CONSIDERING A REVERSE MORTGAGE

Larry, I am thinking about doing a reverse mortgage. I think I understand all of the positive sides. Are there any negative sides to doing this?

Abe

Abe, as you know there are some positives to a reverse mortgage. They are a very good vehicle for certain individuals that are retired that have built up a lot of equity in their home, but are not ready to sell their house. You say that you know the positives so I will just tell you some of the things that we watch out for:

• Expect to pay some hefty fees. Many times we see an origination fee for as much as 2% of the mortgage and then additionally some fees on the balance.
• If you are a younger borrower, there are some big risks. If you live longer than you participate, you could possibly run out of money and won’t have any home equity to fall back on. Over the last decade, the average age of the risk mortgage borrower has fallen from 76 to 72. At age 62 this could cause a problem.
• There are other options that might work better for you. Even though you’ll have some counseling, which is required for first mortgages, taking out a home equity line of credit or downsizing your home might be an answer.
• You may not be able to borrow as much as you think. You will not be able to tap your home for its full price. There is a formula on the amount that you can take on depending on your age and other factors.

Before you determine if a reverse mortgage is right for you, we really would have to know your exact circumstances. You should discuss this with your financial counselor. If you are a client of the firm, please get in touch with me. If you are not a client of the firm, you should discuss this with your representative.

RECOVERY.COM IS SPOT ON IN TRACKING STIMULUS FUNDS

If you're interested in finding out where the stimulus money is going, click on www.recovery.com.

Recovery.com, a Web site run by government-procurement researcher Onvia in Seattle, is seen to be faster at providing information on how stimulus funds are being spent than Recovery.gov, the federal government's Web site for that purpose. Information on Recovery.com is more up to date, and it tracks local contracts in real time. Onvia's data show that stimulus spending is slow, perhaps because of excessive caution about results, but businesses are eagerly awaiting funds to get started on projects.

REPAIRS OR IMPROVEMENTS

Larry, I hope that you can help me. I am doing some work on my building. At one of your programs you mentioned that repairs are better than improvements, or vise verse. What is the difference?

Carmina

Carmina, when it comes to taxes, talking about repairs versus improvements can be tricky.

The cost of repairs made by your business is currently deductible. However, the cost of improvements must be capitalized and written off over time via depreciation deductions.

What To Do:

Separate repairs from improvements when work is done on the building. For example, don't lump standard repairs with a major renovation. If that occurs, it will take longer to write off the cost of the repairs. It is up to you to show that renovation expenses should be deducted currently instead of being capitalized.

Sometimes it's hard to tell the difference between a repair and an improvement. If you're having trouble telling the difference, remember these rules:

• A repair keeps the property in good operating condition.
• An improvement extends the useful life of the property.
• If the cost of the work amounts to 25% or more of the original cost, it will probably be classified as an improvement.

If you have any other questions, please let me know.

Larry Kopsa CPA

STAFF RETREATS

If you are going to own a business, there are certain expenses that are necessary. Can you imagine running a business without paying rent or utilities or having employees? It would be nice if we did not have to pay these bills, but we all know that if you did not make these investments you would not be in business.

Another expenditure that I feel is just as important is incurring the cost and the time to have staff retreats. Our accounting firm just had a one-day retreat and I have to share with you that it was well worth the time and cost.

A staff retreat can be a source of great unity and inspiration. During the retreat we learn many things. During our retreat we focused on how each of the members of our organization had different strengths and how we can utilize these strengths to be a better team. We also developed deeper understandings of who we are as individuals and as a group.

Spending time with coworkers in a way that is fun, relaxed, and reflective can be nourishing as well as productive. Rarely in this culture do we take the time to simply pause from the frantic pace of our actions. A commitment to pausing on an organizational level can lead to the manifestation of an entirely different and powerful orientation toward work, vision, community, and self.

I urge you to keep in mind this important tool for running a successful business.

BEWARE: ANOTHER SCAM

Watch out for this scam. I have had a client that received the following email. Remember, the IRS never sends notices by email.

See www.snopes.com for more information.

