Take Advantage of the Summer Downtime and Reevaluate Your Business

It’s that time of year again. Every day the temperature is a predictable triple digit number and Phoenix seems to be a ghost town. Just because summer is here does not mean business has to slow down for you. In fact summer is the perfect opportunity for you to reevaluate your expenses for the year, set goals for your company, and review your employees’ performances. Here are a few suggestions on how you can take advantage of this downtime and make sure your business thrives in the coming year.

· Get new quotes from your vendors! Take a look at your expenses from this year and request new quotes from your vendors. This is the perfect time to examine everything from insurance premiums, internet services, rents, landscaping, etc. If your current vendors cannot offer you a better rate, then investigate other options. Your customers are putting pressure on you right now-remember you’re a customer too! Put pressure on your vendors and seek relief!

· Reevaluate your marketing plan. Devote some time to research different marketing plans. You can trim your expenses by cutting out archaic marketing techniques such as advertising in the yellow pages.

· Examine your retirement plan. Now is the perfect time to evaluate your retirement plan to see if you need to make any modifications. Converting from a 401k plan to a SIMPLE IRA plan may save you more than $1,500 in administration fees. SIMPLE IRA plans have no annual filing requirements, which is an excellent option for business looking for leaner expenses. The deadline to set up a SIMPLE IRA or safe harbor 401k is October 1, 2010.

Feel free to give us a call if you have any questions!

Fannie Mae Announced Sanctions for Struggling Homeowners for Strategic Defaults

Fannie Mae recently announced sanctions against homeowners who strategically default on their mortgage, making them ineligible for Fannie Mae mortgages for seven years. A “strategic default” is defined when a homeowner did not work in good faith to avoid foreclosure and has as the ability to pay but chooses to walk away when the value of the home is less than what is owed.

Fannie Mae also announced that they would seek “deficiency judgments” against homeowners in court to recover debt by seizing borrower’s other assets. Since Arizona is a non-deficiency state, this threat does not hold much clout against Arizona homeowners.

The Wall Street Journal recently reported that nearly one in five mortgage defaults in the first half of 2009 were considered strategic. Fannie Mae’s recent decision attempts to curb homeowners from forcing foreclosure to pursue other alternatives such as a lender-approved short sale or formally giving up the deed.

Analysts question whether the aggressive Fannie Mae sanctions will have a positive effect on the housing market. The plan clearly challenges the Obama administration’s policy of stimulating the fragile housing market.

Furthermore, Fannie Mae’s policy might be impossible to execute. The task of distinguishing between intentional defaults and homeowners who had no other options will subject Fannie Mae to scrutiny. Additionally, Fannie Mae’s pursuit of deficiency judgments is economically inefficient since there is no tax liability on forgiven portions of home mortgages until 2012.

Whether or not Fannie Mae will be able to execute the new policy is to be determined. However, the policy draws one important question: will the housing market improve with decrease of mortgage defaults, especially with a decline in unemployment or do home prices need to appreciate before the market can improve? Time can only tell.

Health-Care Overhaul Imposes Wealth Taxes, Makes Roth IRA Conversions More Attractive

Last March Congress passed the landmark Patient Protection and Affordable Care Act. This radical policy forced many critics to ask “How is the government going to pay for this?” The answer to this million dollar (or $1 trillion according to the Congressional Budget’s Office’s projection) question? The health-care overhaul will impose two new taxes on earnings: 1) an extra 0.9% levy on wages for couples earning more than $250,000 (or $200,000 for singles) and a 3.8% tax on investment income for the same group. How could these taxes affect you?

Let’s say you and your spouse both earn $150,000, combined income is $300,000. In 2013, you will owe an extra 0.9% on the excess earnings over $250,000, or $450, in addition to your regular Medicare tax because your combined wages are above $250,000.

How will your investment income be affected? First of all, let’s define investment income. Investment income includes, interest, dividends, rents, royalties, captain gains in addition to the taxable portion of insurance annuity payouts (unless it is from a company pension). All of these types of investment income are subject to the 3.8% tax on amounts over the $250,000 (or $200,000 for single filers) threshold. For example, if you earned $60,000 a year, but have an investment income of $180,000, your total income is $240,000 and you are subject to additional tax. Because your investment income is $40,000 over the $200,000 threshold, you would owe $1,520.

How can you minimize these taxes? Essentially, your investment income is subject to the new tax when it increases your adjusted gross income. While social security and pensions are not investment income, they still raise your AGI. Here are some suggestions on how you can avoid increasing your AGI.

· Roth IRA conversions. These are an excellent option because they do not raise AGI and are not considered investment income.

· Defined-benefit pensions. If you are in a small business or have consulting income, pensions could be a good fit. Pensions are not investment income and you can contribute more with age.

· Installment sales if you are selling assets. If you are spreading out the income, you would minimize the tax.

