
may now be subjected to filing requirements with both the IRS and the
U.S. Treasury. Each of these organizations has separate reporting
thresholds and forms in order to comply with the foreign reporting
requirements.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicVeQZu36d-hmupmnJx1Xmau_iimyjJxHSZlbSKTYI1DB63cloFwK6vdZdb9gY2Gt8ijKTK56P4aQhEsSJ2cilmpug9h0Eb4bzZab6yMS6vCgq3wgVVkE-D1EPxYC_zBi3U7JvQByu1Ii8/s1600/Foreign+Reporting.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="383" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicVeQZu36d-hmupmnJx1Xmau_iimyjJxHSZlbSKTYI1DB63cloFwK6vdZdb9gY2Gt8ijKTK56P4aQhEsSJ2cilmpug9h0Eb4bzZab6yMS6vCgq3wgVVkE-D1EPxYC_zBi3U7JvQByu1Ii8/s400/Foreign+Reporting.jpg" width="400" /></a><span style="font-family: Arial,Helvetica,sans-serif;"></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">The IRS defines a financial interest as receiving any gains, losses or distributions from holding or disposing of the account or asset that would be required to be recorded on an income tax return. For this form, specified foreign financial assets includes financial accounts held in foreign accounts, securities issued by non-U.S. persons, interests in foreign partnerships, and other foreign assets not held in financial institutions. Form 8938 is required to be filed with the individual’s timely filed income tax return including extensions. Failure to comply with the requirements of Form 8938 may result in penalties. Those who fail to disclose a foreign financial asset can be fined up to $10,000 at the time of the discovery by the IRS. If failure to disclose continues, additional fines may be imposed. Taxpayers who willfully fail to file Form 8938 also face potentially criminal penalties.</span><br />
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<b><span style="font-family: Arial,Helvetica,sans-serif;">U.S. Treasury Form TD F 90.22-1</span></b><br />
<span style="font-family: Arial,Helvetica,sans-serif;">The U.S. Treasury also requires the filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. This form is required for those with financial interest or signature authority over a foreign bank account in which the value exceeds $10,000 at any time during the calendar year. A financial interest includes owners of the account and anyone who has the authority to control the disposition of the assets. If a taxpayer is required to file this form, the maximum value of the financial account during the year must. Form TD F 90-22.1 must be received by the U.S. Treasury on or before June 30th.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Failure to comply with the Treasury requirements could potentially result in civil and criminal fines. Individuals willfully not reporting a foreign financial account may be faced with a fine equal to the greater of $100,000 or 50% of the unreported account balance. In addition to monetary penalties, criminal penalties of up to $250,000 or imprisonment for up to five years, or both can be assessed to those who willfully avoid reporting. If the individual failed to report in a non-willful manner a fine of up to $10,000 can be assessed.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Individuals who have previously failed to file Form TD F 90.22-1 for years prior to 2011 can become compliant by filing late returns and reporting income associated with the foreign accounts. The IRS currently has a voluntary disclosure initiative in effect to assist taxpayers with this process. (An individual should seek tax advice before approaching the IRS.)</span><br />
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<b><span style="font-family: Arial,Helvetica,sans-serif;">Conclusions</span></b><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Based on the requirements of the IRS and U.S. Treasury, it may be necessary for individuals to file both Form 8938 and Form TD F 90.22-1. It is imperative that taxpayers access their holdings in foreign assets and accounts to determine if they are affected by these updated regulations.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-43702753679996868332012-05-23T13:30:00.000-07:002012-05-23T13:30:02.068-07:00Accounting & Tax News<span style="font-family: Arial,Helvetica,sans-serif; font-size: small;"><span>G.R. Reid Associates, LLP
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<span style="font-size: x-large;"><b>State & Local Tax Credits and Incentives</b></span></div>
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<b><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">New York City Green Roof Tax Credit</span></span></b><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">You may qualify for a real property tax abatement if you constructed a "green roof" covering at least 50% of a building’s rooftop space on a class one, two, or four building.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Connecticut Enterprise Zone Credit And Exemption</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If you have a qualified business located in an Enterprise Zone, you may be entitled to a tax credit for 10 years or be exempt from sales and use tax.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">New York Brownfield Redevelopment Credit</span></b><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">A 10% to 20% credit may be available to you for the costs of certain site preparation, tangible property, and ground water remediation.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">New Jersey Enterprise Zone Tax Credit And Exemption</span></b><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">You may be entitled to a tax credit for hiring new employees or investing within an Enterprise Zone (EZ) and may be exempt from sales and use taxes for certain purchases of property and services used within the EZ.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-86383772805054386842012-05-22T14:34:00.001-07:002012-05-22T14:34:46.211-07:00Accounting & Tax News<span style="font-size: small;"><span>G.R. Reid Associates, LLP
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<span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">How do I...Obtain back tax returns or account information from the IRS?</span></b></span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">A taxpayer who may have misplaced or lost a copy of his tax return that was already filed with the IRS or whose copy may have been destroyed in a fire, flood, or other disaster may need information contained on that return in order to complete his or her return for the current year. In addition, an individual may be required by a governmental agency or other entity, such as a mortgage lender or the Small Business Administration, to supply a copy of his or a related party's tax return.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In such circumstances, you may obtain a copy of your tax return by filing Form 4506, Request for Copy or Transcript of Tax Form, along with the applicable fee, to the IRS Service Center where the return was filed. Also, tax account information based on the return may be obtained free of charge from IRS Taxpayer Service Offices. You may also request a transcript that will show most lines from the original return, including accompanying forms and schedules.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Fees</span></b><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">There is no charge to request a tax return transcript of the Form 1040 series filed during the current calendar year and the three preceding calendar years. For other requests, a fee of $23.00 per tax period requested must be paid in order to obtain copies of a return. Taxpayers seeking tax account information (such as adjusted gross income, amount of tax, or amount of refund) should contact their local IRS Taxpayer Service Office, which will provide the account information free of charge.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Timing of Requests</span></b><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">A request for a copy of a return must be received by the IRS within 60 days following the date when it was signed and dated by the taxpayer. It may take up to 60 calendar days to get a copy of a tax form or Form W-2 information. If a return has been recently filed, the taxpayer must allow six weeks before requesting a copy of the return or other information. The IRS cautions that returns filed more than six years ago may not be available for making copies; tax account information, however, is generally available for these periods.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">You may be able to save some time by going directly to your tax return preparer for the information. Although a return preparer may retain a copy of the taxpayer’s return, however, there is no absolute requirement to do so. Preparers must retain for three years either a copy of each completed return and claim for refund or a list of the names and taxpayer identification numbers of taxpayers for whom returns or claims have been prepared</span>.News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-35813243778591053502012-05-22T14:27:00.000-07:002012-05-22T14:27:14.825-07:00Accounting & Tax News<span style="font-family: Arial,Helvetica,sans-serif; font-size: small;"><span>G.R. Reid Associates, LLP
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<span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">What You Should Know About Sales and Use Tax Exemption Certificates</span></b></span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">Business owners should be concerned about exemption certificates and understand when and why they should obtain them so they can minimize sales tax exposure should the business be audited.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Why are exemption certificates required?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Sales tax exemption certificates are required whenever a seller makes a sale of taxable goods or services, and does not collect sales tax in a jurisdiction, in which they are required to. The certificate is issued by a purchaser to make tax-free purchases that would normally be subject to sales tax. Most state sales tax exemption certificates do not expire and the seller is required to maintain exemption certificates for as long as sales continue to be made to the purchaser and sales tax is not collected. Exemption certificates are not required for items that are not taxable by statute.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Is there a global exemption certificate that can be used in multiple states?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">No, unfortunately there are no global rules regarding exemption certificates. Each state has its own set of exemption certificates as well as rules and regulations covering their use. However, some general rules do apply. For example, most states have broad categories of exemptions – resale, government, manufacturing, exempt organizations, telecommunications, agricultural, etc. Since not every state has every exemption in place, local rules and local compliance requirements must be considered.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Do states differ in their treatment of sales made to exempt organizations and governmental agencies? </span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Yes, states differ in their treatment of sales made to exempt organizations (501 (c) (3) status for income tax purposes) and governmental agencies. A general rule of thumb is that purchases by the Federal government are exempt in every state, but documentation requirements vary. Some states tax state and local government purchases including MN, SC, WA, CA, AZ and HI. States that do exempt state and local governmental agencies generally require the purchases must be for the exclusive use of the exempt entity and the exempt entity must be the payer of record.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Most clients think all sales made to not-for-profit 501 (c) (3) organizations are automatically exempt. This could be a costly presumption. In order for a not-for-profit to be exempt the organization must apply for, and be granted, exempt sales and use tax status in the state(s) in which they conduct business. Don’t be fooled by the organization’s exempt sounding name, ensure you obtain a properly completed exemption certificate if tax is not charged or you may be subject to penalties for not collecting sales tax.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">As a seller, how do I know which exemption certificate applies to a transaction?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">As noted above, there are no quick and easy rules regarding exemption certificates. Different certificates apply for different exemptions, and there may be unique certificates for specialized property or services. One must research the various tax department web sites or consult with their SALT advisor to determine which form applies. For example, the New York State Department of Taxation and Finance’s website posts a very helpful Tax Bulletin, ST-240 Exemption Certificates for Sales Tax, which explains who may use exemption certificates, how to use them properly and which certificate should be used based upon general sales tax exemptions in the Tax Law. The bulletin can be found at: http://www.tax.ny.gov.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"><b>Why can’t a seller simply issue a Multi-Jurisdiction Certificate (MJC) as prescribed by the Multi-State Tax Commission or the Streamlined Sales Tax Agreement Exemption Certificate developed by the Streamlined Sales and Use Tax Governing Board ? </b> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">As discussed above, sales and use tax rules vary by state. To help sellers meet their </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">multi-jurisdictional obligations, many states have joined the Multi-State Tax Commission or the Streamlined Sales Tax Project.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The Multistate Tax Commission is an intergovernmental state tax agency working on behalf of states and taxpayers to administer, equitably and efficiently, tax laws that apply to multistate and multinational enterprises. The Commission has developed a Uniform Sales and Use Tax Certificate that 38 States accept for use as a "blanket" resale certificate (the use of this certificate is not valid in New York State and several others). States however vary in their rules regarding requirements for reseller exemption. Some states require that the reseller (purchaser) be registered to collect sales tax in the state where the reseller makes its purchase. Other states will accept the certificate if an identification number is provided for another state (e.g., the home state of the purchaser). One must check with the appropriate state to determine whether you meet the requirements of that state to be considered a reseller and if one can use the MJC to claim an exemption from sales tax.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The Streamlined Sales and Use Tax Project (“SSTP”) is a cooperative effort of 44 states and the business community to simplify sales and use tax collection administration by retailers and states. As a means to make it easier for retailers and remote sellers who operate in multiple states to conduct their business in a fair and competitive environment, the Governing Board of the SSTP developed a multi-state exemption certificate, the Streamlined Sales Tax Agreement Exemption Certificate. The certificate provides a variety of exemptions and is not limited to resale type of transactions. Not all states allow all exemptions listed on this form and states such as New York do not accept the use of this certificate as a valid exemption certificate. Purchasers are responsible for determining if they qualify to claim exemption from tax in the state that would otherwise be due tax on the sale. So, depending upon the rules in a given jurisdiction and their level of participation in the MJC or SSTP different exemptions and filing requirements could apply.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">What is meant by a “properly completed” certificate?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In most states a properly completed exemption certificate means the certificate is completed in its entirety by the purchaser, i.e. every line required to be completed is completed by the purchaser issuing the certificate. Most states require that the properly completed certificate be obtained within 90 days of the date of sale and that a seller accept the certificate in “good faith”. Accepting a certificate in good faith means that the seller has no reason to believe that what the purchaser has indicated on the certificate is not true.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">What happens if a seller didn’t obtain a properly completed exemption certificate and can’t locate the customer to obtain a new one because they are no longer in business?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In most audit situations a non-taxable sale not supported by a properly completed exemption certificate will be disallowed and sales tax will be assessed against the seller, even though sales tax, in general, is a “consumer tax." To make matters worse, since most non-taxable sales are reviewed using a “test period audit method” (a limited period is “tested” and an error rate is developed which is projected throughout the audit period) the sales tax due on each disallowed sale will be “projected” throughout the entire audit period. A missing or incomplete exemption certificate can create unnecessary exposure on an audit due to the mathematical compounding of the error rate:</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Say the auditor tests a total of $525,000 worth of non-taxable sales for a one month period. Of that amount, the auditor disallows $12,000 worth of the non-taxable sales in the test period due to lack of properly completed exemption certificates. Assuming an 8% sales tax rate and 36 months in the audit period, the auditor will project additional sales tax due of $34,560 ($12,000 x 8% = $960 X 36 months) as the result of only $960 of additional tax found due in the test period.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">In addition to the business being assessed sales tax as the result of missing or incomplete exemption certificates, most states hold “responsible persons” (those under a duty to act for the business) personally liable should the business not fully pay the tax, penalty and interest due as the result of an audit. Consequently, using the example above and assuming the business does not agree or does not fully pay the tax found due on audit, the business owner will have an assessment issued personally for the $34,560 of tax due, plus penalty and interest. Personal assessments can severely affect credit ratings and will certainly cause unnecessary financial hardship.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">What can one do to avoid or minimize exposure on audits when obtaining exemption certificates?</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The following best practices can help minimize or eliminate exposure on audit of your business’s non-taxable sales:</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br />