Taxpayer ID: name-00000174073547US
Tax Type: INCOME TAX
Issue: Unreported/Underreported Income (Fraud Application)

Please review your tax statement on Internal Revenue Service (IRS) website (click on the link below):

review tax statement for taxpayer id: name-00000174073547US

Internal Revenue Service

DOCUMENTATION IS THE KEY

Occasionally I get asked about the deductibility of conventions and meetings to foreign countries. Attached is an article that provides a good summary. You will note that there is a list of the countries that have preference. Don’t forget, the key to “audit proofing” your records is Documentation... Documentation... Documentation!

http://www.bizactions.com/index.cfm/ba/e100/fa/117057430G1603J2842411P8P1402T1/

EXIT INTERVIEWS MAY DELIVER IMPORTANT INFORMATION

The way a departing employee sees your company may be the way it really is. For this reason, it may be beneficial to conduct an exit interview with staff members before they leave.

The following link will take you to an exit interview questionnaire on our website. You may use the responses you receive from this questionnaire to help your company improve upon its current practices.

Exit Interview Questionnaire

REMINDER: HOME TAX CREDIT DEADLINE IS QUICKLY APPROACHING

The deadline for qualifying for the Home Tax Credit is December 1, 2009. If you are considering purchasing your first home or have not owned a home in the last 3 years, time is quickly running out if you want to qualify for up to $8,000 in government money.

Here a summary of what you need to know.

1. To be considered a first-time homebuyer, you – and your spouse if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
2. You cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase.
3. To qualify for the credit, the completed purchase must occur before December 1, 2009.
4. The home must be located in the United States.
5. The credit is either 10 percent of the purchase price of the home or $8,000, whichever is less.
6. The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000 or $150,000 for joint filers.
7. The credit is fully refundable. A homebuyer with no taxable income, who qualifies for the credit, may file for the sole purpose of claiming the credit and receive a refund. The credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
8. The credit is claimed on IRS Form 5405, First-Time Homebuyers Credit.
9. Taxpayers can claim the credit for a qualified 2009 purchase on either their 2008 or 2009 tax return. For those who have filed a 2008 return, a Form 1040X, Amended U.S. Individual Income Tax Return can be filed in order to get a refund in 2009.
10. The credit for qualified 2009 purchases does not have to be repaid, as long as the home remains your main home for 36 months after the purchase date.

THE GOVERNMENT ISSUES "GAG ORDER" TO INSURANCE COMPANIES

HHS "Gag Order" Sent To Insurers Prompts Outrage From GOP

ABC World News reported during a Senate Finance Committee hearing "a war of words broke out over what one of the nation's largest health insurance companies is saying about the bill." The order "issued last night by the Department of Health and Human Services" tells "insurance companies who serve Medicare recipients to stop 'misleading' and 'confusing' mailings, saying, quote, 'we are instructing you to immediately discontinue all such mailings and remove any related materials from your websites.'

The extraordinary order comes in response to a mailing the Humana Insurance Company sent to customers in the Medicare Advantage Program," that "warned that because of Medicare cuts in the healthcare reform bills, quote, 'millions of seniors and disabled individuals could lose many important benefits and services.'"

Some legal experts "say the order is unconstitutional." The AP reports Peter Ashkenzaz, a spokesman for the Centers for Medicare and Medicaid, said, "Because these are Medicare contractors, we want to make sure that the health plans' communications to beneficiaries are not violating marketing requirements or using protected information like Medicare mailing lists improperly."

The Washington Post quotes Robert Zirkelbach, a spokesman for America's Health Insurance Plans, "the industry's main lobbying group, as saying, "Seniors have a right to know how the current reform proposals will affect the coverage they currently like and rely on."

DO THE MATH...HOW SMART WAS THE CASH FOR CLUNKERS PROGRAM?

The government said that they passed the Cash For Clunkers Program to help save the environment and to make sure that we are not as dependent on foreign oils. Check out the math. Maybe I am doing the math wrong.

A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.

So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that's 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. Five million barrels of oil is about 5 hours worth of US consumption.

