OBAMA ECONOMIC PLAN WOULD INCREASE TAX ON BUSINESS AND GIVE $1,000 TO FAMILIES

I have said time and again, "If you rob Peter to pay Paul you will always have the support of Paul." Is this a sound economic policy or an effort to buy votes? When you think about who actually "owns" the oil companies, isn't it the stockholders? Aren't the stockholders Americans with their pension plans, investments and mutual funds? Talk about shooting yourself in the foot.

Larry Kopsa

(Politico.com) -- Sen. Barack Obama (D-Ill.) on Friday announced an “Emergency Economic Plan” that would give families a stimulus check of $1,000 each, funded in part by what his presidential campaign calls “windfall profits from Big Oil.” The first part of Obama’s plan is an emergency energy rebate ($500 to individual workers, $1,000 to families) as soon as this fall. Separately, Obama’s plan includes a $50 billion stimulus package that his campaign claims would save more than 1 million jobs. Half of the money would go to state governments, which are facing big budget shortfalls, and half would be used for national infrastructure, including replenishing the Highway Trust Fund, rebuilding roads and bridges, and repairing schools.

John McCain reacted: "Unlike Sen. Obama, I do not believe that raising taxes is the answer to our economic problems. There is no surer way to force jobs overseas than to raise taxes on businesses.”

IS THIS STIMULUS WORTH ALL THE HASSLE?

As I have discussed before, there has been a lot of confusion as to whether or not the advance rebate checks would affect the amount of refund or tax due with the 2008 1040. The IRS website has had conflicting info on this. If you check the IRS's draft release of the 2008 1040 form, you can plainly see on Line 71 that there is a place for the "Recovery rebate credit" which should be a positive number for those people who did not receive the full amounts as checks during the year, and either a zero or negative amount for those who received checks.

This will obviously end up affecting the amount of refund or tax due. As I have been saying, this is exactly the same mechanism as we had for the similar advance rebate payments that we had to deal with a few years ago. People were claiming that the 2008 rebate checks were free money and would not affect the bottom lines on the 1040s. Apparently this is not correct.

PROBLEMS WITH RECEIVING YOUR STIMULUS CHECK

Hi Larry,
I found your blog thru a google search on "stimulus check problems". After waiting now for a long time the IRS finally has an online tool to check the status.

Surprisingly I had to find out that I was not "eligible" because my SSN or ITN do not match their records. I have a SSN and my wife has an ITN.

The interesting thing is that I filed my TAX return electronically with that same info and had no issues in getting my refund in March.

What am I missing? Have you heard about this issue as well, and is there any possible solution?

Thanks for your help.

Richard

Richard, I am sorry that you are having problems with the IRS and your stimulus check. I think you have two choices. One choice is you can continue to contact the IRS to try to resolve the problem. We understand that the IRS is receiving numerous calls and have reallocated staff to the stimulus questions. Although I have not personally been involved with any contact with the IRS regarding stimulus questions, I am sure this would be a long frustrating process.

The other choice that you have is to simply wait until you file your 2008 return and increase your refund or decrease the amount of tax due when you file the 2008 return. As you may know, the stimulus refund is really a reduction of your 2008 tax, not a reduction of your 2007 tax. They are just doing this early to supposedly heat up the economy. I am not sure if it worked, but that was the thought.

On many returns that were extended, they will not receive the stimulus refund until they file the 2008 return.

If it were me, rather than hassle with the IRS, I would probably just wait until you file your 2008 return and make sure your tax preparer understands that you did not receive your stimulus check and reports it correctly on your 2008 return.

Sorry I could not be of more help. If you have any questions, please contact me.

Larry Kopsa CPA

Hi Larry,
Yea your feedback helps. I think I stimulate the economy then next year :) even though I had planned with the money this year.

It just shows the state the IRS is in.

Thanks again!

Richard

QUESTION ON SOCIAL SECURITY BENEFITS

Larry, I saw an article that said a couple can increase their Social Security benefits if the wife applies individually at age 62 and the husband at age 66. Is this correct? Lorinda

Lorinda, It really depends. Some couples benefit by having the higher-earning spouse delay application of benefits. This is due to the interplay between the reduction of benefits for early retirement and the full benefits available to a surviving spouse upon the death of a higher-earning spouse. But several other factors should be considered, including the respective ages of the spouses and the amounts involved.

We do have programs available to determine if this is in your best interest. Let us know if you are interested in us running a calculation for you and we will tell you what we need. We are always up front about costs. The cost to do this calculation and then meet with you in person or via phone and computer is $275.00.