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<li><span style="font-family: Arial,Helvetica,sans-serif;">Become familiar with exemption certificates in the states where you conduct business and design an exemption certificate policy that everyone in your company must adhere to, with no exceptions. </span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Obtain a properly completed exemption certificate at the time of first sale. Too often a seller is told by their customer, “I’m exempt, don’t charge me tax, I’ll send you an exemption certificate”, and of course the customer never sends it. Charge sales taxes on all taxable sale transactions until you receive a properly completed exemption certificate.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Ensure that exemption certificates are maintained for the required time period to support the non-taxable status of exempt sales. Your file may need to be retained for a long as you continue not to charge a certain customer sales tax or the period of the statute of limitations in the state(s) where you do business, whichever applies. And remember, it is not enough to simply get the certificate; you must also maintain it and make it available during an audit.</span><span style="font-family: Arial,Helvetica,sans-serif;"> </span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Centralize the receipt and storage of all exemption certificates. A decentralized filing system can lead to gaps in proper internal control over exemption certificates. Decentralized certificate retention often leads to lost or incomplete certificates. Don’t spread the responsibility throughout your business. Costly errors often occur when exemption certificates are obtained by salespeople, store managers, store clerks, etc. who may not be properly trained to identify what is a properly completed certificate or the correct certificate to obtain.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">In businesses where there are many exemption certificates on file, a good idea is to maintain certificates electronically. Specialized software is available which can reduce audit exposure and increase productivity by centralizing exemption certificate management.</span></li>
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<span style="font-family: Arial,Helvetica,sans-serif;">Whether you sell taxable products or services and don’t collect sales tax, or you purchase items without paying sales tax, you must know the sales and use tax consequences of your activities in each state you do business in. Be sure to obtain exemption in states where nexus has been established, then focus on the type of exemption being claimed to insure the correct exemption certificate is obtained. If you have any questions, visit our website at www.GRRCPAS.com.</span><br /><br />News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-85041922676833361712012-05-17T10:51:00.000-07:002012-05-17T10:51:23.302-07:00Financial & Wealth Services News:: George G. Elkin, Managing Director, Financial & Wealth Services <br />631.923-1595 ext. 314<br /><a href="http://grreidwealth.com/" style="color: blue;" target="_blank">G. R. Reid Wealth Management Services, LLC </a><br />
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<span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">Common Stock vs. Preferred Stock</span><span style="font-family: Arial,Helvetica,sans-serif;"></span></b></span></h2>
<span style="font-family: Arial,Helvetica,sans-serif;">Common stock and preferred stock are the two main types of stocks that are sold by companies and traded among investors on the open market. Each type gives stockholders a partial ownership in the company represented by the stock. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Despite some similarities, common stock and preferred stock have some significant differences, including the risk involved with ownership. It’s important to understand the strengths and weaknesses of both types of stocks before purchasing them. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Common Stock</span></b><br />
<span style="font-family: Arial,Helvetica,sans-serif;"></span><span style="font-family: Arial,Helvetica,sans-serif;">Common stock is the most common type of stock that is issued by companies. It entitles shareholders to share in the company’s profits through dividends and/or capital appreciation. Common stockholders are usually given voting rights, with the number of votes directly related to the number of shares owned. Of course, the company’s board of directors can decide whether or not to pay dividends, as well as how much is paid. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Owners of common stock have “preemptive rights” to maintain the same proportion of ownership in the company over time. If the company circulates another offering of stock, shareholders can purchase as much stock as it takes to keep their ownership comparable.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Common stock has the potential for profits through capital gains. Shareholders are not assured of receiving dividend payments. Investors should consider their tolerance for investment risk before investing in common stock.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Preferred Stock</span></b><br />
<span style="font-family: Arial,Helvetica,sans-serif;"></span><span style="font-family: Arial,Helvetica,sans-serif;">Preferred stock is generally considered less volatile than common stock but typically has less potential for profit. Preferred stockholders generally do not have voting rights, as common stockholders do, but they have a greater claim to the company’s assets. Preferred stock may also be “callable,” which means that the company can purchase shares back from the shareholders at any time for any reason, although usually at a favorable price.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Preferred stock shareholders receive their dividends before common stockholders receive theirs, and these payments tend to be higher. Shareholders of preferred stock receive fixed, regular dividend payments for a specified period of time, unlike the variable dividend payments sometimes offered to common stockholders. Of course, it’s important to remember that fixed dividends depend on the company’s ability to pay as promised. In the event that a company declares bankruptcy, preferred stockholders are paid before common stockholders. Unlike preferred stock, though, common stock has the potential to return higher yields over time through capital growth. Remember that investments seeking to achieve higher rates of return also involve a higher degree of risk.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Both common stock and preferred stock have their advantages. When considering which type may be suitable for you, it is important to assess your financial situation, time frame, and investment goals. The return and principal value of stocks, both common and preferred, fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-size: x-small;"><span style="font-family: Arial,Helvetica,sans-serif;">This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc. All rights reserved </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">George Elkin and Jason Saladino are 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 Wealth Management Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">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. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security</span></span>.<br /><br /><br />News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-33872911082429611772012-04-30T09:56:00.001-07:002012-04-30T09:56:40.114-07:00Accounting & Tax News<div style="color: black; font-family: Arial,Helvetica,sans-serif;">
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<b><span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">President Obama Signs JOBS Act Into Law</span></span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (“JOBS”) Act into law. This legislation is a product of broad bipartisan efforts in response to a decreasing number of initial public offerings (“IPO’s”). The intent of the legislation is to encourage certain private companies to raise capital by means of going public and creating jobs. The JOBS Act amends specific sections of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Companies that fall within specific conditions laid out by the JOBS Act are referred to as “emerging growth companies”. The term “emerging growth company” describes an issuer (an entity that develops, registers and sells securities for the purpose of financing its operations) that has annual gross revenues of less than $1 billion during its most recent fiscal year. Exemptions and provisions of the JOBS Act apply to emerging growth companies until they reach a threshold of $1 billion in revenues, the last day of the fiscal year following the fifth anniversary of the first sale of common equity securities pursuant to an effective registration statement, or the date on which the issuer has, during the previous three year period, issued more than $1 billion in non-convertible debt or is deemed to be a large accelerated filer (typically public float of $700 million or more). An issuer does not have the privilege to be an emerging growth company for purposes of the Act if its first sale of common equity securities pursuant to an effective registration statement under the Securities Act of 1933 occurred on or before December 8, 2011.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Emerging growth companies are exempt from certain disclosure requirements that are currently in place for public companies. An example of one of the most significant exceptions is the fact that an emerging growth company is required to present only two years of audited financial statements in order for its registration statement with respect to an initial public offering of its common equity securities to be effective. Furthermore, in any other registration statement to be filed with the Securities and Exchange Commission (“SEC”), an emerging growth company does not need to present selected financial data in accordance with Item 301 of Regulation S-K, for any period prior to the earliest audited period presented in connection with its initial public offering. Emerging growth companies also have an opportunity to confidentially submit a draft registration statement for SEC staff review and permissible communications during the securities offering of an emerging growth company have been expanded. Emerging growth companies may not be required to comply with any new or revised financial accounting standard until the date that a company that is not an issuer (private companies) is required to comply with such new or revised accounting standard, if the standard applies to companies that are not issuers. Such issuers also have an option to comply with executive compensation disclosure requirements similar to smaller reporting companies (registrants with a market value of outstanding voting and nonvoting common equity held by non-affiliates of less than $75 million).</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Other important exceptions that emerging growth companies benefit from relate to audits of internal controls. Such companies are not required to have an audit of their internal controls performed under Section 404(b) of the Sarbanes-Oxley Act of 2002. There was no change to management's requirement to assess internal controls. Any potential future rules of the PCAOB requiring the mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor will be required to provide additional information about the audit and the financial statements of the issuer (auditor discussion and analysis) will not apply to an audit of an emerging growth company.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">There are also several changes that the JOBS Act brings which also affects entities other than emerging growth companies. One of the changes is a provision that allows “crowdfunding” (Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure) whereby companies can raise equity from a large pool of small investors who may or may not be considered “accredited”. Another noteworthy provision that impacts companies is the threshold for mandatory Exchange Act registration for non-listed companies. Based on the JOBS Act, this threshold has been increased from 500 shareholders of record to 2,000 shareholders of record, provided there are less than 500 "non-accredited" investors. The Act also raises the thresholds for a non-listed bank or bank holding company to terminate its Exchange Act registration from 300 shareholders of record to 1,200 shareholders of record. The JOBS Act ensures that the prohibition against general solicitation or general advertising does not apply to private offers and sales of securities made pursuant to Rule 506 of Regulation D and Rule 144, provided that all purchasers of the securities are accredited investors. The JOBS Act increases the aggregate offering exemption amount of all securities offered and sold within the prior 12-month period in public offerings from $5 million to $50 million.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Opponents believe that the JOBS Act weakens investor protections, which will lead to more financial issues and fraud, and the reduced transparency will make it more difficult for investors and regulators to detect those issues. Additionally, they believe that the $1 billion revenue threshold for emerging growth companies is too high, as it includes the vast majority of current public companies. On the other hand, proponents of the Act believe that the relaxed regulations will help entrepreneurs more efficiently raise the public and private capital needed to put more Americans back to work. It will be interesting to see the effect of the JOBS Act on the capital raising landscape for entrepreneurial growth companies.</span><br />
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<br />News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-71547617881395142422012-04-30T09:47:00.000-07:002012-04-30T12:17:31.956-07:00Accounting & Tax News<div style="color: black; font-family: Arial,Helvetica,sans-serif;">
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<b><span style="font-size: x-large;"><span style="color: black;">10 Facts About Mortgage Debt Forgiveness</span></span></b></div>
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<span style="color: black;">Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.</span></div>
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<span style="color: black;"></span><b><span style="color: black;">Here are 10 things you should know about Mortgage Debt Forgiveness.</span></b></div>
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<li><span style="color: black;">Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.</span></li>
<li><span style="color: black;">The limit is $1 million for a married person filing a separate return.</span></li>
<li><span style="color: black;">You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.</span></li>
<li><span style="color: black;">To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.</span></li>
<li><span style="color: black;">Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.</span></li>
<li><span style="color: black;">Proceeds of refinanced debt used for other purposes, to pay off credit card debt for example, do not qualify for the exclusion.</span></li>
<li><span style="color: black;">If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.</span></li>
<li><span style="color: black;">Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions -- such as insolvency -- may be applicable.</span></li>
<li><span style="color: black;">If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.</span></li>
<li><span style="color: black;">Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.<br /><br /></span><span style="color: black;"><br /></span></li>
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</div>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-54649764266088296622012-04-30T09:34:00.000-07:002012-04-30T09:34:25.474-07:00Accounting & Tax Services News<div style="color: black; font-family: Arial,Helvetica,sans-serif;">
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<b><span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">New York Sales and Use Tax: Reminder Issued on Start of Exemption for Clothing and Footwear Costing Less Than $110</span></span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">On March 28, 2012, the New York Department of Taxation and Finance issued a notice reminding businesses and consumers that beginning April 1, 2012, items of clothing and footwear sold for less than $110 will be exempt from state sales and use tax (up to March 31, 2012, such items up to $55 were exempt).</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The exemption is based on per item sold, and also applies to most fabric, thread, yarn, buttons, hooks, zippers, and similar items. The exemption does not apply to items of jewelry, watches and equipment, such as tool belts and hard hats, and for sport, bicycle and motorcycle helmets.</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">New York City, the city of Norwich and the following counties will also fully exempt eligible sales of less than $110 from local sales and use tax:</span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Chautauqua</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Chenango</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Columbia</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Delaware</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Greene</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Hamilton</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Madison (outside the City of Oneida)</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Tioga </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> • Wayne</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">For more information, see the Department of Taxation and Finance’s website at <a href="http://www.tax.ny.gov./">www.tax.ny.gov.</a></span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-60367398740913082702012-04-30T09:26:00.004-07:002012-04-30T09:26:50.901-07:00Financial & Wealth Services News<div style="color: blue; font-family: Arial,Helvetica,sans-serif;">
: : George G. Elkin, Managing Director, Financial & Wealth Services <br />631.923-1595 ext. 314<br /><a href="http://grreidwealth.com/" style="color: blue;" target="_blank">G. R. Reid Wealth Management Services, LLC </a></div>
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<b><span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">How Long Will It Take to Double My Money? </span></span></b></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_9LIcqBvUrY6d33KzsNxW_P0MLjiGo4dRn6dMBmW3gWmj_HvePtCzIVvoobdDTXe86o5t4hrLyvP67Jn7gpkbiNqUdsyW6ZfLw3pho-wgeiEPOEqZK4axwa5DKhmW5qei793lYkbRxkrR/s1600/calculatorSmallB&W.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="133" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_9LIcqBvUrY6d33KzsNxW_P0MLjiGo4dRn6dMBmW3gWmj_HvePtCzIVvoobdDTXe86o5t4hrLyvP67Jn7gpkbiNqUdsyW6ZfLw3pho-wgeiEPOEqZK4axwa5DKhmW5qei793lYkbRxkrR/s200/calculatorSmallB&W.jpg" width="200" /></a></div>