More importantly, 5 million barrels of oil at $70 per barrel (pretty close to the current price) costs about $350 million dollars. So, the government paid $3 billion of our tax dollars to save $350 million. We spent $8.57 for every dollar saved. How good a deal was that? They'll probably do a great job with health care though!! Hey - go figure!!

BENEFITS OF STAFF GATHERINGS

One of the most effective and inexpensive ways of building employee loyalty is to hold regular outings and get-togethers. By holding staff gatherings, you build loyalty and form bonds outside the workplace. Plus, you get a major tax break.

You can hold a staff party at a restaurant or treat your entire staff and their families to a day at a local ball game or amusement park. Most places offer discount rates for groups.

When planning an event, here are four cues to keep the emphasis on fun:

• Take it outside. Hold your outings away from the office, if possible. This creates a more relaxed atmosphere and lets staff members feel free to put work aside and just have a good time. They are more likely to bond if the focus is off the workplace.
• Involve families. This lets everyone feel a part of the workplace community and opens the way for more personalized relationships. In addition, spouses and family members play a major role in employees' longevity with your company.
• Make it enjoyable. Come up with a theme and hold a contest. For example, if you're going to a ballpark, the employee who can name the team's highest scoring player wins a baseball cap. Or if you're headed to the beach, a beach towel can be awarded to the family that comes up with the longest list of songs from Annette Funicello and Frankie Avalon movies.
• Keep it regular. The more often you hold company-wide events, the more your staff members feel part of a community that works and plays together. Send out invitations at least a month before each outing and get everyone involved in a countdown.

By investing a little time and money in showing employees and their families a good time, you build loyalty that can help retain your staff.

Now, here's the tax bonus: As long as the get-together is open to everyone, the entire cost of the event is a deductible entertainment expense. Generally, you can write off only 50 percent of entertainment expenses. And with a company gathering, you don't have to talk about business to deduct the cost.

QUOTE OF THE WEEK

"Study without desire spoils the memory,

and it retains nothing that it takes in."

--Leonardo Da Vinci

DEDUCTING SCHOOL EXPENSES

One of the most popular questions I see around this time of year is whether you can deduct the cost of:

• band uniforms and instruments
• school uniforms for public, private or parochial school
• athletic team uniforms school supplies
• field trips
• fill-in-the-blank school expense that is sucking money out of my wallet
  The short answer is no.

These expenses are considered personal expenses and are not deductible for federal income tax purposes for students in elementary and high school.

Larry Kopsa CPA

FUTURE TAX HIKES

It certainly seems like we are going to be facing some tax hikes in the future. We have been spending time with clients trying to determine if it is in their best financial interest to take income this year before the tax rates may increase. The link below is to a recent Wall Street Journal article that discusses some ideas on why and how to beat the tax increase.

Higher Taxes Are Coming. Are You Prepared?

HAPPY FEAST OF ST. MATTHEW - PATRON SAINT OF TAX GEEKS

It has been quite a streak of religious holidays! Rosh Hashanah and Eid were both celebrated over the weekend and now… It’s the Feast of St. Matthew (September 21st)!

Okay, many of you may not be familiar with the significance of the Feast of St. Matthew so here’s the scoop:

Matthew is one of the Twelve Apostles named in the New Testament of the Christian Bible and is the author or the inspiration for the Book of Matthew. He was a tax collector – sometimes referred to as a “publican” – among the Jews, which was a pretty unpopular job back then, even worse than it is now. In the time of the Romans, tax collectors didn’t receive a salary; they were expected to earn a commission, of sorts, by collecting whatever extra they could in the guise of taxes. Most were cheats and widely despised. In fact, even Jesus lumped them together with the worst of the worst, having dinner with a group of people so terrible that the Pharisees were prompted to ask, “Why does your teacher eat with tax-collectors and sinners?”

Today, Matthew is recognized as a Saint in the Roman Catholic, Eastern Orthodox, Lutheran and Anglican churches.