· Life Insurance. If you purchase a policy, you could borrow from it and settle before death. You can avoid income tax on investment gains within the policy.

For more information, check out this article from the Wall Street Journal or give us a call!

New Tax Benefits Available to Aid Employers

Last March Congress passed two watershed reform laws, the Hiring Incentives to Restore Employment (HIRE) Act and the Patient Protection and Affordable Care Act, both of which include considerable tax breaks for employers. These tax benefits might be the perfect remedy for employers looking to expand payroll or looking to save.

The HIRE Act

The HIRE Act includes provisions that will benefit employers who hire previously unemployed or underemployed workers this year. The employers who qualify are eligible for a 6.2% payroll incentive, which effectively exempts them from their share of Social Security taxes on wages paid to the employee. How much exactly could that 6.2% save you? It could be a lot!

Let’s say you hire 3 previously unemployed employees and each are paid $25,000. With the HIRE tax benefit, you can save $4650!

Another tax break included in the HIRE act is an additional general business tax credit, up to $1,000, for each previously unemployed worker retained for at least a year. The tax credit applies when businesses file their 2011 income tax return.

Here is the breakdown on how you might qualify:

· Employers must have hired unemployed workers this year from February 3, 2010 and before January 1, 2011.

· The employer must receive a statement from the new hire that confirms he or she was unemployed for at least 60 days before being hired or have worked less than a total of 40 hours in the previous job.

· New hires who fill existing position may only qualify if the previous workers left voluntarily.

Check out this link http://www.paychex.com/hireact/

from PayChex to see how

much you can save.

The Patient Protection and Affordable Care Act

The new health care law offers a tax credit to small employers that provide health care coverage to their employees. Businesses can claim a maximum credit of 35% of the employer’s premium expenses against their income tax return.

How much can you save from this tax credit? Let’s say you have 10 employees on staff and you pay $300 a month for their health care premium, a total of $36,000 a year. If you qualify for the maximum credit of 35%, you can receive a $12,600 credit!

Here is how you may qualify:

• Businesses must have fewer than 25 full time employees for the tax year.
• The wages for the employees must average less than $50,000 per employee.

For more information, give us a call!

Save the Date! - Client Appreciation Party

Mark your calendar for Friday, May 7, 2010 for eeCPA's client appreciation party. Get ready for Casino Night and plenty of food, music, gambling, and prizes. Why? Because we appreciate you! More details to come...

Client Spotlight - Germain Kirk

Germain Kirk is an online designer, developer, and consultant based in Scottsdale, Arizona. Through his company, KirkInteractive, Germain offers small and mid-sized businessess and organizations professional web site design, doman and hosting plans, E-mail marketing, Search Engine Optimization (SEO), consultation, analytics, and site management services. Germain has been involved with internet services for more than 13 years, starting when he was in college at the University of Washington in Seattle. Since then he has worked with inline properties in the broadscast TV industry in Washington state and Arizona- most recently at 3TV KTVK as the Site Master for AZfamily.com

Currently, Germain is a national online consultant for Cox Communication (www.cox.com) and also does online consultation and web development for the Metro Phoenix Parternship for Arts & Culture. If you are interested in any online services, you can email Germain at germain@kirk-interactive.com, call at 1-888-335-3439 or visit www.kirk-interactive.com.

Homebuyer Tax Credit - It is No Longer Just for First Time Buyers

On November 6, 2009, President Obama signed into law the “Worker, Homeownership, and Business Assistance Act of 2009.” The new law extends and generally liberalizes the tax credit for first-time homebuyers and includes some restrictions to prevent abuse of the credit. What can this mean for you? The new law will make it easier for you to buy or sell a home and aims to improve the real estate markets. Best of all, the changes can be a tax-saving tool!

Here are the facts about the revised homebuyer credit:

· Deadline Extended. Previously, the homebuyer credit applied only to purchases after April 8, 2008 and before December 1, 2009. Now the homebuyer credit is extended to apply to a principal resident bought before May, 1, 2010. Additionally, homebuyers can use the credit if they bought a principal residence before July 1, 2010 if they entered a written contract before May 1, 2010. With the extra months available, homebuyers can apply the credit if they find a home they like but cannot close on it before May 1, 2010.

· “Long-Time Resident” Credit. The homebuyer credit no longer applies to first time home purchases. If you maintained the same principal residence for any period of five consecutive years during the eight years ending on the date that you buy the subsequent principal residence, you can claim credit of up to $6,500. In order to qualify, you do not need to sell your current home; rather you can buy the replacement home to meet the new deadlines.

· Now available to higher-income taxpayers. The homebuyer credit phases out over higher levels of modified AGI, range is between $125,000 and $145,000.· New home-price limit for the homebuyer credit. The homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000.

The restrictions:

· Settlement Statement. The homebuyer credit cannot be claimed unless the taxpayer attaches the settlement statement to the return.

Please call us today to find out how you can benefit from the homebuyer credit!