<span style="font-family: Arial,Helvetica,sans-serif;">Before making any investment decision, one of the key elements you face is working out the real rate of return on your investment. Compound interest is critical to investment growth. Whether your financial portfolio consists solely of a deposit account at your local bank or a series of highly leveraged investments, your rate of return is dramatically improved by the compounding factor. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">With simple interest, interest is paid just on the principal. With compound interest, the return that you receive on your initial investment is automatically reinvested. In other words, you receive interest on the interest. </span><span style="font-family: Arial,Helvetica,sans-serif;">But just how quickly does your money grow? The easiest way to work that out is by using what's known as the “Rule of 72.”<span style="font-size: x-small;">1</span> Quite simply, the “Rule of 72” enables you to determine how long it will take for the money you've invested on a compound interest basis to double. You divide 72 by the interest rate to get the answer. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">For example, if you invest $10,000 at 10 percent compound interest, then the “Rule of 72” states that in 7.2 years you will have $20,000. You divide 72 by 10 percent to get the time it takes for your money to double. The “Rule of 72” is a rule of thumb that gives approximate results. It is most accurate for hypothetical rates between 5 and 20 percent. </span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">While compound interest is a great ally to an investor, inflation is one of the greatest enemies. The “Rule of 72” can also highlight the damage that inflation can do to your money. </span><span style="font-family: Arial,Helvetica,sans-serif;">Let’s say you decide not to invest your $10,000 but hide it under your mattress instead. Assuming an inflation rate of 4.5 percent, in 16 years your $10,000 will have lost half of its value. </span><span style="font-family: Arial,Helvetica,sans-serif;">The real rate of return is the key to how quickly the value of your investment will grow. If you are receiving 10 percent interest on an investment but inflation is running at 4 percent, then your real rate of return is 6 percent. In such a scenario, it will take your money 12 years to double in value. </span><span style="font-family: Arial,Helvetica,sans-serif;">The “Rule of 72” is a quick and easy way to determine the value of compound interest over time. By taking the real rate of return into consideration (nominal interest less inflation), you can see how soon a particular investment will double the value of your money. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-size: x-small;"><span style="font-family: Arial,Helvetica,sans-serif;">1 The Rule of 72 is a mathematical concept, and the hypothetical return illustrated is not representative of a specific investment. Also note that the principal and yield of securities will fluctuate with changes in market conditions so that the shares, when sold, may be worth more or less than their original cost.The Rule of 72 does not include adjustments for income or taxation. It assumes that interest is compounded annually. Actual results will vary. </span></span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<span style="font-size: x-small;"><span style="font-family: Arial,Helvetica,sans-serif;">This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc. All rights reserved. George Elkin and Jason Saladino are 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 Wealth Management 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</span></span><br />News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-12780792349661490992012-04-24T15:22:00.001-07:002012-04-24T15:24:13.423-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">
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<b><span style="font-size: x-large;">Spring Cleaning: <br />Tax Records You Can Throw Away</span></b></div>
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<span style="font-family: Arial,Helvetica,sans-serif;">Spring is a great time to clean out that growing mountain of financial papers and tax documents that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Let's start with your "safety zone," the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">The concept behind it is that after a period of years, records are lost or misplaced and memory isn't as accurate as we would hope. There's a need for finality. Once the statute of limitations has expired, the IRS can't go after you for additional taxes, but you can't go after the IRS for additional refunds, either.</span><br />
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<b><span style="font-family: Arial,Helvetica,sans-serif;">The Three-Year Rule</span></b><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you're looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">If you don't report all your income and the unreported amount is more than 25% of the gross income actually shown on your return, the limitation period is six years.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">If you've claimed a loss from a worthless security, the limitation period is extended to seven years.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">If you file a "fraudulent" return, or don't file at all, the limitations period doesn't apply. In fact, the IRS can get you at any time.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">If you're deciding what records you need or want to keep, you have to ask what your chances are of an audit. A tax audit is an IRS verification of items of income and deductions on your return. So you should keep records to support those items until the statute of limitations runs out.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Assuming that you've filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.</span><br />
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<b><span style="font-family: Arial,Helvetica,sans-serif;">Here's a checklist of the documents you should hold on to:</span></b><br />
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<li><span style="font-family: Arial,Helvetica,sans-serif;">Capital gains and losses. <br />Your gain is reduced by your basis - your cost (including all commissions) plus, with mutual funds, any reinvested dividends and capital gains. But you may have bought that stock five years ago and you've been reinvesting those dividends and capital gains over the last decade. And don't forget those stock splits. You don't ever want to throw these records away until after you sell the securities. And then if you're audited, you'll have to prove those numbers. Therefore, you'll need to keep those records for at least three years after you file the return reporting their sales.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Expenses on your home. <br />Cost records for your house and any improvements should be kept until the home is sold. It's just good practice, even though most homeowners won't face any tax problems. That's because profit of less than $250,000 on your home ($500,000 on a joint return) isn't subject to taxes under tax legislation enacted in 1997. If the profit is more than $250,000/$500,000, or if you don't qualify for the full gain exclusion, then you're going to need those records for another three years after that return is filed. Most homeowners probably won't face that issue thanks to the 1997 tax law, but of course, it's better to be safe than sorry.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Business records. <br />Business records can become a nightmare. Non-residential real estate is now depreciated over 39 years. You could be audited on the depreciation up to three years after you file the return for the 39th year. That's a long time to hold on to receipts, but you may need to validate those numbers.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Employment, bank, and brokerage statements. Keep all your W-2s, 1099s, brokerage, and bank statements to prove income until three years after you file. And don't even think about dumping checks, receipts, mileage logs, tax diaries, and other documentation that substantiate your expenses.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Tax returns. Keep copies of your tax returns as well. You can't rely on the IRS to actually have a copy of your old returns. As a general rule, you should keep tax records for 6 years. The bottom line is that you've got to keep those records until they can no longer affect your tax return, plus the three-year statute of limitations.</span></li>
<li><span style="font-family: Arial,Helvetica,sans-serif;">Social Security records. You will need to keep some records for Social Security purposes, so check with the Social Security Administration each year to confirm that your payments have been appropriately credited. If they're wrong, you'll need your W-2 or copies of your Schedule C (if self-employed) to prove the right amount. Don't dispose of those records until after you've validated those contributions.<br /><br /><br /> </span></li>
</ul>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-78627269539519948592012-03-27T03:30:00.003-07:002012-03-27T03:30:01.933-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP <br />
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</div><div style="font-family: Arial,Helvetica,sans-serif;">631.425.1800 <a href="http://www.grreid.com/" style="color: blue;">www.GRReid.com</a></div><div style="font-family: Arial,Helvetica,sans-serif;"></div><h1 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 22px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The S Corporation Built-In Gains Tax: </h1><h1 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 22px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Commonly Encountered Issues</h1><h1 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 22px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"> </h1><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">M</span><span style="font-size: 12px; margin: 0px; padding: 0px;">i</span>llions of corporations have found S corporation status to be beneficial for both federal and state income tax purposes. When a corporation makes an election to be taxed as an S corporation, its shareholders generally are taxed on their allocable shares of income and may—subject to limitations—deduct their allocable shares of the corporation’s losses. However, when a corporation has converted its status from C corporation to S corporation or acquires assets from a C corporation in a tax-free transaction, it may be subject to a corporate-level “built-in gains” tax in addition to the tax imposed on its shareholders.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The concepts underlying this tax are relatively basic, but its application can be complex. This article examines some of the issues corporations commonly encounter in complying with the built-in gains tax.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">If a C corporation converts its tax status to a partnership or a disregarded entity, the resulting actual or deemed liquidation, in most cases, would be a taxable transaction for both the corporation and its shareholders. In contrast, if a C corporation elects S corporation status, these immediate tax consequences are avoided.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_1" name="fnref_1" style="color: #3773b0; position: relative; text-decoration: none;">1</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>If a corporate-level built-in gains tax were not imposed, a C corporation could make an election to be taxed as an S corporation (assuming it is otherwise eligible to do so) and sell all or part of its assets with a single level of tax. The built-in gains tax is imposed to prevent an S corporation election from being used to circumvent the effects of a taxable liquidation.</span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The tax is imposed upon an S corporation that has some history—however brief—as a C corporation before the effective date of its S corporation election.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_2" name="fnref_2" style="color: #3773b0; position: relative; text-decoration: none;">2</a></span><span class="Apple-converted-space"> </span>It also is imposed on an S corporation that has always been an S corporation, if it acquires assets from a C corporation in a tax-free transaction, such as an acquisition of assets in a tax-free reorganization or the tax-free liquidation of a controlled subsidiary.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_3" name="fnref_3" style="color: #3773b0; position: relative; text-decoration: none;">3</a></span><span class="Apple-converted-space"> </span>The corporation must determine whether it has a net unrealized built-in gain (NUBIG) in its assets on the effective date of the relevant transaction. If the corporation has a NUBIG in its assets, it must track its dispositions of these assets for 10 years.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_4" name="fnref_4" style="color: #3773b0; position: relative; text-decoration: none;">4</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">To the extent that gains recognized during this period represent recognized built-in gains (RBIGs), the tax is imposed at the highest rate of tax applicable to corporations (currently 35%) on the net RBIG. To prevent the tax from becoming significantly more onerous than the tax that would have been imposed on a C corporation, it is not imposed on an amount greater than the taxable income that would have been reported by the taxpayer had it remained a C corporation.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_5" name="fnref_5" style="color: #3773b0; position: relative; text-decoration: none;">5</a></span><span class="Apple-converted-space"> </span>For any tax year in which the net RBIG of an S corporation exceeds its taxable income computed in this manner, the excess is carried over and is treated as RBIG in the subsequent year.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_6" name="fnref_6" style="color: #3773b0; position: relative; text-decoration: none;">6</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">The tax imposed on the corporation is in addition to—and not in lieu of—the tax that may be imposed on its shareholders under the rules generally applicable to S corporations. To replicate the effects of C corporation taxation, the shareholders are subject to tax on the corporate-level gain, net of the corporate-level tax. This result is achieved by permitting the shareholder to treat the corporate-level tax as a loss that has the same character as the gain that gives rise to the tax.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_7" name="fnref_7" style="color: #3773b0; position: relative; text-decoration: none;">7</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Thus, for example, if an S corporation recognizes a $100 long-term capital gain, all of which is treated as RBIG, the corporation generally incurs a $35 built-in gains tax.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_8" name="fnref_8" style="color: #3773b0; position: relative; text-decoration: none;">8</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>The shareholders recognize their allocable share of a net $65 long-term capital gain for the same tax year.</span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">The tax can be complex, but several issues are most frequently encountered. Five of these issues are explored in this article: (1) the desirability of obtaining a proper appraisal as of the beginning of the recognition period; (2) the treatment of sales of inventories during the recognition period; (3) the application of the tax to corporations using the cash receipts and disbursements method of accounting; (4) the efficient use of losses to reduce or eliminate the tax; and (5) the use of C corporation attributes, such as net operating losses (NOLs) and general business credits, to reduce or eliminate the tax.</span></div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Getting the Proper Appraisal</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">Statutory presumptions applicable to the built-in gains tax effectively require taxpayers to prove their case to the IRS’s satisfaction. Thus, all gains recognized by an S corporation during the recognition period are presumed to be RBIGs, except to the extent the taxpayer establishes that a portion of the gain constitutes post-conversion appreciation or that the asset was not held at the beginning of the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_9" name="fnref_9" style="color: #3773b0; position: relative; text-decoration: none;">9</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Conversely, no loss recognized by an S corporation during the recognition period is treated as a recognized built-in loss (RBIL), except to the extent the taxpayer establishes that the asset was held at the beginning of the recognition period and further establishes the portion of the recognized loss that was built in at the beginning of the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_10" name="fnref_10" style="color: #3773b0; position: relative; text-decoration: none;">10</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Under applicable regulations, a corporation’s NUBIG is:</div><ol style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><li>The amount of net gain, if any, that the corporation would have recognized if it had sold its assets at the beginning of the recognition period for their fair market value (FMV) in a single transaction to an unrelated buyer that also assumed all of the corporation’s liabilities; decreased by</li>
<li>The sum of any deductible liabilities of the corporation that would be included in the amount realized on the hypothetical sale and the corporation’s aggregate adjusted basis in all of its assets; increased or decreased by</li>
<li>The corporation’s Sec. 481 adjustments that would be taken into account on a hypothetical sale; and increased by</li>
<li>Any RBIL that would not be allowed as a deduction under Secs. 382, 383, or 384 on the hypothetical sale.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_11" name="fnref_11" style="color: #3773b0; position: relative; text-decoration: none;">11</a></span></li>
</ol><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The goal of the calculation is to ascertain the net tax consequences to the corporation of a hypothetical liquidating sale of its entire business and assets.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">The best defense against an assertion that additional tax is due on RBIG is a proper appraisal of the assets at the beginning of the recognition period. The appraiser should be qualified and experienced in valuing similar businesses and should be given proper instructions consistent with the requirements of the statute and regulations. That is, the appraisal should assume a hypothetical sale of the corporation’s assets as a going concern, not its stock. The appraisal must take into consideration the business’s intangible assets, such as goodwill and going-concern value, in addition to the tangible or identifiable assets. Because the appraisal must assume a sale of assets, it may not claim discounts for minority interests or for lack of marketability—discounts that might have been claimed in an appraisal of stock for gift or estate tax purposes.</span></div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Sales of Inventories</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Taxpayers that maintain inventories for sale to customers may be surprised to learn that the built-in gains tax may apply to individual sales of their products to customers during the recognition period. Consistent with the principles that apply to the determination of NUBIG, the regulations provide, in effect, that the inventories must be valued using a “bulk sale” approach.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_12" name="fnref_12" style="color: #3773b0; position: relative; text-decoration: none;">12</a></span><span class="Apple-converted-space"> </span>In the case of an actual bulk sale of inventories as part of a sale of an entire trade or business, the IRS has provided guidelines for determining the FMV of inventories and, thus, the amount of consideration that should be allocated to the inventories.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_13" name="fnref_13" style="color: #3773b0; position: relative; text-decoration: none;">13</a></span><span class="Apple-converted-space"> </span>The guidance clarifies that inventories should not be valued solely on the basis of aggregate costs incurred by the seller of the business; nor should they be valued based solely on the aggregate selling prices that the buyer of the business would expect to realize from their disposition in individual sales. Rather, the FMV should be between these two extremes, to allow for a “fair division between the buyer and the seller of the profit on the inventory.”<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_14" name="fnref_14" style="color: #3773b0; position: relative; text-decoration: none;">14</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The determination of the corporation’s unrealized built-in gain in its inventories is merely the first step in the process. The taxpayer should—theoretically, at least—monitor the disposition of inventory items held at the beginning of the recognition period to determine the amount of RBIG resulting from each sale. The regulations permit taxpayers, in complying with this requirement, to assume that the physical flow of goods in inventory at the beginning of the recognition period is consistent with the cost-flow assumption used for income tax purposes.