He is the patron saint of:
Accountants
Bankers
Bookkeepers
Tax collectors

'SMALL BUSINESS OWNERS COULD BE WIPED OUT BY PROPOSED CARD-CHECK LEGISLATION'

(Examiner.com) -- Examiner.com reports that the federal card-check legislation would "destroy many local companies" according to a group of concerned small business owners in Colorado. The "so-called Employee Free Choice Act (EFCA)" will "'shut down job creation,'" says A. F. Gagliardi, Colorado's state director of the National Federation of Independent Business (NFIB) organization. "Gagliardi told Examiner.com that no business is too small to be a target of EFCA’s union organizing efforts and that "even businesses with as few as five employees will be targeted -- and may not even realize they are being organized until notified after the fact by the National Labor Relations Board. That, in turn, will set in motion a series of events that leads to binding wage and benefit arbitration for many small businesses." In regards to finding a legislative compromise, "Gagliardi says when it comes to EFCA, there can be none ... 'EFCA is a ‘solution’ in search of a problem.'" See more at <http://www.examiner.com/x-16299-Denver-Business-Commentary-Examiner~y2009m9d2-Small-business-owners-could-be-wiped-out-by-proposed-union-legislation>

QUOTE OF THE WEEK

Members of Congress should be

Compelled to wear uniforms

Just like NASCAR drivers…

So we could identify

Their corporate sponsors.

A WORLD RUN BY HAIRDRESSERS

It was recently announced that Farouk Shami announced he is running for the Democratic nomination of governor of the state of Texas.

Read more at:
http://www.modernsalon.com/NewsLandingPage/tabid/67/Default.aspx?tid=2&cid=836518

WHEN SHOULD I START TAKING SOCIAL SECURITY BENEFITS?

Do you think I should start drawing Social Security at age 62?

Bill

Bill, deciding when to start drawing Social Security has too many variables for me to give you a correct answer. There is a very good article addressing this issue in the AARP website http://bulletin.aarp.org/yourmoney/socialsecurity/articles/when_to_collect_social_security.html

The article directs you to the Social Security Calculator that is located at http://www.ssa.gov/planners/calculators.htm.

Remember if you start taking Social Security early you can only have earned income of $14,160 in 2009 or you will have to pay back $1 for every $2 over this amount.

Your accountant or the Social Security Administration should be able to provide you with more assistance on this matter.

Larry Kopsa CPA

'THE 7 MOST OVERRATED BUSINESSES'

(Yahoo! Small Business) -- Smallbusinessanswers.yahoo.com reports that with higher unemployment, many Americans are looking to launch their own business. "But many people do a lousy job of picking businesses they can realistically turn into a profitable operation," the article notes. According to small business experts, some of the most difficult businesses to operate profitably are: "Restaurants; direct sales; online retail; high-end retail; independent consulting; franchise ownership; and traffic-driven Web sites." See the article at <http://smallbusinessanswers.yahoo.com/overrated>

NOW THAT’S SOME REFUND

Laura Schultz was expecting to hear from the IRS. After all, the Denver-area house cleaner owed the IRS about $80. But when she opened up a letter from the IRS, it wasn’t quite was she was expecting: a refund check for $122,783.51.

Schultz felt that it was a mistake – and it was. She called the IRS and they told her to destroy the check, which she did.

Of course, I know what you’re thinking: why didn’t she just keep the check? Because she knew better. I’ve gotten this call more than once from a client. The IRS always figures it out eventually (it’s pretty hard to misplace more than $100,000 for long) and you’re then stuck with repaying the principal plus interest.

And trust me, that’s not a letter that you want to get…Larry Kopsa CPA

INMATES RUNNING THE ASYLUM

It's bad enough that the person in charge of the IRS, Treasury Secretary Timothy Geithner, is an acknowledged tax cheat who claims not to understand how to use Turbo Tax. Now, Charlie Rangel, the Chairman of the House Ways & Means committee, which writes all of the tax laws, has been discovered to be hiding even more income and assets than were previously disclosed.

Here are just a few of the current news stories, courtesy of Drudge:

The Absent-Minded Chairman. Charlie Rangel wins the personal lottery.

OOPS! CHARLIE FORGOT THIS $1M HOUSE. REALTY BITES TAX-THEM-NOT-ME RANGEL

CHARLIE'S MORTGAGE BARES HOME UNTRUTH

Stop embarrassing us, Mr. Rangel. Resign

WHAT'S IN A NAME?

