Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


President Obama Signs JOBS Act Into Law
 
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.

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.

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).

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.

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.

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.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com

10 Facts About Mortgage Debt Forgiveness

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.

Here are 10 things you should know about Mortgage Debt Forgiveness.

1. 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.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes, to pay off credit card debt for example, do not qualify for the exclusion.
7. 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.
8. 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.
9. 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.
10. 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.
    
    
    

Financial & Wealth Services News

: : George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 314
G. R. Reid Wealth Management Services, LLC 

How Long Will It Take to Double My Money? 

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.

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. 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.”1 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.
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.

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. 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. 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. 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.

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.
 
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

Accounting & Tax News

G.R. Reid Associates, LLP
Certified Public Accountants 


631.425.1800   www.GRReid.com

 

 

Small Employers: Reminder to Utilize Small Business Health Care Tax Credit

The IRS is encouraging small employers that provide health insurance coverage to their employees to check out the Small Business Health Care Tax Credit.

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.

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.

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. 

Additional information about eligibility requirements and figuring the credit can be found on IRS.gov or by contacting your G.R. Reid Tax Professional.

Accounting & Tax News

G.R. Reid Associates, LLP
Certified Public Accountants 


631.425.1800   www.GRReid.com

IRS Releases 2012 Auto and Truck Valuation Rules

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.

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.

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.

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.

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.

Financial & Wealth Services News

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

 Save Now or Save Later?

Most people have good intentions about saving for retirement. But few know when they should start and how much they should save.

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.

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.

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).*

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.

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.

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.

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.

*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.

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



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


This material was written and prepared by Emerald.

Accounting & Tax News

G.R. Reid Associates, LLP
631.425.1800

Charitable Deductions – More Than One Benefit



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.

Cash Donations
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.

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.

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.

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.

Property Donations
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.

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.

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.

Other Considerations
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.

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.

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.

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.

When donating please confirm that the charity is a qualified charitable organization.

Please visit the G.R. Reid website for contact information or to arrange a consultation.

Accounting & Tax News

G.R. Reid Associates, LLP
631.425.1800

April 17 Tax Deadline

Taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns.

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline. The IRS will begin accepting e-file and Free File returns on Jan. 17, 2012.
 
Assistance Options
Last year, the IRS unveiled IRS2Go, its first smartphone application that lets taxpayers check on the status of their tax refund and obtain helpful tax information. The IRS reminds Apple users that they can download the free IRS2Go application by visiting the Apple App Store and Android users can visit the Android Marketplace to download the free IRS2Go app.

Virtual Service
The IRS has begun a new pilot program where taxpayers can get assistance through two-way video conferencing. The IRS is conducting a limited roll out of this new video conferencing technology at 10 IRS offices and two other sites, and may expand to further sites in the future. A list of locations is available on IRS.gov.
 
Check for a Refund
Once taxpayers file their federal return, they can track the status of their refunds by using the "Where's My Refund? tool, which taxpayers can get to using the IRS2Go phone app or from the front page of www.IRS.gov.  By providing their Taxpayer Identification Numbers, filing status, and the exact whole dollar amount of their anticipated refund taxpayers can generally get information about their refund 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

Accounting & Tax News

Congress Passes Temporary Payroll Tax Cut Extension

G.R. Reid Associates, LLP
631.425.1800

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

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

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

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

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

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

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

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

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

Financial & Wealth Services News

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

How Should I Manage My Retirement Plan?

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

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

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

Consider Keeping a Portion in Stocks

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

Diversify

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

Find Out About the Guaranteed Interest Contract

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

Periodically Review Your Plan’s Performance

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

 

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

Commercial Insurance News

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

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

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

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

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

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

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

Disaster plans should include:

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

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

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

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

Information Technology News

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


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

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

Good for Consumers, Developers and Enterprises

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

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

Respecting Customer Choice and Control

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

Accounting & Tax News

G.R. Reid Associates, LLP 
631.425.1800

 Standard Mileage Rates for 2012


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

Health Benefit Services News

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

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC




2012 HSA & FSA Changes to Know About

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

Flexible Spending Accounts

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

Contribution Limits

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

Health Savings Accounts

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

HSA Contribution Limits

Family: $6,250

Individual: $3,100

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

HDHP Minimum Required Deductibles

Self: $1,200

Family: $2,400

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

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

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

Accounting & Tax News

Tax Breaks Soon To Expire

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

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

Section 179 Expensing Allowance

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

Research Tax Credit

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

Work Opportunity Tax Credit

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

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

Charitable Contribution Deductions

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

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

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

Commercial Insurance Services

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


Never Cut Corners When it Comes to Safety in The Workplace

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

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

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

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

Employees should follow these guidelines:

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

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

Financial Services News

G.R. Reid Consulting Services, LLC


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

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

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

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

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

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


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