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_15" name="fnref_15" style="color: #3773b0; position: relative; text-decoration: none;">15</a></span>Accordingly, if the corporation consistently uses LIFO accounting for inventories, it will not be treated as having disposed of any of its inventory items held at the beginning of the recognition period unless the carrying value of the inventories at the end of a tax year is less than the carrying value of the inventories at the beginning of the recognition period.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">For non-LIFO taxpayers, compliance may be significantly more difficult. The cost-flow assumptions will generally result in the taxpayer’s being required to treat the inventory items on hand at the beginning of the recognition period as the first items disposed of during the recognition period. Thus, if the inventories generally turn over at least once each year, the entire amount of the unrealized gain inherent in the recognition period beginning inventory will be treated as RBIG in the first year of the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_16" name="fnref_16" style="color: #3773b0; position: relative; text-decoration: none;">16</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Taxpayers that fail to account properly for the built-in gains tax in connection with the sale of their inventories may be subject to interest and penalties,</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_17" name="fnref_17" style="color: #3773b0; position: relative; text-decoration: none;">17</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;">and tax return preparers may be subject to penalties for failing to recognize the application of the built-in gains tax to ordinary-course dispositions.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_18" name="fnref_18" style="color: #3773b0; position: relative; text-decoration: none;">18</a></span></div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Beware the Cash-Basis Corporation</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">Although the principal focus of Sec. 1374 is the treatment of gains and losses from the sale or exchange of property, Congress recognized that certain income and deduction items also could be treated as “built in” as of the beginning of the recognition period. Accordingly, the Code treats as RBIG any item of income that properly is taken into account during the recognition period but that is attributable to periods preceding the beginning of the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_19" name="fnref_19" style="color: #3773b0; position: relative; text-decoration: none;">19</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Similarly, the Code treats as RBIL any deduction allowable during the recognition period that is attributable to periods preceding the beginning of the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_20" name="fnref_20" style="color: #3773b0; position: relative; text-decoration: none;">20</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Appropriate adjustments must be made to the corporation’s NUBIG where items of income and deduction are treated as RBIGs and RBILs, respectively.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_21" name="fnref_21" style="color: #3773b0; position: relative; text-decoration: none;">21</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">The statute provides little guidance on how to determine whether an item of income or deduction is attributable to periods preceding the beginning of the recognition period. For both income and deduction items, the regulations generally adopt an accrual-method standard to determine if an item is attributable to such prior periods. Thus, if a corporation using an accrual method would have taken into account an item of income or a deduction before the beginning of the recognition period, that item is considered built in for this purpose, if it is actually taken into account during the recognition period.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_22" name="fnref_22" style="color: #3773b0; position: relative; text-decoration: none;">22</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Certain C corporations are permitted to use the cash receipts and disbursements method of accounting as their overall method for tax purposes.<span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_23" name="fnref_23" style="color: #3773b0; position: relative; text-decoration: none;">23</a></span><span class="Apple-converted-space"> </span>When these corporations make an S corporation election, the application of the built-in gains tax is clear but may be surprising. Under the accrual-method rule, the post-conversion collection of the accounts receivable that a corporation held as of the beginning of the recognition period will be treated as RBIG. Similarly, the post-conversion payment of their accounts payable and accrued expenses as of the beginning of the recognition period generally will be treated as RBIL. As a result, where a cash-basis corporation merely operates the business in the normal course, the items of income recognized early in the recognition period could give rise to the built-in gains tax. A corporation in this position could reduce or eliminate its liability for the tax by reducing or eliminating its overall taxable income, but it would be required to do so for the entire 10-year recognition period to escape the reach of the tax permanently.</div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Planning the Recognition of Losses</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">Corporations do not uniformly have unrealized gains in their assets. Some assets may have unrealized losses at the beginning of the recognition period even though the corporation has NUBIG. Moreover, some corporations may expect to recognize deductions during the recognition period that would be treated as RBILs. Losses, whether realized or unrealized, may reduce the built-in gains tax of an S corporation in two ways: First, an unrealized loss is included in the determination of a corporation’s NUBIG. Because the tax is not imposed on an amount in excess of a corporation’s NUBIG, the corporation may have RBIG from a particular asset or group of assets that exceeds its NUBIG. It is not necessary to recognize the unrealized loss to achieve a reduction of the built-in gains tax. Second, if a corporation has both RBIG and RBIL in the same tax year, the two are combined to determine the net RBIG, upon which the tax is imposed.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_24" name="fnref_24" style="color: #3773b0; position: relative; text-decoration: none;">24</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Thus, a corporation could plan to recognize the loss from a loss asset in the same tax year as it recognizes the gain from a gain asset to reduce or eliminate the tax imposed on the gain asset.</span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">A corporation may, however, lose the benefit of holding the loss asset or claiming the built-in deduction if the loss or deduction is recognized in a tax year preceding the year in which the built-in gain or income item is recognized. There is no provision in the Code for carrying forward an unused RBIL or deduction for offset against an RBIG or built-in income item recognized in a subsequent tax year.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 0px 18px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><b><i>Example 1:</i></b><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Assume a corporation has a $1,000 NUBIG at the beginning of its recognition period. In year 1, it recognizes a $75 RBIL, and in year 2, it recognizes a $100 RBIG. Assuming its taxable income limitation is greater than its RBIG, the corporation will pay a tax of $35 in year 2, based solely on the $100 RBIG. However, if it had recognized the two items in the same tax year, its built-in gains tax would be only $8.75, based on a $25 net RBIG.</span></div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Use of Credits and Other Tax Attributes</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">Corporations that are taxed consistently as C corporations from year to year are permitted to carry back or forward a number of tax attributes, including NOLs, capital losses, excess charitable contributions, general business tax credits, minimum tax credits, and foreign tax credits. In contrast, an S corporation generally cannot carry forward any such tax attributes from exa tax year in which it was a C corporation.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_25" name="fnref_25" style="color: #3773b0; position: relative; text-decoration: none;">25</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>However, the policy underlying the built-in gains tax is to treat the S corporation, for purposes of its RBIGs, in a manner similar to its treatment if it had remained a C corporation. To bridge these policy differences, the Code permits an S corporation to carry forward certain tax attributes from a C corporation year to an S corporation year for the purpose of reducing or eliminating its liability for the built-in gains tax. Accordingly, it may carry forward an NOL or capital loss from a C corporation year as a deduction against its net RBIG for the tax year.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_26" name="fnref_26" style="color: #3773b0; position: relative; text-decoration: none;">26</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Similarly, after determining its liability for the built-in gains tax, the corporation may apply its unused general business tax credits and minimum tax credits against this tax, subject to generally applicable limitations.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_27" name="fnref_27" style="color: #3773b0; position: relative; text-decoration: none;">27</a></span></div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: 12px; margin: 0px; padding: 0px;">The Code does not permit the full utilization of all tax attributes that a C corporation might have used to reduce its federal income tax liability. For example, excess charitable contributions of a C corporation may not be deducted against the RBIG of an S corporation.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_28" name="fnref_28" style="color: #3773b0; position: relative; text-decoration: none;">28</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Similarly, an excess foreign tax credit of a C corporation may not be used in computing an S corporation’s liability for the tax.</span><span style="color: black; font-size: smaller; font-weight: bold; margin: 0px; padding: 0px; vertical-align: top;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fn_29" name="fnref_29" style="color: #3773b0; position: relative; text-decoration: none;">29</a></span><span style="font-size: 12px; margin: 0px; padding: 0px;"><span class="Apple-converted-space"> </span>Accordingly, if an S corporation is subject to the built-in gains tax and has any tax attributes being carried forward from C corporation years, it should fully utilize those attributes that it is permitted to use but also should be aware of any attributes it is not permitted to use.</span></div><h3 style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 18px; font-style: normal; font-variant: normal; letter-spacing: normal; line-height: normal; margin: 5px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Conclusion</h3><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">The application of the built-in gains tax to S corporations can be one of the more complex and costly aspects of obtaining flowthrough status for a C corporation. The potential scope of the tax should be one of the considerations undertaken by a corporation seeking to make the election to be taxed as an S corporation. With proper planning, the corporation can both anticipate and manage the amount and timing of the tax. Surprises in this area, whether from tax return preparers or IRS examining agents, are never welcome.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><br />
</div><div style="background-color: white; border-bottom: 1px solid rgb(0, 0, 0); color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: italic; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Footnotes</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_1" name="fn_1" style="color: #3773b0; position: relative; text-decoration: none;"><sup>1</sup></a><span class="Apple-converted-space"> </span>Two immediate consequences may result from an election, but only if the corporation uses the last-in, first-out (LIFO) method of accounting for its inventories or has an overall foreign loss. Under Sec. 1363(d), a LIFO recapture tax is imposed in the last year of its C corporation status, and the resulting tax is paid in equal installments over a period of four tax years beginning with the final C corporation year. Under Sec. 1373(b), an overall foreign loss generally must be recaptured.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_2" name="fn_2" style="color: #3773b0; position: relative; text-decoration: none;"><sup>2</sup></a><span class="Apple-converted-space"> </span>The tax generally does not apply to an S corporation that has always been an S corporation, subject to a rule that treats an S corporation and its predecessors as one corporation for purposes of this rule (Sec. 1374(c)(1)).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_3" name="fn_3" style="color: #3773b0; position: relative; text-decoration: none;"><sup>3</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(8). When the tax applies to a group of assets acquired in this manner, the recognition period begins on the date on which the assets are so acquired.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_4" name="fn_4" style="color: #3773b0; position: relative; text-decoration: none;"><sup>4</sup></a><span class="Apple-converted-space"> </span>Legislation enacted in the last several years has effectively shortened the recognition period for certain S corporations. Unless Congress provides further relief, these shortened periods apply only to corporations recognizing built-in gains in tax years that began in 2009, 2010, or 2011. For built-in gains recognized in subsequent tax years, the recognition period is restored to 10 years.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_5" name="fn_5" style="color: #3773b0; position: relative; text-decoration: none;"><sup>5</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(2)(A)(ii).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_6" name="fn_6" style="color: #3773b0; position: relative; text-decoration: none;"><sup>6</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(2)(B).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_7" name="fn_7" style="color: #3773b0; position: relative; text-decoration: none;"><sup>7</sup></a><span class="Apple-converted-space"> </span>Sec. 1366(f)(2).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_8" name="fn_8" style="color: #3773b0; position: relative; text-decoration: none;"><sup>8</sup></a><span class="Apple-converted-space"> </span>The conclusion is based on a number of assumptions, including that (1) the corporation has no other recognized built-in losses for the same tax year; (2) the taxable income limitation does not apply; (3) the NUBIG of the corporation, reduced by built-in gains recognized in prior tax years, was at least $100; and (4) the corporation did not avail itself of any net operating loss, capital loss, or credit carryovers from C corporation tax years.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_9" name="fn_9" style="color: #3773b0; position: relative; text-decoration: none;"><sup>9</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(3).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_10" name="fn_10" style="color: #3773b0; position: relative; text-decoration: none;"><sup>10</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(4).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_11" name="fn_11" style="color: #3773b0; position: relative; text-decoration: none;"><sup>11</sup></a><span class="Apple-converted-space"> </span>Regs. Sec. 1.1374-3(a).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_12" name="fn_12" style="color: #3773b0; position: relative; text-decoration: none;"><sup>12</sup></a><span class="Apple-converted-space"> </span>Regs. Sec. 1.1374-7(a).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_13" name="fn_13" style="color: #3773b0; position: relative; text-decoration: none;"><sup>13</sup></a><span class="Apple-converted-space"> </span>Rev. Proc. 2003-51, 2003-2 C.B. 121 (applicable only to an asset acquisition subject to Sec. 1060 or a deemed asset acquisition under a Sec. 338 election).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_14" name="fn_14" style="color: #3773b0; position: relative; text-decoration: none;"><sup>14</sup></a><span class="Apple-converted-space"> </span>Id., citing<span class="Apple-converted-space"> </span><span style="font-size: 12px; font-style: italic; margin: 0px; padding: 0px;">Knapp King-Size Corp.</span>, 527 F.2d 1392 (Ct. Cl. 1975).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_15" name="fn_15" style="color: #3773b0; position: relative; text-decoration: none;"><sup>15</sup></a><span class="Apple-converted-space"> </span>Regs. Sec. 1.1374-7(b).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_16" name="fn_16" style="color: #3773b0; position: relative; text-decoration: none;"><sup>16</sup></a><span class="Apple-converted-space"> </span>The regulations also contain a narrow antiabuse rule, under which a taxpayer is required to use its former method of accounting in complying with the requirement of the built-in gains tax if it changed its method “with a principal purpose of avoiding the tax” (Regs. Sec. 1.1374-7(b)).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_17" name="fn_17" style="color: #3773b0; position: relative; text-decoration: none;"><sup>17</sup></a><span class="Apple-converted-space"> </span>Penalties an S corporation may be subject to include those for a substantial understatement of its tax liability (Sec. 6662) and for failure to make estimated tax payments (Sec. 6655).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_18" name="fn_18" style="color: #3773b0; position: relative; text-decoration: none;"><sup>18</sup></a><span class="Apple-converted-space"> </span>Penalties a tax return preparer may be subject to include the Sec. 6694 penalty for certain understatements of the taxpayer’s liability.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_19" name="fn_19" style="color: #3773b0; position: relative; text-decoration: none;"><sup>19</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(5)(A).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_20" name="fn_20" style="color: #3773b0; position: relative; text-decoration: none;"><sup>20</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(5)(B).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_21" name="fn_21" style="color: #3773b0; position: relative; text-decoration: none;"><sup>21</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(5)(C). These adjustments are effectively taken into account in the five-part approach to determining the NUBIG of an S corporation under Regs. Sec. 1.1374-3(a).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_22" name="fn_22" style="color: #3773b0; position: relative; text-decoration: none;"><sup>22</sup></a><span class="Apple-converted-space"> </span>Regs. Sec. 1.1374-4(b). Special rules are also provided for specific types of income or deductions, including (1) income from long-term contracts; (2) gain reported under the installment method; (3) income from discharge of indebtedness; (4) Sec. 481(a) adjustments from prior accounting method changes; (5) deductions for bad debts; and (6) deductions deferred under the economic performance rules of Sec. 461(h), the nonqualified deferred compensation rules of Sec. 404(a)(5), and the Sec. 267(a)(2) rules for certain related-party accruals.