A few years back, my partner, Candy Otte, and I decided to step back and look at our branding. We realized that it was time for a change. We also realized that this was not something we could do on our own.

We hired a marketing firm and worked together to come up with the branding we have now.








Not only are we extremely happy with our new logo and marketing materials, this was also an exciting and educational process to go through. We learned a lot and it was well worth the effort and cost.

But if you don't want to spend the money rebranding, consider the following:

I stopped for gas on my way home from Colorado last month. While I waited I picked up a local newspaper, and as I scanned through the paper an interesting salon name caught my eye.

CURL UP & DYE

If you're a salon and looking at rebranding, you may want to consider this name. I'm not sure how much business you'll get, but it certainly did catch my eye.

Larry Kopsa CPA

OPINION: 'The Real Culture War Is Over Capitalism'

(Wall Street Journal) -- In a recent op-ed appearing at WSJ.com, American Enterprise Institute president Arthur Brooks writes: "There is a major cultural schism developing in America. But it's not over abortion, same-sex marriage or home schooling ... The new divide centers on free enterprise -- the principle at the core of American culture." Mr. Brooks notes that "the Congressional Budget Office predicts $9.3 trillion in new debt over the coming decade" and predicts "government spending will grow continuously in the coming years as a percentage of the economy -- as will tax collections." He also notes that a recent "Rasmussen poll conducted to choose the better system between capitalism and socialism, 13% of respondents over 40 chose socialism. For those under 30, this percentage rose to 33%." He reasons that "advocates of free enterprise must learn from the growing grass-roots protests, and make the moral case for freedom and entrepreneurship. They have to declare that it is a moral issue to confiscate more income from the minority simply because the government can. It's also a moral issue to lower the rewards for entrepreneurial success, and to spend what we don't have without regard for our children's future." See the op-ed at <http://online.wsj.com/article/SB124104689179070747.html>

ACORN TAX ADVICE TO HOOKER

Late last week, news broke that officials with the group ACORN were secretly videotaped allegedly offering advice to folks posing as a pimp and prostitute. While accusations have flown about what was or was not said/meant/intended/edited, it’s clear that at least one of the officials was offering improper tax advice.

Here’s the set up for the video. James O’Keefe, a 25-year-old independent filmmaker, and a young woman paid a visit to an ACORN office in Baltimore. O’Keefe posed as an over the top pimp and the young woman pretended to be a prostitute. They told the officials at ACORN that they were hoping to find housing where the young woman could continue to operate as a prostitute. Both acknowledge and are advised that prostitution is illegal. And that’s where the fun begins.

The young woman is first advised that she should file taxes even if she’s working as a prostitute. This is absolutely true. Gains from illegal activities are still reportable and taxable.

Next, the staffer advises the young woman that she needs a “code” for her occupation for purposes of her tax return. She’s referring to the “Principal Business or Professional Activity Codes” that the IRS requires for Schedule C. The instructions state:

Select the category that best describes your primary business activity (for example, Real Estate). Then select the activity that best identifies the principal source of your sales or receipts (for example, real estate agent). Now find the six-digit code assigned to this activity (for example, 531210, the code for offices of real estate agents and brokers) and enter it on Schedule C or C-EZ, line B.

After the young woman has advised that she’s a prostitute, the ACORN staffer advises her to refer to herself as a freelance performing artist. Hmm… I think I would have suggested “812990 – All other personal services.”

The young woman tells an ACORN tax advisor that she earns about $8,000 per month. The ACORN employee, it has been reported, then advised the young woman that she would report $9,600 per year on her tax return (as opposed to $96,000). It sounded very deliberate when I first read the reports but watching the video made me change my mind. Tax evasion or bad math? I vote bad math on this one.

The staffer goes on to advise (properly) that self-employment income reported on a Schedule C would be subject to self-employment tax unless it could be offset by expenses. The staffer goes on to improperly advise that clothing and grooming would be deductible as expenses (who honestly believes that what a prostitute wears would pass muster with IRS as a uniform?). She also suggests that gifts to clients might be deductible – they are, to a point. But those would be subject to limits. The “pimp” then suggests that condoms could be considered a client gift. I actually think condoms would be considered a legitimate business expense (certainly ordinary and necessary in the trade of prostitution), not a gift.

