RICHARD C. WOODBURY P.C.

CERTIFIED PUBLIC ACCOUNTANT
103 E. Sharon Avenue
Houghton, MI 49931 USA
Phone (906) 482-1305
Fax (906)482-9555
Email rwoodbur@up.net
 

ONLINE ADVI$OR



March 2000

Welcome to ONLINE ADVI$OR.

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

* March 1 - Farmers and fishermen who did not make 1999 estimated tax payments must file 1999 tax returns and pay taxes in full.

* March 15 - 1999 calendar-year corporation income tax returns are due.

* March 15 - Deadline for calendar-year corporations to elect S corporation status for 2000.

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

Here's what's happening with tax legislation -

* The House has passed a bill that would reduce the marriage penalty that many two-income couples now pay. According to estimates, about 42 million joint filers would get a tax cut averaging about $470 if the bill became law.

The House bill would increase the standard deduction for couples to double the amount allowed for single taxpayers. It would broaden the 15% income tax bracket for joint filers to twice that for single filers. It would raise the income phase-out level for the earned income tax credit by $2,000 to help low-income couples.

Democrats are proposing a smaller reduction in the marriage penalty, and President Clinton has indicated that he would veto a bill like the one passed by the House.

* Another tax change being discussed is a repeal of the earnings limit for social security benefits paid to individuals age 65 through 69. Currently, social security benefits are reduced for these working seniors by $1 for every $3 they earn over $17,000.

* Also, hearings are being held on the provision in the Tax Relief Extension Act of 1999 (signed into law December 17, 1999) that eliminated installment reporting on sales made by accrual basis taxpayers.

Check our Web site periodically for news on these and other tax issues that could affect your tax and financial affairs.

 

 

Spring Tax Tips

Even though 1999 is history, it may not be too late to cut your 1999 tax bill. Consider these possibilities:

--You can set up a 1999 IRA and make a contribution up to April 17, 2000.

--If you contributed to an IRA in 1999 but didn't reach the maximum $2,000 by December 31, 1999, designate those contributions you make in 2000 prior to April 17 as 1999 contributions (up to the maximum $2,000 allowed). You can then deduct these amounts on your 1999 return for a quicker tax benefit.

--If you had self-employment income in 1999, you can contribute to a SEP or a Keogh pension plan. (The Keogh had to be in place by December 31, 1999.) Contributions can be made up to the due date of your 1999 return, plus extensions.

--If you sold stock or mutual funds in 1999, check your records carefully for reinvested dividends that will add to your basis and reduce gain on the sale.

--Check for carryover items that could reduce your 1999 taxes. Check prior years for unused capital losses, investment interest expense, business operating losses, and charitable contributions.

 

 

New Business

How to find workers in a tight labor market

If you're having trouble finding employees in today's extremely tight labor market, here are some ideas you might try:

* Look to the 55-64 age group for good, experienced workers. Check your area for programs sponsored by local governments and civic groups that encourage employers to hire older workers. Get on the Internet and look for local job fairs that get business representatives together with older workers looking for jobs.

* Use the Internet to help you recruit. Your home page can give potential job applicants a closer look at your company. Use a Webcam to show your workplace and day-to-day activities as they're happening. Let job seekers e-mail a description of their ideal job, and if your company has an opening that seems to match, you can respond.

* If a job opening is the result of an employee promotion, let the promoted employee hire his or her replacement. The person who did the job knows what the job requires and is likely to ask the best interview questions and identify the best candidate for the job.

 

 

Smart Business

Read this before you buy your next business car

Are you aware that there are limitations on the tax deduction allowed for business use of "luxury cars"?

The definition of a luxury car may surprise you. It doesn't depend on manufacturer or model, or even on price; it depends on weight.

For cars (with certain exceptions, such as hearses and taxis), annual depreciation expense is limited for any vehicle with an unloaded gross weight of less than 6,000 pounds. That means that virtually every passenger car manufactured today is subject to the limits. If you buy a business vehicle in 2000 and it meets the "luxury car" definition, first-year depreciation will be limited to $3,060.

An important exception to these rules exists for certain trucks, vans, and sport utility vehicles. The same "luxury car" limit applies if the loaded gross vehicle weight of any of these vehicles is less than 6,000 pounds, but if the manufacturer's specified gross vehicle weight, including load, is more than 6,000 pounds, these vehicles escape the depreciation limitation.

As a result, if you buy for your business a truck, van, or sport utility vehicle with a loaded gross weight over 6,000 pounds, your first-year deduction won't be limited by the luxury car rules. Your vehicle may also qualify for the Section 179 deduction of up to $20,000 in 2000. But if you buy a passenger car instead, your first-year deduction will be much lower.

There are many additional tax factors that should be considered, so call us before you buy a business car.

 

 

What's New in Financial Planning?

Volatility can diminish your investment returns

If you have investments in the stock market these days, you know what volatility is all about. Wide swings in the market can give you a big increase in your portfolio's value one day and take that increase (and more) away from you the next. Just what effect do wide swings in investment returns have over the long run?

Compare $100,000 invested in two different portfolios. If the first portfolio increases 8% every year, slowly but steadily, you will have $685,000 after 25 years. In the other $100,000 portfolio, assume that you have a 25% increase one year, followed by a 15% decline the next year. After 25 years of alternating 25% increases and 15% declines, your $100,000 will be worth only $385,000.

Not only can high volatility in your investments give you sleepless nights - or at least cause for concern - it can also lower your long-term results. Be sure to factor this into your long-term strategy and your investment selections.

 

 

April 1 is an important date for IRA owners

Like all good things, the tax deferral opportunities of an individual retirement account (IRA) eventually come to an end.

Reaching age 70-1/2 is the event that triggers the beginning of the end. Mandatory withdrawals must begin no later than April 1 of the year following the year in which you reach age 70-1/2. (Withdrawals may start as early as age 59-1/2.) For example, if you reach age 70-1/2 in 2000, mandatory withdrawals must begin by April 1, 2001. Required withdrawals can be a lump sum or periodic over a number of years.

If periodic distributions are chosen, they must be made each year. The initial distribution can be made in the year you turn 70-1/2 or delayed until April 1 of the following year. If you delay the first distribution, you must take and pay tax on two distributions in the same year.

If annual distributions are chosen, they can be based on your life expectancy or the combined life expectancies of you and your beneficiary (within limits), but you must decide this up front. You could also have the choice of "locking in" your life expectancy at age 70-1/2 or recalculating it every year.

The minimum withdrawal requirement for IRAs does not apply to Roth IRAs.

If you're facing this situation, contact us soon. We can help you sort through your options and choose what's best for you.

 

 

Chuckle of the Month

It's tax season - time for taxes and some tax humor:

"A taxpayer is someone who works for the federal government but who doesn't have to take a civil service examination." - Ronald Reagan

"The trick is to stop thinking of it as 'your' money." - Revenue Auditor

"The hardest thing in the world to understand is income tax!" - Albert Einstein

"Your federal government needs your money so that it can perform vital services for you that you would not think up yourself in a million years." - Dave Barry

People who complain about paying their income tax can be divided into two types: men and women.

The ideal solution is for the Government to live within its means, not yours.

Definition of "one thin dime": a dollar with all the taxes taken out.

 

 

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