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_23" name="fn_23" style="color: #3773b0; position: relative; text-decoration: none;"><sup>23</sup></a><span class="Apple-converted-space"> </span>Such corporations generally consist of corporations not required to use an accrual method of accounting under Sec. 448 because their three-year average annual gross receipts do not exceed $5 million, other small corporations eligible for certain administrative procedures, and qualified personal service corporations regardless of size.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_24" name="fn_24" style="color: #3773b0; position: relative; text-decoration: none;"><sup>24</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(d)(2). In every case, the other two limitations—based on NUBIG and taxable income, respectively—must also be applied to determine the corporation’s liability for the tax.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_25" name="fn_25" style="color: #3773b0; position: relative; text-decoration: none;"><sup>25</sup></a><span class="Apple-converted-space"> </span>Sec. 1371(b)(1).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_26" name="fn_26" style="color: #3773b0; position: relative; text-decoration: none;"><sup>26</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(b)(2). A capital loss carryforward may offset only an RBIG that is properly characterized as a capital gain under general principles.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_27" name="fn_27" style="color: #3773b0; position: relative; text-decoration: none;"><sup>27</sup></a><span class="Apple-converted-space"> </span>Sec. 1374(b)(3)(B). The general business tax credits are only those described in Sec. 38, for which Sec. 39 allows a carryforward and carryback. The most common allowable credits are the credit for increasing research activities, the low-income housing credit, the various “investment” credits (including the rehabilitation credit), and a variety of business-related energy and employment credits.</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_28" name="fn_28" style="color: #3773b0; position: relative; text-decoration: none;"><sup>28</sup></a><span class="Apple-converted-space"> </span>C corporations may deduct their charitable contributions up to an amount equal to 10% of their taxable income determined before such contributions and certain other deductions (Sec. 170(b)(2)). Any excess charitable contributions may be carried forward for up to five tax years and are subject to the same limitation in the carryforward years (Sec. 170(d)(2)).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a class="Blue" href="http://www.aicpa.org/Publications/TaxAdviser/2012/March/Pages/anderson_mar2012.aspx#fnref_29" name="fn_29" style="color: #3773b0; position: relative; text-decoration: none;"><sup>29</sup></a><span class="Apple-converted-space"> </span>C corporations may claim a credit for certain foreign taxes paid or accrued during the tax year (Sec. 901). The credit is generally limited to the amount of federal income tax that otherwise would be imposed on the same income (Sec. 904(a)). Any excess foreign tax credits may be carried back one tax year and forward for up to 10 tax years, subject to the same limitations in the prior and subsequent years (Sec. 904(c)).</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><br />
</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><br />
</div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><i style="background-color: white; font-size: 11px; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;">Written by Kevin D. Anderson, CPA, J.D. </i> </div><div style="background-color: white; color: black; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; margin: 10px 0px; orphans: 2; padding: 0px; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="color: black; font-family: Arial,Helvetica,sans-serif;">Originally published by </span><span style="background-color: #e4e4db; color: white; display: inline ! important; float: none; font-family: Arial,Helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="color: black; font-family: Arial,Helvetica,sans-serif;">American Institute of CPAs, March 2012.</span></span></div>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-72897121419007793142012-03-27T03:00:00.000-07:002012-03-27T03:00:08.197-07:00Personal Insurance Services<div style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: small;"><a href="mailto:npatel@grreidagency.com">: : <b>Neal B. Patel</b>, Managing Director,</a><br />
Personal Insurance Services | <a href="http://www.grreidagency.com/" style="color: blue;">G.R. Reid Agency, LLC</a><br />
631.923.1595 ext. 303</span></div><div style="font-family: Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: Arial,Helvetica,sans-serif;"><span style="font-size: large;"></span><span style="font-size: large;"><b>Boating Season is Right Around the Corner</b></span></div><div style="font-family: Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: Arial,Helvetica,sans-serif;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwvflDGxovyUAH3pv4oEQAdJNwf0wXROzZE-V08d9TGF_bMkCnRniz7DZcBQtcJjGGKq3CCvB-NMQkn10bdNTcG1iynF2earFkfVAa-TPN3iVLjo4PPFBv6EP7mYydGPOiv4EgkfN45tbZ/s1600/SpeedBoat.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwvflDGxovyUAH3pv4oEQAdJNwf0wXROzZE-V08d9TGF_bMkCnRniz7DZcBQtcJjGGKq3CCvB-NMQkn10bdNTcG1iynF2earFkfVAa-TPN3iVLjo4PPFBv6EP7mYydGPOiv4EgkfN45tbZ/s320/SpeedBoat.jpg" width="320" /></a>Americans love the sense of freedom and adventure that comes from boating. But the price tag of recreational boating accidents is high: about $36 million dollars per year. And these figures are probably only the tip of the iceberg since the Coast Guard believes that more than 80 percent of all boating accidents go unreported.<br />
<br />
Given this level of risk for accidents, it would make sense that boat owners would look for a way to protect themselves, but that doesn't seem to be the case. A study conducted by Progressive Insurance revealed that nearly one third of U.S. boat owners don't own a separate watercraft policy. That's probably because boat owners assume that their craft is covered by their personal auto policy or their homeowner's policy. This is a mistake that can cost them big time.<br />
<br />
The standard auto policy covers the boat trailer for liability with the option to add coverage for physical damage. The boat itself, however, is not covered for liability or damage.<br />
<br />
Some homeowner's policies offer coverage for physical damage for boats, but only for smaller vessels. The typical homeowner's policy contains a special property limit of $1,500 on watercraft, which doesn't begin to equal the dollar value of most boats. In addition, the covered perils specific to the boat are also greatly restricted. There is also liability coverage available for boats under the majority of homeowner's policies, but once again, it is only applicable to smaller watercraft. The only exception is a boat with an outboard motor. That means that any type of boat you own that is powered by an inboard or inboard-outboard motor is excluded from liability coverage under the homeowner's policy.</div><div style="font-family: Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: Arial,Helvetica,sans-serif;"><b>Until You Know It's Protected, Keep Your Boat on Dry Land</b> </div><div style="font-family: Arial,Helvetica,sans-serif;">Because most boat owners are unaware how large a property and liability loss they expose themselves to without proper insurance, the Institutional Risk Management Institute (IRMI) has created a list of loss scenarios that demonstrate the need for specialized boat owners coverage:</div><ul style="font-family: Arial,Helvetica,sans-serif;"><li>Your cruiser collides with a speedboat whose operator fails to yield the right of way, causing extensive damage to your boat. The owner of the speedboat does not have any insurance coverage.</li>
<li>An expensive fishing boat you just purchased is stolen from your home.</li>
<li>Your 27-foot-long sailboat is damaged by a hailstorm and high winds while docked at the marina.</li>
<li>Your sport fishing boat is struck by lightning, incapacitating its electrical system.</li>
<li>Your daughter's friend is water skiing behind your boat and falls into the lake, injuring herself, due to the excessive speed of the boat.</li>
<li>You negligently cause another boat to overturn to avoid a collision.</li>
<li>Your outboard motor explodes, seriously injuring your next-door neighbor.</li>
</ul><div style="font-family: Arial,Helvetica,sans-serif;"><br />
These scenarios illustrate the need to factor insurance costs into the equation when buying a boat. If you fail to insure your boat properly, your boat loan may become the smallest of your financial worries.</div><div style="font-family: Arial,Helvetica,sans-serif;"><b><br />
</b></div><div style="font-family: Arial,Helvetica,sans-serif;"><b>Obtain the property and liability protection that makes sense for you.</b><span class="colored"> </span></div><div style="font-family: Arial,Helvetica,sans-serif;"><b><span class="colored">What To Consider:</span></b></div><ul class="check-list" style="font-family: Arial,Helvetica,sans-serif;"><li><b>Size Of Vessel</b><br />
We can insure boats of all sizes, from small runabouts to some of the world’s largest super yachts.</li>
<li><b>Your Comfort Level</b><br />
Various deductible options empower you to choose how much up-front risk you’d like to take; higher deductibles often can result in meaningful premium savings.</li>
<li><b>Your Cruising Itinerary</b><br />
We can cover vessels cruising anywhere in the world.</li>
<li><b>Presence & Size Of Crew</b><br />
Different circumstances call for different solutions.</li>
<li><b>On-Board Contents</b><br />
Broad coverage extends to large amounts of fine art and/or other personal effects.</li>
<li><b>Your Liability Exposure</b><br />
We can provide adequate protection, including coverage for crew claims under the Federal Jones Act.</li>
</ul><span style="font-family: Arial,Helvetica,sans-serif;">Visit the <a href="http://www.grreidagency.com/" style="color: blue;" target="_blank">G.R. Reid website</a> for more information and to request a quote.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-60855510480278038872012-03-23T06:00:00.001-07:002012-03-23T06:00:00.073-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP <br />
Certified Public Accountants
</div><div style="font-family: Arial,Helvetica,sans-serif;">631.425.1800 <a href="http://www.grreid.com/">www.GRReid.com</a></div><div style="font-family: Arial,Helvetica,sans-serif;"> </div><div style="font-family: Arial,Helvetica,sans-serif;"> </div><b><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">Small Employers: Reminder to Utilize Small Business Health Care Tax Credit </span></span></b><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The IRS is encouraging small employers that provide health insurance coverage to their employees to check out the Small Business Health Care Tax Credit.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">This program, which was enacted two years ago as part of the Affordable Care Act, provides income tax credits to small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement. The credit is specifically targeted to help small businesses and tax-exempt organizations provide health insurance for their employees.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The IRS recently revised the Small Business Health Care Tax Credit page on IRS.gov and included information and resources designed to help small employers determine if they qualify for the credit and then to compute it correctly. The webpage includes a step-by-step guide for determining eligibility and examples of typical tax savings under various scenarios. The credit is computed utilizing IRS forms 8941 and 3800.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Filing deadlines differ depending upon how a small business is structured, such as a sole proprietor, corporation, partnership, limited liability company or a tax-exempt organization. Taxpayers needing more time to determine eligibility should consider obtaining an automatic tax-filing extension. Businesses that have already filed and later find that they qualified in 2010 or 2011 can still claim the credit by filing an amended return. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Additional information about eligibility requirements and figuring the credit can be found on IRS.gov or by contacting your G.R. Reid Tax Professional.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-34790358888625661882012-03-22T17:53:00.000-07:002012-03-22T17:53:21.223-07:00Accounting & Tax News<div style="font-family: Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP <br />
Certified Public Accountants
</div><div style="font-family: Arial,Helvetica,sans-serif;">631.425.1800 <a href="http://www.grreid.com/">www.GRReid.com</a></div><div style="font-family: Arial,Helvetica,sans-serif;"><br />
</div><span style="font-size: large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">IRS Releases 2012 Auto and Truck Valuation Rules</span></b></span><br />
<br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">With the release of Rev. Proc. 2012-13, the IRS has set the maximum fair market value amounts regarding the proper valuation rule for employees calculating fringe benefit income from employer-provided automobiles, trucks, and vans first made available for personal use in 2012.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Taxpayers whose employers provide company cars (or trucks and vans) for their personal use must factor that usage into in his or her income and wages as fringe benefit income.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The taxpayers may calculate the value of their personal use using the cents-per-mile valuation rule. The calculation involves imputing the fair-market value of the employer-provided vehicle. The IRS limits the dollar amount of the fair market value of the employer’s vehicle. In 2012, the mileage allowance rate is 55.5 cents-per-mile and the maximum fair market value allowed in 2012 is $15,900 for a passenger automobile, and $16,700 for a truck or van. This means that the cents-per-mile rule cannot be used to value an automobile whose fair market value, as of the first day on which it is made available to any employee for personal use, exceeds certain amounts set by the IRS.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">It is important to note that the maximum fair market values released by Rev. Proc. 2012-13 only applies to automobiles that were allowed to be used as personal property beginning in the year 2012. Therefore, if the automobile in question was first used for personal purposes prior to 2012, then the fair market value limits that apply are those designated by the IRS for those years. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Employers that maintain a fleet of at least 20 automobiles can value the fair market value of each automobile as equal to the average value of the entire fleet. This is known as the Fleet-average value method. This method averages the fair market value of all automobiles used in the fleet. The maximum fair market value for the fleet-average valuation allowed by the IRS in 2012 is $21,000 for a passenger automobile and $21,900 for a truck or van. If a vehicle within the fleet owned by the employer exceeds the maximum fair market value allowed by the IRS, then the fleet-average valuation rule cannot be used.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-25144401842488048082012-03-22T12:11:00.000-07:002012-03-22T12:11:25.856-07:00Financial & Wealth Services News<span style="font-family: Arial,Helvetica,sans-serif;">:: <a href="mailto:gelkin@grreidwealth.com">George G. Elkin,</a> Managing Director, Financial & Wealth Services </span><br style="font-family: Arial,Helvetica,sans-serif;" /> <span style="font-family: Arial,Helvetica,sans-serif;">631.923-1595 ext. 336</span><br style="font-family: Arial,Helvetica,sans-serif;" /> <span style="font-family: Arial,Helvetica,sans-serif;"><a href="http://www.grreidwealth.com/">G. R. Reid Wealth Management Services, LLC </a> </span><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisH2kXKnbw8DxBKjwmx4ZpZlNv6nTOfdv4FKC7W1JswZZFHiuJE_E7zXjTkOA66rt5pTGPkn1IH80x-PyqU0pvW8Dp49-jU5RHzrk3swJjgIYxPnoo_s40kk_iy2SxSrYyS-CSvKKbfaaG/s1600/GRRWealthGeorgeheadshot.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisH2kXKnbw8DxBKjwmx4ZpZlNv6nTOfdv4FKC7W1JswZZFHiuJE_E7zXjTkOA66rt5pTGPkn1IH80x-PyqU0pvW8Dp49-jU5RHzrk3swJjgIYxPnoo_s40kk_iy2SxSrYyS-CSvKKbfaaG/s320/GRRWealthGeorgeheadshot.jpg" width="320" /></a></div><span style="font-family: Arial,Helvetica,sans-serif;"> </span><b><span style="font-size: large;"><span style="font-family: Arial,Helvetica,sans-serif;">What Is the Most Tax-Efficient Way to Take a Distribution from a Retirement Plan?</span></span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If you receive a distribution from a qualified retirement plan, such as a 401(k), you need to consider whether to pay taxes now or to roll over the account to another tax-deferred plan. A correctly implemented rollover can avoid current taxes and allow the funds to continue accumulating tax deferred. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Paying Current Taxes with a Lump-Sum Distribution</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If you decide to take a lump-sum distribution, income taxes are due on the total amount of the distribution and are due in the year in which you cash out. Employers are required to withhold 20 percent automatically from the check and apply it toward federal income taxes, so you will receive only 80 percent of your total vested value in the plan. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The advantage of a lump-sum distribution is that you can spend or invest the balance as you wish. The problem with this approach is parting with all those tax dollars. Income taxes on the total distribution are taxed at your marginal income tax rate. If the distribution is large, it could easily move you into a higher tax bracket. Distributions taken prior to age 59½ are subject to an additional 10% federal income tax penalty.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
<h3><span style="font-size: small;"><i><span style="font-family: Arial,Helvetica,sans-serif;">If you were born prior to 1936, there are two special options that can help reduce your tax burden on a lump sum.</span></i></span></h3><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The first special option, 10-year averaging, enables you to treat the distribution as if it were received in equal installments over a 10-year period. You then calculate your tax liability using the 1986 tax tables for a single filer.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The second option, capital gains tax treatment, allows you to have the pre-1974 portion of your distribution taxed at a flat rate of 20 percent. The balance can be taxed under 10-year averaging, if you qualify. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">To qualify for either of these special options, you must have participated in the retirement plan for at least five years and you must be receiving a total distribution of your retirement account.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Note that these special tax treatments are one-time propositions for those born prior to 1936. Once you elect to use a special option, future distributions will be subject to ordinary income taxes. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Deferring Taxes with a Rollover</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If you don’t qualify for the above options or don’t want to pay current taxes on your lump-sum distribution, you can roll the money into a traditional IRA.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If instead you choose a rollover from a tax-deferred plan to a Roth IRA, you must pay income taxes on the total amount converted in that tax year. However, future withdrawals of earnings from a Roth IRA are free of federal income tax as long as the account has been held for at least five tax years.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">If you elect to use an IRA rollover, you can avoid potential tax and penalty problems by electing a direct trustee-to-trustee transfer; in other words, the money never passes through your hands. IRA rollovers must be completed within 60 days of the distribution to avoid current taxes and penalties.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">An IRA rollover allows your retirement nest egg to continue compounding tax deferred. Remember that you must begin taking annual required minimum distributions (RMDs) from tax-deferred retirement plans after you turn 70½ (the first distribution must be taken no later than April 1 of the year after the year in which you reach age 70½). Failure to take RMDs subjects the funds that should have been withdrawn to a 50 percent federal income tax penalty. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Of course, there is also the possibility that you may be able to keep the funds with your former employer, if allowed by your plan. </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Before you decide which method to take for distributions from a qualified retirement plan, it would be prudent to consult with a professional tax advisor. </span><br />