The “pimp” and the young woman then tell the staffers that they plan to bring in young, illegal immigrants to work as prostitutes. The “pimp” wants to keep them off of the books but the staffer advises that they should issue 1099s, a good idea except for the teensy-weensy detail that they’re illegal. When the “pimp” points this out again, the staffer backtracks and says, “well then, you don’t have to worry about them.” She’s right in that, without a proper tax ID number, you can’t issue a 1099. But that doesn’t mean that you don’t report those workers, it means that you don’t hire them in the first place. That should have been the answer.

The most disturbing part of the video is when the staffer suggests that the girls who are being trafficked for the purpose of prostitution could be claimed as dependents. The IRS defines a dependent as a qualifying child, or a qualifying relative. There’s no way that these girls could be described as a “qualifying child.” They almost fit the definition of “qualifying relative” since the intent is to live with the taxpayer “all year as a member of your household” – however, there is a caveat that the relationship must not violate local law. Clearly, in this situation, it does violate local law on a whole bunch of levels.

So it’s a mixed bag on the advice. Occasionally on the right track. But mostly bad/wrong/illegal.

A lot has been said on both sides about the tape, including noting the holes in the editing. I’m glad that I watched it, though, rather than relying on reports from either side of the debate. Is it scream worthy? You can watch the tape here and judge for yourself what you think:

http://biggovernment.com/2009/09/10/chaos-for-glory/#more-274

Reportedly, both staffers have since been fired.

'SEPTEMBER IS DISASTER PREPAREDNESS MONTH: IS YOUR BUSINESS READY?'

(About.com) -- In a business law blog on About.com, it is reported that "September is National Preparedness Month." Are you ready if a disaster hits? Some suggestions to help you keep your business and vital business records safe in a disaster: (1.) Develop an emergency response plan for your business. Find evacuation routes and establish meeting places. (2.) Back up important records. Store backups in a different location or in a secure storage vault. See the full story at <http://biztaxlaw.about.com/b/2009/09/07/september-is-disaster-preparedness-month-is-your-business-ready.htm>

I AM GETTING MARRIED, NOW WHAT?

I finally found the man of my dreams and we are getting married this month. Is there anything I need to do before for taxes?

Mona

Mona, congratulations. I wish you well. I remember a toast that I gave at a wedding when I was honored to be the best man. “A man marries a woman thinking she will never change, and a woman marries a man thinking that they can change them - and they are both wrong.” The toast did not work because four years later they were divorced. Speaking of divorce, consider talking to your lawyer about a pre nuptial agreement. Not a bad document to have just in case.

Enough of that… here are the tax things that you need to think about.

1. Notify the Social Security Administration to report any name change, so your name and SSN will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security card at your local SSA office. The form is available on SSA’s Web site at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.

2. Notify the IRS If you have a new address. You should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from the IRS website IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).

3. You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.

4. Notify Your Employer(s) to report any name and address changes to ensure receipt of your Form W-2, Wage and Tax Statement after the end of the year.

Also consider checking your withholding. If both you and your spouse work (I hope he does. If he is unemployed you might want to think about this), your combined income may place you in a higher tax bracket. There is an IRS Withholding Calculator at www.irs.gov that will help you and will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate. You can print it out and give it to your employer so they can withhold the correct amount from your pay.

Best of luck and again congratulations.

Larry Kopsa CPA

QUOTE OF THE WEEK

My favorite poem is the one that starts

'Thirty days hath September'

because it actually tells you something."