Remember, everyone's situation is different. If you would like to research this yourself you might check out the Social Security website, http://www.ssa.gov/.

Larry Kopsa CPA

CONDITIONAL GIFTS

Larry, I'm planning to purchase an engagement ring for my fiancee. Will it be subject to any tax? Robert

Robert, Congratulations on your engagement! To answer your question, you can give gifts worth up to $12,000 to any individual annually - and not owe gift tax. And, if you marry in the year that you give the ring, it's also OK, because spouses' gifts to each other are tax free, and marital status at year-end governs for the full year for tax purposes.

If the ring is worth more that $12,000 and you don't marry in the year that you give it, state law determines whether it is a gift. In some states, an engagement ring is considered a conditional gift that must be returned if no wedding takes place, so no federal gift tax applies. But in a state where the gift of the ring is considered a completed gift that the recipient is entitled to keep even if there is no marriage, gift tax applies.

Good luck with your future plans!

Larry Kopsa CPA

SECOND OPINION

Larry, because of you we saved over $3,000 on our taxes. I thought my tax guy was taking all the deductions that I had coming until you gave me a Second Opinion. This is the kind of help I've been needing for a long time. Thanks again! Steve

Steve, thanks for the kind words. As I've said time and time again, salons are so busy that they rarely have time for tax planning. I wish I could sit down with everyone to review their individual situations. I'm glad we could help.

Larry Kopsa CPA

• As you know, the law requires us to pay taxes but does not require us to leave a tip. Unfortunately, many of us are leaving a big "tip" with the IRS. If you are interested in a "Second Opinion", contact us at ahansen@kopsaotte.com.

KOPSA OTTE HIRES OUTSTANDING GRADUATE

Kopsa Otte is lucky to have such a great staff, and we are happy to announce our newest addition. Megan Munsell has recently been hired as an accountant. She graduated Summa Cum Laude in Accounting from York College and also received the Dean's Award. Click here to read about Megan: Megan Munsell receives Dean's Award

QUESTION ON MISCLASSIFIED WORKERS

Hi Larry,Your blog is wonderful. I love reading your blog. May I ask you a question? I'd really appreciate if you can help me.!!! Do you have the official release from the IRS about that the info you mentioned in your March 6, 2008 blog: "The IRS has just announced that it is going on the attack against firms that have misclassified workers". It is unveiling an electronic matching system to identify firms that issue 1099s with payments of at least $25,000 to five or more workers who don’t have any other sources of earned income.

Could you please kindly send me an IRS official announcement about this if possible? I searched the IRS whole site and cannot find the official announcement. Looking forward for your reply. Thanks! Ann

Ann, Thank you for your kind comments. We are attempting to bring useful information to the industry. I have seen the independent contractor review twice. The first one was in the 3.20.08 edition of the Kiplinger Tax Newsletter. I am not sure of where I saw the quote the second time. If I find my second reference I will let you know. Larry

Dear Larry,Wow, I can't believe I can receive your reply!!! That's amazing. Thank you so much! Thanks for letting me know the answer. If you get to know the IRS official announcement, please let me know. Waiting for more and more of your great blogs!!! Best Regards, Ann

DIGITAL CLOCK

This is an interesting link. However, it does make me think that somebody has too much time on their hands. Digital Clock

QUESTION ABOUT 2008 ELECTION

Larry, I went on this online community thing and everyone was talking about you... what is going on? There's even a video about it on News3Online. Is this true? Ed from St. Louis

Ed, I think this is what you are referring to. Larry

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LEARNING LOUNGE AT COSMOPRO

I was honored to have the opportunity to speak at the Learning Lounge, sponsored by PBA at Las Vegas during the CosmoPro Event. The topic of Learning Lounge was employee compensation. Besides myself, there was an attorney present to discuss labor laws, along with two panels discussing compensation issues. If you weren’t there, you really missed out on some interesting comparison of compensation plans and issues in the industry. In addition, the labor information is something we all need to get our arms around.

PBA is to be commended for their continued efforts to serve our industry.