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<span style="font-size: small;"><b><span style="font-family: Arial,Helvetica,sans-serif;">Visit our website: </span><span style="color: blue; font-family: Arial,Helvetica,sans-serif;"><a href="http://www.grreidwealth.com/"></a><a href="http://www.grreidwealth.com/"><span style="color: #351c75;">G.R. Reid Wealth Management Services, LLC</span></a> </span></b></span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"></span><span style="font-size: x-small;"><span style="font-family: Arial,Helvetica,sans-serif;"></span></span><br />
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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.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"><br />
This material was written and prepared by Emerald.</span></span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-55741621256074431472012-02-28T01:17:00.000-08:002012-02-28T01:17:54.469-08:00Accounting & Tax News<h1 style="background-color: white; color: #262870; font-family: Arial,Helvetica,sans-serif; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: small;"><span style="font-weight: normal;">G.R. Reid Associates, LLP </span></span></h1><h1 style="background-color: white; color: #262870; font-family: Arial,Helvetica,sans-serif; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: small;"><span style="font-weight: normal;">Certified Public Accountants <br />
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<span style="font-size: small;"><span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;">President's FY 2013 budget proposals carry numerous tax changes</span></b></span></span><br />
<span style="font-size: small;"><span style="font-size: x-large;"><b><span style="font-family: Arial,Helvetica,sans-serif;"> </span></b></span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">On February 13, the President released his federal budget proposals for fiscal year 2013, and, on the same day, the Treasury released its “General Explanations of the Administration's Fiscal Year 2013 Revenue Proposals” (the so-called “Green Book”). The revenue proposals include over 130 large and small proposed tax changes for businesses and individuals, including new incentives to “insource” jobs, higher taxes for upper-income taxpayers, and the extension of key tax breaks.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span><br />
<span style="font-size: small;"><b><span style="font-family: Arial,Helvetica,sans-serif;">Business Tax Proposals</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The budget's proposals for business include the following:</span></span><br />
<span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span><br />
<ul><li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">The payroll tax cut currently in place for January and February of this year would be extended for the rest of 2012.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Qualified employers would be provided a tax credit for increases in wage expense, whether driven by new hires, increased wages, or both. The credit would be equal to 10% of the increase in the employer's 2012 eligible wages (OASDI wages) over the prior year (2011). The maximum amount of the increase in eligible wages would be $5 million per employer, for a maximum credit of $500,000, to focus the benefit on small businesses. For employers with no OASDI wages in 2011, eligible wages for 2011 would be 80% of their OASDI wage base for 2012. The credit would generally be considered a general business credit. A similar credit would be provided for qualified tax-exempt employers. The credit would be effective for wages paid during the one-year period beginning on Jan. 1, 2012.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Employers currently pay FUTA tax at a rate of 6.0% (beginning July 1, 2011) on the first $7,000 of covered wages paid annually to each employee. The rate for the first half of 2011 was 6.2%, including the 6% permanent tax rate and the 0.2% temporary surtax that expired on June 30, 2011. The net federal unemployment insurance tax on employers would permanently revert to 6.2%, effective for wages paid with respect to employment on or after Jan. 1, 2013. Also, under current law, employers in States that meet certain Federal requirements are allowed a credit against FUTA taxes of up to 5.4%, making the minimum net Federal rate 0.6%. States that become non-compliant are subject to a reduction in FUTA credit, causing employers to face a higher Federal UI tax. Effective on the enactment date, short-term relief would be provided, for example, the FUTA credit reduction for employers in borrowing States would be suspended in 2012 and 2013. Other changes would be made. For example, the FUTA wage base would be raised in 2015 to $15,000 per worker.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">The 100% bonus first-year depreciation deduction that generally applies only for assets placed in service before 2012, would be extended through 2012.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Use of the last-in, first-out (LIFO) accounting method would be repealed, for tax years beginning after Dec. 31, 2013. Taxpayers required to change from the LIFO method also would be required to report their beginning-of-year inventory at its first-in, first-out (FIFO) value in the year of change, causing a one-time increase in taxable income that would be recognized ratably over 10 years.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2013, bar the use of the lower-of-cost-or market and subnormal goods methods of inventory accounting, which currently allow certain taxpayers to take cost-of-goods-sold deductions on certain merchandise before the merchandise is sold. Any resulting income inclusion would be recognized over a four-year period beginning with the change year.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">An additional $5 billion of credits for investments in eligible property used in a qualifying advanced energy manufacturing project. Taxpayers would be able to apply for a credit with respect to part or all of their qualified investment. Applications for the additional credits would be made during the two-year period beginning on the date on which the additional authorization is enacted.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Replace the existing deduction for energy efficient commercial building property with a tax credit equal to the cost of property that is certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting, heating, cooling, ventilation, and hot water systems of the building by 20% or more in comparison to a reference building which meets certain minimum requirements. The tax credit would be available for property placed in service during calendar year 2013.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Effective for bonds issued after the enactment date, make the Build America Bonds program permanent at a Federal subsidy level equal to 30% through 2013 and 28% of the coupon interest on the bonds thereafter. The 28% Federal subsidy level would be intended to be approximately revenue neutral relative to the estimated future Federal tax expenditure for tax-exempt bonds. The eligible uses for Build America Bonds also would be expanded.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Effective after 2013, require employers in business for at least two years that have more than ten employees to offer an automatic IRA option to employees, under which regular contributions would be made to an IRA on a payroll-deduction basis. If the employer sponsored a qualified retirement plan, SEP, or SIMPLE for its employees, it would not be required to provide an automatic IRA option for its employees. Additionally, the non-refundable “start-up costs” tax credit for a small employer that adopts a new qualified retirement, SEP, or SIMPLE would be doubled from the current maximum of $500 per year for three years to a maximum of $1,000 per year for three years and extended to four years (rather than three) for any employer that adopts a new qualified retirement plan, SEP, or SIMPLE during the three years beginning when it first offers (or first is required to offer) an automatic IRA arrangement. This expanded “start-up costs” credit for small employers, like the current “start-up costs” credit, would not apply to automatic or other payroll deduction IRAs.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For qualified small business stock (QSBS) acquired after Dec. 31, 2011, make the 100% exclusion for qualified small business stock permanent. The AMT preference item for gain excluded under Code Sec. 1202 would be repealed for all excluded small business stock gain. Also, the time for a taxpayer to reinvest the proceeds of sales of small business stock under Code Sec. 1045 would be increased to 6 months for qualified small business stock the taxpayer has held longer than three years.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years ending on or after the date of enactment, the maximum amount of start-up expenditures that a taxpayer may deduct (in addition to amortized amounts) in the tax year in which a trade or business begins, would be permanently doubled from $5,000 to $10,000. This maximum amount of expensed start-up expenditures would be reduced (but not below zero) by the amount by which start-up expenditures with respect to the active trade or business exceed $60,000.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2011, liberalize the tax credit available to small employers providing health insurance to employees. For example, the group of employers who are eligible for the credit would be expanded to include employers with up to 50 full-time equivalent employees and the phase-out would begin at 20 full-time equivalent employees.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Require corporate business jets that carry passengers to be depreciated over seven years instead of five, effective for property placed in service after Dec. 31, 2012.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Eliminate these tax preferences for oil and gas companies, generally effective after Dec. 31, 2012: investment tax credit for enhanced oil recovery projects, production credit for oil and gas from marginal wells, intangible drilling cost deduction, the deduction for tertiary injectants used as part of a tertiary recovery method, the exception to passive loss limits for working interests in oil and natural gas properties, percentage depletion, and two-year amortization of independent producers' geological and geophysical expenditures (amortization period would be increased to seven years).</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Eliminate tax preferences for coal activities beginning in 2013 (expensing of exploration and development costs, percentage depletion for hard mineral fossil fuels, capital gains treatment for royalties, and the Code Sec. 199 deduction).</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Tax certain “carried interest” as ordinary income, instead of at the 15% capital gains rate.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Permit IRS to issue generally applicable guidance about the proper classification of workers and to require prospective reclassification of workers who are currently misclassified and whose reclassification is prohibited under section 530 of the '78 Revenue Act. Penalties would be waived for service recipients with only a small number of workers, if they had consistently filed all required information returns reporting all payments to all misclassified workers and agreed to prospective reclassification of misclassified workers. This proposal would apply on enactment, but the prospective reclassification for those covered currently by section 530 of the '78 Revenue Act would not be effective for at least one year after the enactment date.</span></span></li>
</ul><span style="font-size: small;"><b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Proposals to Boost U.S. Manufacturing and Insourcing of Jobs</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">To encourage businesses to locate jobs and business activity in the U.S., the President's budget proposes to make these changes, among others:</span></span><br />
<ul><li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Effective for expenses paid or incurred after the date of enactment, create a new general business credit against income tax equal to 20% of the eligible expenses paid or incurred in connection with insourcing a U.S. trade or business. Insourcing a U.S. trade or business would mean reducing or eliminating a trade or business (or line of business) currently conducted outside the U.S. and starting up, expanding, or otherwise moving the same trade or business within the U.S., to the extent that this action results in an increase in U.S. jobs.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Effective for expenses paid or incurred after the date of enactment, deductions for expenses paid or incurred in connection with outsourcing a U.S. trade or business would be disallowed. Outsourcing a U.S. trade or business would mean reducing or eliminating a trade or business or line of business currently conducted inside the U.S. and starting up, expanding, or otherwise moving the same trade or business outside the U.S., to the extent that this action results in a loss of U.S. jobs.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Creation of a new allocated tax credit to support investments in communities that have suffered a major job loss event (i.e., when a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in a long-term mass layoff). About $2 billion in credits would be provided for qualified investments approved in each of the three years, 2012 through 2014.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2012, limit the extent to which the Code Sec. 199 domestic production deduction is allowed with respect to nonmanufacturing activities by excluding from the definition of domestic production gross receipts (DPGR) any gross receipts derived from sources such as the production of oil and gas, the production of coal and other hard mineral fossil fuels, and certain other nonmanufacturing activities. Additional revenue obtained from this retargeting would be used to increase the general deduction percentage and to fund an increase of the deduction rate for activities involving the manufacture of certain advanced technology property to approximately 18%.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Retroactively effective after Dec. 31, 2011, make the research credit permanent and increase the rate of the alternative simplified research credit from 14% to 17%.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span></li>
</ul><b><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">International Tax System</span></span></b><br />
<span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Following are highlights of the President's proposals for reforming the U.S. international tax system:</span></span><ul><li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Defer the deduction of interest expense properly allocated and apportioned to a taxpayer's foreign-source income that is not currently subject to U.S. tax until such income is subject to U.S. tax.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Require a taxpayer to determine foreign tax credits from the receipt of a dividend from a foreign subsidiary on a consolidated basis for all its foreign subsidiaries. Foreign tax credits from the receipt of a dividend from a foreign subsidiary would be based on the consolidated earnings and profits and foreign taxes of all the taxpayer's foreign subsidiaries.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Provide that if a U.S parent transfers an intangible to a controlled foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the U.S., then an amount equal to the excessive return would be treated as subpart F income.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Clarify the definition of intangible property for purposes of the special rules relating to transfers of intangibles by a U.S. person to a foreign corporation (Code Sec. 367(d)) and the allocation of income and deductions among taxpayers (Code Sec. 482) to prevent inappropriate shifting of income outside the U.S.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Amend the rules that limit the deductibility of interest paid to related persons subject to low or no U.S. tax on that interest to prevent inverted companies from using foreign-related party and certain guaranteed debt to inappropriately reduce the U.S. tax on income earned from their U.S. operations.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Disallow the deduction for non-taxed reinsurance premiums paid to affiliates.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Modify tax rules for dual capacity taxpayers.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Tax gain from the sale of a partnership interest on look-through basis.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Prevent use of leveraged distributions from related foreign corporations to avoid dividend treatment.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Extend Code Sec. 338(h)(16), which provides that (subject to certain exceptions) the deemed asset sale resulting from a section 338 election is not treated as occurring for purposes of determining the source or character of any item for purpose of applying the foreign tax credit rules to the seller, to certain asset acquisitions.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Remove foreign taxes from a Code Sec. 902 corporation's foreign tax pool when earnings are eliminated.</span></span></li>
</ul><span style="font-size: small;"><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Tax Changes for Individuals</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">The President's plan calls for numerous changes to be made for individuals, including the following:</span></span><br />