--Groucho Marx

SOME JOB-SEARCH SPENDING CAN BE DEDUCTED FROM YOUR TAXES

Expenses incurred while looking for employment are often tax deductible, but you have to follow the rules laid down by the Internal Revenue Service. The first thing to consider is whether your search is targeted to a position similar to the one you last held. Career changers are out of luck when it comes to deducting job-search expenses. Under the "same occupation rule" you can claim expenses that you've incurred only in trying to find a job like the one you had before. The Wall Street Journal

FIRST-TIME HOMEBUYER CREDIT

I just closed escrow on the purchase of my first ever house in July 2009. Is my Realtor correct that I can file an amended 2008 tax return to claim the special credit for first time homebuyers? Is he also correct that this credit is mine to keep forever and doesn’t need to be repaid? I had read somewhere that the credit was just an interest free loan that had to be repaid on future tax returns. It sounds too good to be true.

Owen

Owen, your Realtor is correct that you won’t have to wait until April 15, 2010 to receive this credit, which can be as much as $8,000. You have the option to claim the credit on your original or amended 2008 1040, as long as the purchase has been completed. This can get tricky if your modified Adjusted Gross Income is over $75,000 ($150,000 for married couples) because that places you into the dreaded “Evil Rich” category as defined by our imperial rulers in DC.

In regard to repaying the credit, there was a change in the original program from what we had in 2008. For homes purchased in 2008, the credit must be repaid in 15 annual installments, starting with the 2010 1040. If the home ceases to be the main residence before the 15 year repayment time is up, the remaining amount of the credit will be due in one lump sum on that year’s 1040.

For homes purchased between January 1, 2009 and December 1, 2009 (the current end of the credit qualification period), the credit does not have to ever be repaid if you use the home as your primary residence for at least three years. If you move out of the home, sell it or convert it to business or rental usage before the three year anniversary of your purchase, you will be required to repay the full amount of the credit in one lump sum on the tax return for the year in which the home ceased to be your principal residence.

As with any tax law, there are even more twists to this one; so be sure to work with a professional tax advisor.

Good luck. I hope this helps.

Larry Kopsa CPA

DON’T LET YOUR GUARD DOWN

It is a unfortunate fact that during tough economic times businesses experience an increase in fraud. Perpetrators can include angry laid-off former employees or staff members who justify stealing because they're worried about job security. At the same time, organizations are so overwhelmed by the economy that they let their guards down. The result is a perfect storm for devastating losses. Make sure that you are watching your numbers, they can be an indicator that you have a problem.

For more information let us know.

Larry Kopsa CPA

HERE COMES INFLATION

According to economists the federal government will not be able to contain inflation because the government has pumped trillions of dollars in stimulus funds into the economy, the Federal Reserve will not be able to keep inflation in check in the next several years. While the central bank's unofficial inflation target is 2%, economists expect the price gauge tracked by the Fed to increase by an average of 3% annually from 2014 through 2018.

"An excessively stimulative fiscal policy and a complicated exit from its quantitative-easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires," according to the National Association for Business Economics.

To see the entire article go to Bloomberg.

MISSPELLING YOUR NAME ON YOUR AIRLINE TICKET WILL NOW COST YOU $20-$150 OR MORE

American Airlines now charges 20 dollars to process a name correction (misspelled name). Even if you have to change one letter it is $20 bucks. Many people tend to use their nicknames when they buy a ticket and forget that they have to have the ticket match their government issued ID (drivers license or passport). A simple Chris to Kris will cost you $20. Steven to Stephen is $20. Matt to Mathew is also $20. Changing a complete name on most non-refundable tickets is not allowed.

USE THESE STRATEGIES TO HELP INCREASE SALON SALES

We received a question on our Facebook account asking what strategies we would recommend using to help increase salon sales. I thought you might be interested in my response.

"We are a CPA firm that works with hundreds of salons across the country. As I look at the monthly numbers I am happy to report that service sales are back to the 2008 levels in 80+% of the salons and spas that we work with. Retail sales remain below the 2008 levels in most of the salons. Overall sales are still down for the year because of the poor first quarter.

We had one on one meetings with most of our salons in May and also did a Webinar which we entitled Survival Strategies. During these meetings we stressed the steps that need to be taken to offset the lower sales and methods to help increase sales.

Every salon and spa is different so I do not believe that there is one strategy that can be used across the board for every salon. It sounds like you are working your clients and potential clients.

A few of the items that we recommended:

• Provide great customer service. This will keep clients coming back.

