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Houghton, MI 49931 USA
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January 2000

Our monthly online newsletter provides useful tax, business, and financial planning information as part of our firm's commitment to total client service.

The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

For more information on anything in ONLINE ADVI$OR, or for assistance with any of your tax, business, or financial planning concerns, contact our office.



Major Tax Deadlines for January 2000

* January 18 - Final 1999 individual estimated tax payment is due, unless 1999 tax return is filed and taxes are paid in full by January 31, 2000.

* January 31 - Employers must provide W-2 statements to employees.

* January 31 - Payors must provide Form 1099s to payees.

* January 31 - Employers must file 1999 federal unemployment tax returns and pay any tax due.

Note: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business. For information on the tax deadlines that apply to your business, contact our office.



What's New in Taxes

President Clinton signs tax extension law

On December 17, 1999, President Clinton signed the Tax Relief Extension Act of 1999 into law. The law is a minor one that does little more than extend several expired or expiring tax provisions.

Among the tax relief provisions included in the law:

* Extension of the research and experimentation tax credit through June 30, 2004.

* Extension of the work opportunity tax credit through December 31, 2001.

* Extension of the welfare-to-work tax credit through December 31, 2001.

* Extension through December 31, 2001, of the exclusion from income for employer-provided education assistance.

* Extension through December 31, 2001, of alternative minimum tax relief for taxpayers claiming nonrefundable personal tax credits, such as the child tax credit and education credits.

Among revenue-raising provisions in the bill:

* Modification of the prior-year safe harbor for estimated tax payments made by individuals with annual income in excess of $150,000. For 2000, the prior-year safe harbor percentage increases to 108.6% from the previous 105%.

* Repeal of the installment method of reporting for sales for most accrual basis taxpayers.

For complete details on these changes and other provisions included in the Tax Relief Extension Act of 1999, give us a call.



Tax cuts could be all in the family

As you begin your tax planning for 2000 (and look for ways that will still cut your 1999 tax bill), don't overlook the tax-saving opportunities provided by your children.

* First, look into the child tax credit, a $500 credit against taxes for each child under age 17. Note that the credit begins to phase out if your modified adjusted gross income exceeds $110,000 for a joint return ($75,000 single).

* Don't forget the child care credit. If you paid child care expenses for a dependent under age 13 so you and your spouse could work in 1999, you may be able to claim a credit against taxes of up to $480 for child care expenses ($960 for two or more children). The rules are complicated, so contact our office if you think you qualify.

* Other tax-cutting opportunities come from the $2,750 exemption for each child who qualifies as a dependent. Children can qualify up to age 24 if they're enrolled as full-time students, so don't overlook your older kids in college if you still support them. And divorced parents can arrange to assign the dependency exemption from the custodial parent to the noncustodial parent if it makes more tax sense.

* Consider shifting some income to your children this year. You can shift up to $1,400 of investment income to a child under age 14 before the "kiddie tax" kicks in and requires the income to be taxed at your rates.

* If you own your own business, you can reduce taxes overall by employing your child, perhaps to help out during school vacations. Provided it's a real job and you pay a reasonable wage for the work, your business can claim a deduction, and your child will pay taxes on the income at his or her lower rates.

* Tax planning applies to your child's income, too. Let’s say your teenage daughter has income from a part-time job. She should seriously consider opening up a Roth IRA and putting aside up to $2,000 of her earnings. By beginning to save at this early age, she'll get a great start on her retirement nest egg.

Of course, deciding to invest in a Roth IRA could affect other strategies for her education expenses. That's why your tax planning should cover income taxes for all family members, and it should include estate tax planning, too.



New Business

Try stand-up meetings

If you want more productive business meetings, consider having attendees stand rather than sit. Research conducted at the University of Missouri found that, compared to sit-down meetings, stand-up sessions--
      1. were about a third shorter,
      2. accomplished as much in making decisions, and
      3. were considered more worthwhile by attendees.



Smart Business

How to get your business ready for sale

"Sell my business? Never!" So say many small business owners. Yet unless you go broke or die on the job, chances are you will eventually consider selling your business. For some, enjoying a secure retirement means selling.

Where do you start? Can you make your business attractive and command a higher price? How do you find buyers and negotiate the sale? Here are some essential steps:

* Tighten up. Cut unnecessary operating expenses that sap profits. Go over your financial statements line by line. If any item doesn't contribute to profitability, ax it! Smart business decisions lead to better looking financial statements.