<ul><li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2012, reinstatement of upper-income taxpayers' reduction of itemized deductions and phaseout of personal exemptions.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">The expiration of the 2001 and 2003 (EGTRRA and JGTRRA) tax cuts for those with household income over $250,000 a year for joint filers ($200,000 for single taxpayers), effective after 2012.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For dividends received after Dec. 31, 2012, the current reduced tax rates on qualified dividends would expire for income that would be taxable in the 36% or 39.6% brackets. In other words, qualified dividends for upper income taxpayers would be taxed as ordinary income.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For long-term capital gains realized after Dec. 31, 2012, the current reduced tax rates on long-term capital gains would expire for capital gain income that, in the absence of any preferential treatment of long-term capital gains, would be taxable in the 36% or 39.6% brackets. Thus, the maximum long-term capital gains tax rate for upper-income taxpayers would be 20%.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2012, the tax value of specified deductions or exclusions from AGI and all itemized deductions would be limited to 28% of the specified exclusions and deductions that would otherwise reduce taxable income in the 36% or 39.6% tax brackets. A similar limit also would apply under the alternative minimum tax. The limit would apply to tax-exempt state and local bond interest, employer-sponsored health insurance paid for by employers or with before-tax employee dollars, health insurance costs of self-employed individuals, employee contributions to defined contribution retirement plans and individual retirement arrangements, the deduction for income attributable to domestic production activities, certain trade and business deductions of employees, moving expenses, contributions to health savings accounts and Archer MSAs, interest on education loans, and certain higher education expenses. The change would apply to itemized deductions after they have been reduced by the proposed statutory limit on certain itemized deductions for higher income taxpayers.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">The budget proposal would make permanent the American Opportunity Tax Credit (AOTC), a partially refundable tax credit worth up to $10,000 per student over four years of college.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2012, the expansion of the EITC for workers with three or more qualifying children would be made permanent. Specifically, the phase-in rate of the EITC for workers with three or more qualifying children would be maintained at 45%, resulting in a higher maximum credit amount and a longer phase-out range.</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">For tax years beginning after Dec. 31, 2012, the AGI level at which the child and dependent care credit begins to phase down would permanently increase from $15,000 to $75,000. The percentage of expenses for which a credit may be taken would decrease at a rate of 1 percentage point for every $2,000 (or part thereof) of AGI over $75,000 until the percentage reached 20% (at incomes above $103,000).</span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">The exclusion for income from the discharge of qualified principal residence indebtedness (QRPI) would be extended to amounts that are discharged before Jan. 1, 2015, and to amounts that are discharged pursuant to an agreement entered before that date.</span></span></li>
</ul><span style="font-size: small;"><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Estate and Gift Tax Proposals</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Restoration of transfer tax to 2009 levels. The estate, generation-skipping transfer (GST), and gift tax parameters as they applied during 2009 would be made permanent. The top tax rate would be 45% and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes. These changes would apply for estates of decedents dying, and for transfers made, after Dec. 31, 2012.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Portable estate tax exclusion made permanent. The provision allowing a surviving spouse to use the deceased spouse's unused estate tax exclusion, which expires for decedents dying after Dec. 31, 2012, would be made permanent.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Basis consistency and reporting requirement for donated and inherited property. The basis of property in the hands of the recipient could be no greater than the value of that property as determined for estate or gift tax purposes (subject to subsequent adjustments). A reporting requirement would be imposed on executors and donors to provide the necessary valuation and basis information to both the recipient and IRS. These rules would apply for transfers on or after the enactment date.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Toughened rules for valuation discounts. Certain additional restrictions (“disregarded restrictions”) would be ignored under Code Sec. 2704 in valuing an interest in a family-controlled entity transferred to a member of the family if, after the transfer, the restriction will lapse or may be removed by the transferor and/or the transferor's family. The transferred interest would be valued by substituting for the disregarded restrictions certain assumptions to be specified in regs. These rules would apply to transfers after the enactment date of property subject to restrictions created after Oct. 8, 1990 (the effective date of Code Sec. 2704)</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Minimum and maximum term for grantor retained annuity trusts (GRATs). A GRAT would be required to have a minimum term of ten years and a maximum term of the life expectancy of the annuitant plus ten years. Also, the remainder interest would have to have a value greater than zero at the time the interest is created and any decrease in the annuity during the GRAT term would be prohibited. These rules would apply to trusts created after the enactment date.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Duration of GST tax exemption limited. On the 90th anniversary of the creation of a trust, the GST exclusion allocated to the trust would terminate. This rule would apply to trusts created after the enactment date, and to the portion of a preexisting trust attributable to additions to such a trust made after that date.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Coordination of income and transfer tax rules applicable to grantor trusts. The current lack of coordination between the income and transfer tax rules applicable to a grantor trust creates opportunities to structure transactions between the deemed owner and the trust that can result in the transfer of significant wealth by the deemed owner without transfer tax consequences. New rules for grantor trusts would prevent this by: (1) including the assets of the trust in the grantors' gross estate of that grantor for estate tax purposes, (2) subjecting to gift tax any distribution from the trust to one or more beneficiaries during the grantor's life, and (3) subjecting to gift tax the remaining trust assets at any time during the grantor's life if the grantor ceases to be treated as an owner of the trust for income tax purposes. These rules would apply for trusts created on or after the enactment date and with regard to any portion of a pre-enactment trust attributable to a contribution made on or after the enactment date.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Extension of estate tax lien on Code Sec. 6166 deferrals. The estate tax lien under Code Sec. 6324(a)(1) would be extended to apply throughout the Code Sec. 6166 deferral period, effective for estates of decedents dying on or after the effective date and for estates of decedents dying before the enactment date as to which the current law Code Sec. 6324(a)(1) lien period had not expired on the effective date.</span></span><br />
<span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><b><span style="font-family: Arial,Helvetica,sans-serif;">Other Proposals</span></b><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Many expiring provisions would be extended. The Administration proposes to extend a number of provisions that have expired or are scheduled to expire on or before Dec. 31, 2012. For example, the optional deduction for State and local general sales taxes, the deduction for qualified out-of-pocket classroom expenses, the deduction for qualified tuition and related expenses, the Subpart F “active financing” and “look-through” exceptions, and the modified recovery period for qualified leasehold, restaurant, and retail improvements, would be extended through Dec. 31, 2013.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">Reducing the tax gap. The President's budget calls for increases in IRS's tax enforcement and compliance budget to enable IRS to more effectively crack down on “tax cheats and delinquents,” and thereby bring in more revenue, and implement many recent tax law changes. The plan also includes a host of measures to expand information reporting, improve compliance by businesses (e.g., require more forms to be filed electronically), and specific changes to step up collection of taxes.</span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;"> </span></span><br />
<br />
<span style="font-size: small;"><i><span style="font-family: Arial,Helvetica,sans-serif;">The following web links can go to the White House or Treasury websites to access the official release material:</span></i></span><br />
<ul><li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">White House FY2013 budget webpage can be viewed at <a href="http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf%20.">http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf .</a></span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Treasury press release can be viewed at <a href="http://www.treasury.gov/press-center/press-releases/Pages/tg1414.aspx.%20">http://www.treasury.gov/press-center/press-releases/Pages/tg1414.aspx. </a></span></span></li>
<li><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Full text of the FY2013 Green Book can be viewed at <a href="http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2013.pdf.">http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2013.pdf.</a></span></span></li>
</ul><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Source: Federal Tax Updates on Checkpoint News tab 2/14/2012</span></span><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-size: x-small;"><span style="font-family: Arial,Helvetica,sans-serif;">Source: WG&L Accounting & Compliance Alert on Checkpoint 2/14/2012 </span><span style="font-family: Arial,Helvetica,sans-serif;"></span><br style="font-family: Arial,Helvetica,sans-serif;" /><span style="font-family: Arial,Helvetica,sans-serif;">© 2012 by Thomson Reuters/RIA. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of Thomson Reuters/RIA.</span></span></span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-24102065153849753982012-02-28T00:41:00.000-08:002012-02-28T00:41:58.455-08:00Healthcare and Benefit Services<div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><a href="mailto:jseiden@grreidhealth.com">: : <b>Julie Seiden</b>,<b> </b>Managing Director,</a><br />
Health Benefits Services | </div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> 631.923.1595 ext. 310</div><a href="http://www.grreidhealth.com/"><span style="color: #444444; font-weight: bold;">G.R. Reid Healthcare & Benefit Services, LLC</span></a><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: x-large;"><strong>Behavior-Based Design Promotes Healthy Lifestyle Changes</strong></span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhz8a3mLghjcETLZVUetTh-SZuE_cd-fzSl9AOB9EmCrWAupUEGnbGvKQ5pDP-pB0e7TSTxAMsBY-e17VQbvg6HA2vSoCOu3lJE0_gKMxB1fJsFpSQ68Y7gyqarjbyPGcMM1fdovsikTuZU/s1600/JSeiden.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhz8a3mLghjcETLZVUetTh-SZuE_cd-fzSl9AOB9EmCrWAupUEGnbGvKQ5pDP-pB0e7TSTxAMsBY-e17VQbvg6HA2vSoCOu3lJE0_gKMxB1fJsFpSQ68Y7gyqarjbyPGcMM1fdovsikTuZU/s200/JSeiden.jpg" width="138" /></a></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;"><strong> </strong>According to the Centers for Medicaid Services, at $8,086 per person annually, the United States spends more per capita on health care than any other country in the world. However, at least half of the country's population has one or more chronic diseases, 33% are diabetic or pre-diabetic and 66% are overweight or obese. These statistics came from the U.S. Centers for Disease Control and Prevention. However, Americans inflict these statistics upon themselves. Lack of exercise, poor nutrition and smoking are three leading contributors to such a high percentage of unhealthy people.</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;"><strong><i>Promoting A Healthy Lifestyle</i></strong><br />
People are naturally wired to keep doing what they're already doing. If there is no incentive to change, even if it's beneficial, they won't. This also applies to offering passive open enrollment. Employees are more likely to keep their current coverage. VBID is a new insurance design based on value. It also encourages wellness proponents. The main idea is to match patients' out-of-pocket expenses with heath service values. Different levels of value are recognized in this approach. By making high-value treatments more available and discouraging low-value treatments, this approach works to yield improved health outcomes on all health care expenditure levels. Research shows that barrier reductions improve patient compliance for recommended treatments.</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;">In addition to increasing compliance for treatments, this approach has also been shown to increase compliance in patients who need regular medication. A study performed by the Center for Health Value Innovation and the University of Michigan Center for Value-Based Insurance Design showed that patients with chronic illnesses who required medication were more willing to take it. Their cooperation for preventative services was also better. However, there is still one troubling issue, which is people who have the opportunity and encouragement to comply but don't. This has left researchers wondering what is missing from the VBID approach that is necessary to make such people more compliant. The solution is to implement the use of loss aversion and productive tension to raise individual involvement for improving healthy behavior.</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;"><strong><i>Raising The Productive Tension Level</i></strong><br />
The main idea of productive tension is to create a program that gives enough initiative to provide patients with a positive reason to change. In order to be optimal, productive tension needs to have four different components:</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><ul style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><li><span style="font-size: small;">Information - Although it increases knowledge, it doesn't always encourage action. If it did, the country's population would be rich, fit and happy. After purchasing $46 billion on diet and self-help books in 2010, Americans still need help.</span></li>
<li><span style="font-size: small;">Infrastructure - This includes having the right tools, technology and resources to help people. Keep in mind that infrastructure alone doesn't necessarily initiate action.</span></li>
<li><span style="font-size: small;">Incentives - Nothing works better for motivation than a reward. Financial rewards are especially enticing. These still may not initiate action in all people. In a Global Survey of Health Promotion and Workplace Wellness Strategies, only 48% of employers stated that their incentive programs were minimally effective.</span></li>
<li><span style="font-size: small;">Imperatives - These are important for accountability and understanding. People need to know what they must accomplish, why they need to do so and what happens if they fail.</span></li>
</ul><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;"><strong><i>Applying The Behavioral Design</i></strong><br />
One illustrative example of applying the behavior-based design is depicted by Safeway. The supermarket chain's CEO, Steven Burd, said that 70% of his employees' health care costs were because of their own behavior. In addition to this, 74% of those cases included four major chronic health conditions. The conditions were cancer, diabetes, cardiovascular disease and obesity. During the following five years, the supermarket chain redesigned its health care infrastructure. Their new focus, after launching the Healthy Measures Initiative, is consumer-based strategies. As a result of the positive changes, Safeway has seen a great increase in voluntary participation among their workers for controlling and preventing these conditions.</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><span style="font-size: small;"><strong><i>Solutions For Creating Tension</i></strong><br />
There are several different ways to encourage participants to become healthier. The following are a few good examples of beneficial changes:</span></div><div style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><br />
</div><ul style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"><li><span style="font-size: small;">Health Requirements - Having employees pass an annual physical and health exam is a great idea for an incentive.</span></li>
<li><span style="font-size: small;">Company Gym - While providing an outside gym membership may be effective sometimes, having a gym or fitness center in the workplace is even more effective.</span></li>
<li><span style="font-size: small;">Company Contests - Hosting contests that all employees can participate in is beneficial. Weight loss or health competitions with cash prizes and contribution pools are extremely successful.</span></li>
</ul><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif; font-size: small;">The bottom line is that increasing tension to promote a healthy lifestyle change is the best way to make it happen. People are much easier to convince when there are both incentives and rewards. </span><br />
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<span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">For more information on our services, visit the </span><a href="http://grreidhealth.com/" style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">G.R. Reid Healthcare & Benefit Services</a><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> website.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-60292051264808112692012-02-21T16:06:00.000-08:002012-02-21T16:06:17.000-08:00Accounting & Tax News<h1 style="background-color: white; color: #262870; font-family: Times,'Times New Roman',serif; font-size: 18pt; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: small; font-weight: normal;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">G.R. Reid Associates, LLP</span><br style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;" /><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> 631.425.1800 </span></span></h1><h1 style="background-color: white; color: #262870; font-family: Times,'Times New Roman',serif; font-size: 18pt; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><a href="http://www.grreid.com/"><span style="font-size: small; font-weight: normal;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">www.GRReid.com</span></span></a></h1><h1 style="background-color: white; color: #262870; font-family: Times,'Times New Roman',serif; font-size: 18pt; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-size: small; font-weight: normal;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> </span></span><span style="font-size: x-large;"><span id="ctl00_ctl00_HtmlBody_ContentPlaceHolder1_HeadlinePlaceholder"></span></span></h1><h1 style="background-color: white; color: #262870; font-family: Times,'Times New Roman',serif; font-size: 18pt; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif; font-size: x-large;"><span id="ctl00_ctl00_HtmlBody_ContentPlaceHolder1_HeadlinePlaceholder">Congress Passes Payroll Tax Cut Extension</span></span><span id="ctl00_ctl00_HtmlBody_ContentPlaceHolder1_HeadlinePlaceholder"> </span></h1><h1 style="background-color: white; color: #262870; font-family: Times,'Times New Roman',serif; font-size: 18pt; font-style: normal; font-variant: normal; font-weight: bold; letter-spacing: normal; line-height: 18pt; margin-top: 0.25em; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span id="ctl00_ctl00_HtmlBody_ContentPlaceHolder1_HeadlinePlaceholder"><br />
</span></h1><span style="font-size: small;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">Last Friday, the House of Representatives and the Senate both passed a bill that will extend the reduced 4.2% Social Security tax rate through the end of the year (The Middle Class Tax Relief and Job Creation Act of 2012, H.R. 3630). The vote was 293–132 in the House and 60–36 in the Senate. The bill now goes to President Barack Obama, who is expected to sign it quickly.</span></span><br />