Larry Kopsa CPA

DEPOSITORS MAKE RUN ON BANK THAT FAILED

We always advise our clients to have FDIC coverage up to $100,000. With the controls that have been in place since the 1930's, bank failures were non existent. But, never say never. If you think it can't happen, read this: Depositors Make Run On Bank That Failed

WAX FOR HANDS

The best way to increase your bottom line is to add on services. I came across a vendor at a recent show that had a service worth looking into. Click here to check it out: Wax For Hands

RISING GAS PRICES

If you drive a car or truck, you've probably noticed that gas is getting pricey! Even out here in the Midwest I have seen gas pumps at $4 per gallon. Some experts have predicted prices will continue climbing to $5 per gallon or more. With gas prices so high, it's important to choose the right way to deduct car and truck expenses. I want to make sure you understand the issue.

You have two ways to calculate deductible car and truck expenses:

1. The "actual expense" method lets you deduct the "business use percentage" of all your actual expenses. These include depreciation and interest (if you buy) or lease payments (if you lease), insurance, gas, maintenance and repairs, parking, and tolls.

2. The "mileage allowance" method lets you deduct 58.5 cents/mile.

The problem with the allowance method is that even with the new 58.5 cents per mile rate, it is same for every car on the road whether you drive a hybrid or a Hummer. In actuality the method your are using may be far less than your actual costs! The American Automobile Association's recent survey, "Your Driving Costs (2008)," reports actual costs ranging as high as 91 cents/mile for an SUV driven 10,000 miles/year. These figures are based on gas at $2.941/gallon!

If you deduct automobile expenses or are reimbursed from your employer you may want determine which is the best method for you. If you'd like us to show you how to make the most out of your car and truck expenses, please contact Amanda at our office ahansen@kopsaotte.com and we will tell you how we can help.

KOPSA OTTE IS CPR CERTIFIED

Not only are we CPA certified, now we are also CPR certified. Kopsa Otte provided free CPR Training to our staff on two separate evenings last week. It was held in our conference room, and was led by an instructor from the local hospital.

We believe that providing this opportunity will help strengthen our value to our clients, ourselves, and our co-workers.

TAX DEDUCTIONS FOR BUSINESS TRIPS

Greetings. I am planning on taking a business trip/vacation. Can I get a tax deduction? R.M.

R.M., I hope you have a great trip. Travel costs are generally deductible for trips you take on behalf of your trade or business. Here are the general rules:

You're "traveling" when you're away from home overnight or long enough to need sleep.

• "Business day" costs include 50% of meals and entertainment plus 100% of lodging, local transportation, incidentals, and your first load of laundry and dry cleaning back home.
• If your spouse is a bona fide business partner or employee, traveling for a bona fide business purpose, you can deduct their costs too.

You'll need receipts for all lodging and expenses over $75. Transportation costs include planes, trains, and automobiles. The IRS prescribes specific formulas for calculating deductible business transportation expenses. These rules generally turn on how much of your time away from home you actually spend on business, and whether you travel outside the United States.

These rules generally limit your business deductions to bona fide business trips -- not vacations disguised as business trips. But you can still take generous business deductions for trips including some personal time. We recommend you keep a log or diary of your business time so you can substantiate whatever deduction you claim.

Want to write off weekends? You can treat them as business days if they fall between business appointments or if you stay over (before or after your business time) to qualify for airline "Saturday Stay" discounts. (Low airfares once meant the end of those Saturday requirements -- but $140/barrel oil, along with new fees for checked bags and peanuts, look likely to bring them back.)

Travel deductions aren't especially complicated -- if I had more information about your plans I could give you a more precise answer. Let me know if I can be of more assistance.

Larry Kopsa CPA

WATCH OUT FOR THIS SCAM

We may all think this scam is far fetched, but something similar actually did happen to an elderly client of mine. She wanted to know, if she received a million dollars, would the money be taxable? My immediate thought was that she inherited some money, but I eventually came to find out that she was actually being scammed by someone in Africa.

Many Americans have received an e-mail or letter from Nigeria, claiming that the recipient can receive huge funds from an "over-invoiced" government contract or a wealthy individual who died without a will. In actuality, these are advance fee swindles where the victim must pay phony charges for the nonexistent money.

Thomas Katona, the longtime treasurer of Alcona County, Mich., was charged in January with nine counts of embezzlement by a public official after allegedly wiring more than $1.2 million in county funds to Nigerian con artist in August and September. It represented more tan a quarter of the county's entire annual budget.