* Clean up. Get rid of unneeded items that can make a business look like a cluttered garage. Clutter tends to collect wherever people do. If you can't get rid of clutter, organize it. Clean and paint to brighten the work environment. Replace burned out bulbs and add lighting to dark areas. Would additional windows help? Replace unsightly furniture or fixtures. Make your business appealing to workers, customers, and buyers.

* Get help. If you're like most owners, you're an expert in your field, but a novice at selling your business. Fortunately, there are professionals who can help you get the best price for your life's work. Unless you have potential buyers pounding on your door, you will probably need help.

These three steps are only a start. Your preparation requires  planning, effort, and a fresh look. If you're thinking of selling your business, we can assist you with the related financial and tax planning aspects of the transaction.



What's New in Financial Planning?

Many accountants provide eldercare services

With an aging population, the need for eldercare services is rapidly growing. And while your own estate plan may be in order, and you don't need routine assistance, you may be responsible for a parent or other relative who does. Accountants are available to provide many traditional services for your older relatives. Some accountants also provide eldercare services that go beyond the traditional, in areas that you might not expect.

Among the traditional services, an accountant may be able to help your older relative pay bills, account for routine financial transactions, and monitor investments. Working with other professional advisors, an accountant may also be able to help your relative design and implement an estate plan, making sure that wills, trusts, and insurance policies are properly coordinated and suitable for your relative's needs.

If you are responsible for making health care or living arrangements for an elderly relative, especially over long distances, you may be interested in the additional eldercare services provided by some accountants. For example, an accountant may be able to monitor the quality of the living arrangements provided for your relative, and compare those arrangements to standards that you have established. Some accountants may even be able to help develop standards for your relative's care, recommend local care providers, and monitor the care as often as you request. If your relative is still living at home, an accountant may be able to arrange for in-home services, such as cooking, cleaning, and transportation, and make sure those services are provided in the manner you expect.

If you are taking care of an elderly relative, you probably draw on many different resources. Accountants can be one of the most valuable. If we can be of assistance to you in this area, please call us.



Does your portfolio have any zeros?

With all the different investor styles and goals and the multitude of investment choices available, is there any investment that has a place in almost every portfolio? The answer is yes -- zero coupon bonds ("zeros").

Zeros are bonds that make no periodic interest payments to the bondholder. Instead they are sold at a deep discount to their face value and accrue interest until maturity. The longer the maturity, the deeper the discount. They can be purchased either individually with a set maturity date or by mutual fund. Though zeros are very useful when used appropriately, like any investment, they are not without their drawbacks and risks.

Many entities issue zeros, but the most popular zero coupon bonds are those issued by the U.S. Government which pay a guaranteed rate of return when held until maturity. Thus, U.S. Government zeros are an excellent planning tool for the conservative investor with specific long-term goals, such as retirement. For example, an individual intending to retire in 20 years would purchase a zero that matures in 20 years.

Because zeros pay no periodic interest payments, their prices are highly sensitive to changes in interest rates. Aggressive investors purchase zeros to earn capital gains. When interest rates fall, the prices of zeros rise. When interest rates rise, the prices of zeros fall. These price changes are accentuated by the bond's length of maturity and quality. Thus, zeros can be very volatile investments if not held until maturity.

The main drawback to zeros is that the bondholder owes income tax on the accrued interest each year. Therefore, it is usually recommended that zeros be placed in tax-sheltered accounts.

Call us to discuss the tax treatment and appropriateness of zero coupon bonds in your overall investment portfolio.



Chuckle of the Month

"Dumb blonde" jokes don't bother singer Dolly Parton, who has a full head of platinum curls. "I'm not offended by the jokes based on the dumb blonde stereotype," says Dolly, "because I know I'm not dumb. I also know I'm not blonde."



ONLINE ADVI$OR is issued monthly to provide useful information. Return to this site every month for helpful tax-cutting suggestions, business information, and financial planning tactics.

The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

If you would like more information on anything in ONLINE ADVI$OR, or if you'd like to be on our mailing list to receive other tax, business, or financial planning information from time to time, please contact our office. We're here to help you minimize your taxes, manage your business more profitably, and identify financial planning strategies suited to your situation.




Copyright 1998 Richard C. Woodbury P.C. CPA