<span style="font-size: small;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> </span><br style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;" /><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">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 Temporary Payroll Tax Cut Continuation Act of 2011, P.L. 112-78, enacted Dec. 23, 2011, the 4.2% rate was extended through Feb. 29, 2012. For 2012, that rate applies to the first $110,100 of wages.</span><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> H.R. 3630 extends the 4.2% rate through the end of 2012. As a result, a recapture provision included in the temporary extension will not take effect. Under that rule, taxpayers with income from employment for January and February that exceeds $18,350 would have been required to recapture the excess benefit they receive.</span><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors.</span><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> The extension of the payroll tax cut is estimated by the Joint Committee on Taxation staff to cost $93 billion in revenue over the next two years.</span><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> The act raises revenue through an auction of the spectrum of public airwaves, currently reserved for television, to allow for more wireless Internet systems. The auctions are projected to raise $15 billion.</span><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;"> The act also repeals earlier-enacted shifts in the timing of corporate estimated tax payments.</span></span><br />
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<span style="font-size: small;"><span style="font-size: x-small;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">Content provided by the Journal of Accountancy http://www.journalofaccountancy.com/Web/20125176.htm </span></span></span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-89497643562176832032012-02-21T08:02:00.000-08:002012-02-21T08:02:30.417-08:00Financial & Wealth Services News<span style="font-family: Arial,Helvetica,sans-serif;">:: <a href="mailto:gelkin@grreidwealth.com">George G. Elkin,</a> Managing Director, Financial & Wealth Services </span><br style="font-family: Arial,Helvetica,sans-serif;" /> <span style="font-family: Arial,Helvetica,sans-serif;">631.923-1595 ext. 336</span><br style="font-family: Arial,Helvetica,sans-serif;" /> <span style="font-family: Arial,Helvetica,sans-serif;"><a href="http://www.grreidwealth.com/">G. R. Reid Wealth Management Services, LLC </a> </span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;"> </span><b><span style="color: blue; font-size: x-large;">Save Now or Save Later?</span></b><span style="font-family: Arial,Helvetica,sans-serif;"></span><span style="font-family: Arial,Helvetica,sans-serif;"> </span><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2ThtdFY6I2wSOxnm8IG9LSFQ7vdIqPZrJ2GnmIH8t86VUqcSJ5hqn61duvWi9oeypLLwcSWJ6_rhYQ5MKuro4UGWLPGWfG-ZMTpP0FL3Uf-uw7h4PYj47N7TvshHNe-tXT7yded3RZgXK/s1600/2.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2ThtdFY6I2wSOxnm8IG9LSFQ7vdIqPZrJ2GnmIH8t86VUqcSJ5hqn61duvWi9oeypLLwcSWJ6_rhYQ5MKuro4UGWLPGWfG-ZMTpP0FL3Uf-uw7h4PYj47N7TvshHNe-tXT7yded3RZgXK/s320/2.jpg" width="320" /></a></div><span style="font-family: Arial,Helvetica,sans-serif;"></span>Most people have good intentions about saving for retirement. But few know when they should start and how much they should save. <br />
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Sometimes it might seem that the expenses of today make it too difficult to start saving for tomorrow. It’s easy to think that you will begin to save for retirement when you reach a more comfortable income level, but the longer you put if off, the harder it will be to accumulate the amount you need. <br />
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The rewards of starting to save early for retirement far outweigh the cost of waiting. By contributing even small amounts each month, you may be able to amass a great deal over the long term. One helpful method is to allocate a specific dollar amount or percentage of your salary every month and to pay yourself as though saving for retirement were a required expense. <br />
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Here’s a hypothetical example of the cost of waiting. Two friends, Chris and Leslie, want to start saving for retirement. Chris starts saving $275 a month right away and continues to do so for 10 years, after which he stops but lets his funds continue to accumulate. Leslie waits 10 years before starting to save, then starts saving the same amount on a monthly basis. Both their accounts earn a consistent 8% rate of return. After 20 years, each would have contributed a total of $33,000 for retirement. However, Leslie, the procrastinator, would have accumulated a total of $50,646, less than half of what Chris, the early starter, would have accumulated ($112,415).* <br />
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This example makes a strong case for an early start so that you can take advantage of the power of compounding. Your contributions have the potential to earn interest, and so does your reinvested interest. This is a good example of letting your money work for you.<br />
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If you have trouble saving money on a regular basis, you might try savings strategies that take money directly from your paycheck on a pre-tax or after-tax basis, such as employer-sponsored retirement plans and other direct-payroll deductions. <br />
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Regardless of the method you choose, it’s extremely important to start saving now, rather than later. Even small amounts can help you greatly in the future. You could also try to increase your contribution level by 1% or more each year as your salary grows.<br />
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Distributions from tax-deferred retirement plans, such as 401(k) plans and traditional IRAs, are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if withdrawn prior to age 59½.<br />
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*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.<br />
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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.<br />
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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.</span><br />
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This material was written and prepared by Emerald.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-73271016799421948222012-02-21T06:20:00.000-08:002012-02-21T06:20:23.600-08:00Accounting & Tax News<a href="http://www.grrcpas.com/">G.R. Reid Associates, LLP</a><br />
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<b><span style="color: blue; font-size: x-large;">Charitable Deductions – More Than One Benefit</span></b> <br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifgeFopTUNnVb5NAqoO3jgN6B3rSrV_djn2mmCTRfSt-DxnsueQrWqgi7_aeGNi35UYY0fCYXozselYmieafYJaUO4io2acmGtQOFwXMYD1UvD845WtL3fTmOJKUCu6EuUtoNo4LdnpWCM/s1600/iStock_000005093866Small.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifgeFopTUNnVb5NAqoO3jgN6B3rSrV_djn2mmCTRfSt-DxnsueQrWqgi7_aeGNi35UYY0fCYXozselYmieafYJaUO4io2acmGtQOFwXMYD1UvD845WtL3fTmOJKUCu6EuUtoNo4LdnpWCM/s320/iStock_000005093866Small.jpg" width="320" /></a>Charitable giving is not only a rewarding experience, but also an excellent tax tool to reap benefits when it comes to filing income tax returns. Highlighted below are the main areas to consider when planning for charitable giving.<br />
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<b>Cash Donations</b><br />
Donations under $250 given by cash, check, credit card or payroll deduction are fully deductible as charitable contributions and can be simply supported by a canceled check, credit card receipt or written communication from the charity. Taxpayers do not attach this documentation to their return, rather it is kept in their records.<br />
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A donation in an amount more than $250 must be substantiated by the charity in writing. This letter will indicate the total amount of the donation, date donated, and the value of the donation. When donating to an event, such as a dinner, gala, golf outing or other function held for charity, the value of what you received (i.e. tickets to the event or meals and drinks provided at the event) will be deducted from the total amount donated to arrive at the value of the deduction that may be taken on your income tax return. For example, if you donate $1,000 to a charity golf outing but upon attending the outing you eat a meal worth $50 and the ticket price to the event would have cost you $100, your charitable deduction is actually $850 instead of $1,000. If instead you donate $1,000 but do not attend the outing, the full $1,000 is deductible on your return.<br />
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Donations in excess of $5,000 require a qualified appraisal in order to be deductible. Those in excess of $500,000 require that the qualified appraisal be attached to the return.<br />
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Please note that cash contributions are limited to 50% of your adjusted gross income when giving to public charities. Donations to non-operating private foundations are limited to 30% of your adjusted gross income. These amounts can also be altered if you are in AMT (subject to Alternative Minimum Tax). Consult your tax advisor to be sure that your donations are in your best tax planning interests. Donations that exceed these limits may be carried forward for five years (for individuals), but will be lost after that time.<br />
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<b>Property Donations</b><br />
Donations of property, such as stock or securities, are another excellent way to give to charity. Property held long-term (longer than one year) is deductible as a donation at its current fair market value, thus by giving the property away you avoid paying the capital gains tax that you would have incurred if the property was sold. These donations are limited to 30% of adjusted gross income if given to public charities and 20% if given to non-operating private foundations. There are some limitations regarding basis in making property donations so please consult your tax advisor when considering such donations. Generally speaking, you should not donate property that has a fair market value less than your basis as this is technically a loss to you. In this scenario you should sell the stock and deduct the loss since only the lesser of fair market value or basis is deductible. You may then donate the proceeds to a charitable cause.<br />
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Another consideration in donating property is that donations of tangible personal property are limited to basis in the property, unless the property is directly related to the charity’s tax-exempt function in which case you may deduct the fair market value. Donation of services are not deductible as charitable contributions, although you may deduct mileage and out-of-pocket expenses related to the donation.<br />
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A donation of a car or truck cannot be deducted unless the charity is specifically using the vehicle. The amount that might be deductible in this case is the total that the charity receives after selling the vehicle.<br />
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<b>Other Considerations</b><br />
Taxpayers over the age of 70 ½ can donate directly from IRA funds to charitable organizations. This can help satisfy minimum distribution requirements and the portion that would not otherwise have been taxable may be a deduction. This is an excellent planning tool in that the charitable amount will be excluded from your adjusted gross income and thus save taxes in addition to the charitable deduction.<br />
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Donations of clothing to charity must be in at least “good condition” to be deductible. Clothing and similar household goods donated must be measured by standards provided by the charitable organization.<br />
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Charitable remainder trusts are another option for charitable giving (also known as CRTs). CRTs are tax exempt. This type of investment benefits both the taxpayer and the charity in that it pays an amount (that will be taxable to you) to you each year and at the end of its term distributes remaining assets to charities. When funding the CRT, the donor receives a current year deduction for the present value of the assets designated to charity. This is also practical in estate tax planning as the funds placed into the CRT are removed from the estate.<br />
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Charitable lead trusts help benefit charity while transferring assets to loved ones. Also known as a CLT, the trust pays amounts to charities over time and at the end of its term its remaining assets pass on to the beneficiaries of the trust. In funding the CLT, donors make a taxable gift equal to the present value of the amount that will be distributed to beneficiaries. Again, this is also an estate tax planning technique as these funds are removed from the estate.<br />
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When donating please confirm that the charity is a qualified charitable organization.<br />
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Please visit the <a href="http://www.grreid.com/" style="color: blue;">G.R. Reid website</a><span style="color: blue;"> </span>for contact information or to arrange a consultation.News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0tag:blogger.com,1999:blog-2224342644596085969.post-67552603119752467172012-01-25T04:00:00.000-08:002012-01-25T04:00:19.761-08:00Commercial Insurance Services<span style="font-family: Arial,Helvetica,sans-serif;"> </span><a href="mailto:lsantelli@grreidinsuranceservices.com">: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services</a><br />
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<a href="http://www.grreidinsurance.com/">G.R. Reid Insurance Services, LLC</a><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIMS_C1g4IDdD1sDOpEb5GkFboao5UkmkDsnGJWdmuWAbFYzziSMK5egalRA6pSJV0ggEWdpS22zNOu4BXFv-7z5AuYgJSLjOfMRb0GfoZp0DShd-a2af-iDWrYYkkdbEmMNvslTIAr1D8/s1600/louSantelli.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIMS_C1g4IDdD1sDOpEb5GkFboao5UkmkDsnGJWdmuWAbFYzziSMK5egalRA6pSJV0ggEWdpS22zNOu4BXFv-7z5AuYgJSLjOfMRb0GfoZp0DShd-a2af-iDWrYYkkdbEmMNvslTIAr1D8/s200/louSantelli.jpg" width="174" /></a></div><br />
<span style="font-size: x-large;"><span style="font-family: Arial,Helvetica,sans-serif;">Substance Abuse Costs Employers Billions</span></span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Substance abuse problems among employees cost businesses billions of dollars each year. According to the 2008 National Survey on Drug Use and Health, in that year, 73% of the nation's adults with alcohol or drug dependence were employed either full- or part-time. This amounts to nearly 13 million Americans working under the influence. Put another way, this data from the U.S. Substance Abuse and Mental Health Services Administration means that 8% of full-time employed adults and 10.2% of part-time employed adults are substance abusers.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">For the majority of substance abusers, their problem lies with alcohol. The same study reveals that slightly more than half of Americans aged 12 or older reported being current drinkers of alcohol (51.6 percent). This translates to an estimated 129 million people, which was similar to the 2007 estimate of 126.8 million people (51.1 percent).</span><span style="font-family: Arial,Helvetica,sans-serif;"> According to information published by Ensuring Solutions to Alcohol Problems, a part of the George Washington University Medical Center, alcohol abuse costs American businesses $134 billion in productivity losses annually, and the health care costs for these employees are about twice as high as for those without an alcohol abuse problem. Employees who are heavy drinkers use twice as much sick time as other employees, spend four times as many days in the hospital than the national average, and have higher rates of job turnover.</span><span style="font-family: Arial,Helvetica,sans-serif;"> Significantly, light and moderate alcohol users, who are greater in number than heavy drinkers or alcoholics, account for 60% of alcohol-related absenteeism, tardiness, and poor work quality. And, the problems of alcohol abusers go beyond the addicted individual: about 20% of employees say they have been injured by, have covered for, or have had to work harder because of other employees' drinking.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">The above data shows that alcohol and other substance abuse takes a toll on workplace productivity, and contributes to higher medical costs both for treatment of the addiction and for substance-related medical issues. Employee substance abuse problems also result in an increased occurrence of workplace accidents and higher disability and workers' compensation costs. It is clearly in an employer's best interests to seek ways to minimize the impact of employees' substance abuse on the workplace.</span><span style="font-family: Arial,Helvetica,sans-serif;"> Experts in the field stress the importance of workplace practices that educate employees about the health hazards of substance addiction and encourage employees to seek early treatment of any problems. While stressing the importance of a drug-free workplace, policies that rely primarily on discipline can result in addicted employees hiding their problems out of fear of losing their jobs, and in co-workers enabling such behavior in a spirit of friendship. In that kind of environment, an addicted employee may resist seeking any available help-such as obtaining treatment under the medical plan or taking a leave to enroll in a treatment program-until a crisis occurs.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">On the other hand, employees will be more likely to come forward and get the help they need if they believe that by doing so they will receive help, not punishment. The same is true of co-workers, who can be an invaluable resource in encouraging addicted employees to seek help and to stay on track once treatment has begun.</span><span style="font-family: Arial,Helvetica,sans-serif;"> Since most medical insurance plans include at least some substance abuse benefits, workplace communications about a business's policies on alcohol/drug use should include this information. Employees are more likely to seek help if they feel it is within their reach, and they may not realize that this benefit is available to them. Employee assistance programs (EAPs) also can offer screenings, counseling, and treatment referrals for employees with substance problems; depending on the EAP, it also may have worksite awareness and supervisor training programs.</span><br />
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<span style="font-family: Arial,Helvetica,sans-serif;">Communications to employees about any available benefits should stress that both medical plan and EAP services are confidential. This, along with a supportive (rather than punitive) environment, increases the likelihood that employees will seek the help that they need.</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;">With many dollars in lost productivity at stake, the reasons for businesses to promote substance abuse awareness are compelling. And, because work is such an important part of most people's lives, the workplace can be an effective place for substance abuse intervention to begin.</span>News Update from G.R. Reidhttp://www.blogger.com/profile/03552044476949940870noreply@blogger.com0