• Never ever prejudge clients. The service that you are providing is an inexpensive luxury. If you look at a client and think that they cannot afford a product or service, there is no way that you will increase the ticket price.

• Prebook, prebook, prebook. Get them coming back in asap.

• Follow-up with clients, especially new clients to make sure that they are pleased.

• Fill the empty time. Learn, learn, and learn. Knowledge is Power!

• Consider increasing prices. You most likely will not lose clients if you take a small increase. Remember you are an inexpensive luxury.

• Sell retail. Not just any retail, the retail the works for the client. Remember you are the professional. You know which products work and which don’t. Get them the right product to make them look the best and you will have a client for life… and at the same time get referrals. Remember, people ask, 'Who does your hair? It looks great!'"

IS CASH FOR CLUNKERS TAXABLE?

Larry, I heard on the radio that we will have to pay taxes on the money from the Cars for Clunkers. If so, I am really mad because nobody said we had to pay taxes on it. Is this true?

Robbet

Robbet, let's get this cleared up. No, the discount is not taxable to you the purchaser. Of course, if this is a business auto you cannot claim depreciation on the discount.

A number of web sites and um, what’s the word, liars, opportunists, political wonks, media personalities, have indeed taken to the airwaves to try and stir the pot a little with respect to the CARS program. It certainly gets attention to scream that the program is some kind of secret tax-raising scheme. Only, they’re wrong. Think of it as a sale or discount: $4500 off! It’s not income to you, period.

Dealers are required to report the reimbursement from NHTSA as part of their gross income. This makes sense – they’re still grossing the same amount after the reimbursement. For example, if a dealer sells a $25,000 car to a customer for $22,000 ($25,000 less the CARS “discount” of $3,000), and the dealer next receives a check from NHTSA for $3,000, the dealer has still grossed $25,000. No harm, no foul. There’s no “extra” tax on the dealer, as has been reported. It’s the same reporting requirement as before.

But what about sales tax? In Nebraska they have ruled that the discount is subject to tax. Most states are not including the CARS portion for purposes of sales tax; there are a handful of states like Nebraska that are taking the position that the entire sale price, including the CARS portion, is subject to sales tax. You can check out which states are using this handy chart from Lexis. The good news?

It is a pleasure serving you.

Larry Kopsa CPA

THE WORST SALON EVER

Here’s an exercise you might want to do the next time you are meeting with your staff.

At a recent salon show, I was making my presentation and I started out by asking the attendees who wanted to work at a really bad salon. Of course, no hands came up.

I then went on and said, “OK, let’s make a list of items that you would see at the worst salon in the world.” The list started out and actually went crazy. We got items on the list from bad personal hygiene to believe it or not, not flushing the toilet. After we spent a few minutes having fun coming up with the state of the worst salon ever, we narrowed it down to some of the realistic items like lack of education, cleanliness, clutter, unorganized, etc.

After we came up with that realistic list, I then said, "lets take a look at this list and see which of these toxic items you have in your salon and spa." I think it really opened up the eyes of the owners, managers and the technicians that were present. It only takes a couple of these toxic items to ruin your reputation.

Try this message out some time.

Larry Kopsa CPA

QUOTE OF THE WEEK

Let me win, but if I cannot win,

let me be brave in the attempt."

--Special Olympics motto

QUESTION ON PREBOOKING

Larry, I'm having trouble getting my stylists to rebook their clients. Do you have any suggestions to help me out? Thanks, in advance, for any help you can give me.

Kay

Kay, I understand your frustration. Rebooking is one of the quickest ways to increase sales. I hope the following two tips can help you out.

First of all, tell your stylists not to give the client an option. Simply asking a question like, "will it be 4 or 5 weeks until your next appointment," will lock the client into rebooking.

Next, have them try the consultation technique. Talk with the client about their style, and when their cut stopped looking its best.

These tips will offer the client a valuable service, and should help to increase your prebooking and sales.

It is a pleasure serving you.

Larry Kopsa

GOVERNMENT TRUE-ISMS

A liberal is someone who feels a great debt to his fellow man ..which debt he proposes to pay off with your money. -G. Gordon Liddy