-Joseph T. Wells, CPA, CFE, the Association of Certified Fraud Examiners

QUESTION ON TERMS OF EQUIPMENT LEASE

Larry, Not sure if you can help me out with this? I have an equipment lease and they seem to be changing the terms on it. When we signed it was at 6% for the tax rate and now it seems the tax rate has changed and they are billing us for it. Is that appropriate or would it be at the rate we signed at? Alice

Alice, Depends on the contract. In most cases the sales tax is not a fixed amount but rather varies with the state/city rate. If I had to guess, I would say you are a stuckee. You need to read your contract to be sure.

Larry Kopsa CPA

2008 CELEBRITY TAX DEDUCTIONS

The following essay is from Edward A. Lyon, a nationally recognized author, speaker, and consultant. I thought that you might enjoy.

CINCINNATI, Ohio - March 14, 2008 - Edward A. Lyon announces release of his 2008 Celebrity Deductions list.

Supreme Court Justice Oliver Wendell Holmes called taxes "the price we pay for civilization." But he never said we have to pay retail! As April 15 approaches, let's take a look at what some of our favorite bold-face names might deduct this year:

Lindsay Lohan's Drug Rehab. Competition for the celebrity drug rehab category is always fierce. Actress/trainwreck Lohan takes this year's top spot (beating out Britney Spears, Eddie Van Halen, and Amy Winehouse), with not one but two trips to rehab plus 84 minutes of "hard time" in the Lynwood jail. Bonus: Drug and alcohol rehab is the only deductible medical expense with a two-drink minimum!

Paris Hilton's Acting Lessons. Celebutante Paris Hilton revealed last year that she's hired a top acting coach to win better roles. Will that investment pay? Her first feature, "The Hottie and the Nottie," grossed just $25,000 in its opening weekend. We know Paris can deduct her lessons as a business expense. The real question is whether the rest of us can deduct our tickets as casualty/theft losses!

Kevin Federline's Divorce Lawyer. Why is divorce so expensive? Because it's worth it! Especially when your train-wreck ex sports a net worth estimated as high as $123 million! Most of K-Fed's legal fees will be a nondeductible personal expense. But he can still deduct legal fees for determining tax-deductible spousal support.

Al Gore's Nobel Peace Prize. Former Vice-President Gore is a true Renaissance man. He invented the Internet and global warning. He won an Oscar and a Nobel Peace Prize. He was even smart enough (and confident enough) to donate his cash to charity before he won, avoiding a pesky limit on deducting charitable gifts.

Harry Potter's Hogwarts Tuition. Harvard University runs $34,998 for 2008 tuition and fees. Plus $10,622 for room and board. That's probably more than Hogwarts costs - but without cool classes like Charms, Care of Magical Creatures, or Arithmancy (whatever that is!) Secondary school and college tuition are a nondeductible personal expense - but Harry can use a Coverdell Education Savings Account to earn tax-free income to pay for it.

Kristen's Train Fare. "Kristen" and her fellow "Emperor's Club" fashion models, pageant winners, and students earned tens of thousands servicing former New York Governor Elliot Spitzer. Kristen's an independent contractor (not an employee), so she deducts "business" expenses on Schedule C. These include the train fare she had to pay to visit Spitzer because, as everyone knows, there are no prostitutes in Washington D.C.

YOU ARE BEING SUED - NOW WHAT?

The United States has 5% of the population but 70% of the attorneys that file 90% of the lawsuits. 350,000 lawsuits are filed weekly in the U.S.

It is an owners nightmare to be sued. I can speak from experience. It has happened to me two times in the last 30 years. All the suits were unfounded. We won in each case, but it still cost us time and legal fees, plus the stress of the process. It might be a customer, an employee, or the government, but whatever the source, it is going to cost you time and money.

I am not an attorney and in no way am I giving legal advice, but from a business perspective, here are some steps you can take.

• Don't panic. Deal with it.
  
• Don't ignore the lawsuit. No matter how frivolous you think the lawsuit is, or how much you want it to "just go away," if you don't respond you lose by default.
  
• Contact an attorney right away. Lawsuits are a serious matter and you are at risk. Tell the attorney the whole truth. Don't leave anything out!
  
• Contact your insurance carrier.
  
• Begin organizing your documents. Talk to your attorney about the information you have. He may want you to deliver the documents to his or her office.
  
• Ask your attorney about fees. Many times it is better to negotiate a settlement on the lawsuit, which may be less costly when you consider the attorney fees to take the suit to trial and the value of your time.

Larry Kopsa CPA

10 THINGS YOU MAY NOT KNOW ABOUT YOUR PERSONAL FINANCES

I found a recent article in USA Today that I thought you might be interested in. Click on the following link to check it out: Personal Finances.