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



Welcome to the December 2000

Our monthly online newsletter provides useful tax, business, and financial strategy 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 strategy concerns, contact our office.


"Major Tax Deadlines"

*Early in December - Check the amount of 2000 tax you have prepaid through withholding and quarterly estimates. If you're underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent you being charged underpayment penalties for 2000. 

*December 31 - Last day to pay expenses you hope to deduct on your 2000 return - such as medical bills, property taxes, IRA administrative fees, and charitable contributions. Pay expenses with a credit card if you don't have the cash. You'll get the deduction in 2000 even though you pay the credit card bill in 2001. 

*December 31 - Last day to set up a Keogh plan for 2000. Deductible contributions for 2000 can be made any time up to the filing deadline for your 2000 return.

Note: Business 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" 

IRS targets fraudulent trusts 

The criminal investigation division of the Internal Revenue Service is targeting abusive trust schemes – both promoters of illegal trusts and taxpayers who utilize them. Both domestic trusts and foreign (offshore) trusts are used by promoters. The basic scheme is to have a series of vertically layered trusts with each trust distributing income to the next layer. The result is to illegally reduce the taxpayer’s taxable income to next to nothing. 

There are many legal trusts, typically used for estate planning and charitable purposes, but fraudulent trusts are tax evasion schemes which are illegal. To find out more about the kinds of trusts considered fraudulent, visit the IRS web site at www.treas.gov/irs/ci.




"Act now to see lower taxes next April" 

A little year-end planning can make a big difference in the liability you'll see on your 2000 tax return next April.

Consider these last-minute moves to cut your taxes.

*Check the tax credits for which you could be eligible. If you’re in danger of losing a credit because your income is too high, consider steps to reduce income, or shift income into next year. 

*Purchase business equipment before year-end to utilize the $20,000 expensing option. Check the rules that could limit your tax benefit from year-end equipment purchases. 

*If you turned 70-1/2 in 2000, check the rules for taking your first required minimum distribution from your retirement plans. 

*Review your investment gains, and consider taking offsetting losses before year-end. 
If you’re short of cash at year-end, pay deductible expenses with your credit card to squeeze the tax benefit into 2000. 

Contact our office for other tax-cutting suggestions and help in choosing those best suited to your individual situation. 




"New Business "

Per diem changes on new schedule

Per diem rate changes will now be made at the start of the government’s fiscal year (October 1), rather than at the start of the calendar year as has been the policy in the past. New rates that became effective October 1, 2000, can be used by businesses to substantiate travel costs for the final quarter of 2000. If they prefer, businesses may continue using the rates that were effective prior to October 1 until the end of this year.



"Smart Business"

Fringe benefits give a double tax break

If you want to motivate or reward your employees, give them a tax-free benefit. The cost of certain benefits you offer your employees can be nontaxable to them and tax-deductible to your business. Some fringe benefits you might want to consider offering your employees:

*Pay your employees' health insurance premiums or reimburse them for medical expenses. 

*Pay certain mass transit or parking costs. 

*Pay the premiums for up to $50,000 of group term life insurance coverage. Amounts paid for insurance in excess of $50,000 are taxable to your employees. 

*Allow employees to purchase your company's merchandise at a discount. As long as the discount rate doesn't exceed the gross profit percentage on the merchandise, the benefit is free of tax to the employee. 

*Give holiday gifts of nominal value. As long as the gifts are not in cash or gift certificates, your employee gets a tax-free gift and you get a tax deduction. 


Most of these benefits must be provided equally among all your employees. If you discriminate in favor of certain key or highly compensated employees, the benefits could be taxable to them. 




"What's New in Financial Strategies" 

Divorce and IRAs can present tax problems 

A recent court case points out the hazards of dipping into an IRA as part of a divorce settlement.

The taxpayer involved was required by the divorce decree to divide his IRA equally between himself and his spouse. He withdrew half the IRA funds and transferred them to his spouse. The IRS said the withdrawal was taxable income to the husband and, furthermore, a 10% penalty applied because he was not yet 59-1/2. The Tax Court agreed with the IRS.

There are ways to transfer IRA funds in a divorce without being taxed. If you find yourself faced with this situation, consult your tax advisor before any transfer in arranged.




Take control of your consumer debt 

Consumer debt can be the biggest detriment to securing a sound financial future. You may find yourself in a vicious cycle that seems hopeless to overcome. But with determination and a proper plan, you can take charge of your finances. 

*Identifying where your money goes is the first step toward gaining financial control. There are many good computer programs useful in tracking your money. In your analysis, don’t forget to account for spending from ATM withdrawals, cash, etc. 

*Develop a monthly budget and stick to it. Plan for periodic obligations like insurance and taxes. Make your budget rigid but achievable. Your monthly budget must include debt payments above the minimum required. 

*Make a list of what you owe (balances, monthly payments, interest rates, etc.). Consider moving your high-interest rate credit card to lower-interest rate cards, but be prepared for rate increases after the introductory period. Read the fine print carefully.


Which debt should you pay off first? One approach is to concentrate first on the debt with the highest interest rate. Once you’ve paid that off, cancel the account and focus on the debt with the next highest interest rate. If all your debt carries similar interest rates, focus on paying off the smallest debt first and then move on to the next largest. 

Taking control of your debt and learning to live within your means will enhance your chances for a sound financial future.




"Chuckle of the month"

From the mouths of babes

A class of first-graders were given the first half of some familiar proverbs and asked to come up with the rest. Their responses: 

*Strike while the. . . . . .bug is close 

*It's always darkest before. . . . . .Daylight Savings Time 

*Never underestimate the power of. . . . . .termites 

*You can lead a horse to water but. . . . . .how? 

*Don't bite the hand that. . . . . .looks dirty 

*A miss is as good as a. . . . . .Mr. 

*You can't teach an old dog new. . . . . .math 

*If you lie down with dogs you'll. . . . . .stink in the morning 

*An idle mind is. . . . . .the best way to relax 

*Happy the bride who. . . . . .gets all the presents 

*A penny saved is. . . . . .not much 

*Two's company, three's. . . . . .the Musketeers 

*Laugh and the whole world laughs with you, cry
and. . . . . .you have to blow your nose 

*Children should be seen and not. . . . . .spanked or grounded 

*If at first you don't succeed. . . . . .get new batteries 

*You get out of something what you. . . . . .see picture on the box 

*When the blind leadeth the blind. . . . . .get out of the way 

 

ONLINE ADVISOR is issued monthly to provide useful information. Return to this site every month for helpful tax-cutting suggestions, business information, and financial strategies. 
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 ADVISOR, or if you'd like to be on our mailing list to receive other tax, business, or financial strategy 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 strategies suited to your situation.

 

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Copyright 1998 Richard C. Woodbury P.C. CPA