103 E. Sharon Avenue
Houghton, MI 49931 USA
Phone (906) 482-1305
Fax (906)482-9555


.November 1998

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 for November 1998

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

Congress adjourns without passing tax-cutting legislation

Though Congressional leaders mounted an effort to pass a 1998 bill with $80 billion in tax cuts, they were unable to do so. Instead, a few tax changes were incorporated into an omnibus spending bill.

The bill extended most of the expired or expiring tax credits including the research and development credit, the welfare-to-work tax credit, and the work opportunity tax credit. The bill also included several tax breaks for farmers and ranchers, and it accelerates full deductibility of health insurance costs for the self-employed starting in 2003.

Another provision keeps personal tax credits, such as the child tax credit and the new education credits, from triggering the alternative minimum tax in 1998.

Congressional leaders indicated an intention to consider tax legislation again in 1999.


Beware of the tax traps in the new Roth IRA

A Roth IRA can be an attractive way to save for retirement. However, if you’re interested in establishing a Roth IRA or rolling funds from your traditional IRA into a Roth IRA, be careful not to be caught in one of the many tax traps. Here are some of the important Roth IRA rules you need to know -

Careful planning is advisable in order to avoid costly mistakes in using a Roth IRA. Call our office if you would like more information or assistance.


New Business

This year, give your employees the full story

According to a National Institute of Business Management survey, employee benefits account for 20% to 30% of a company’s payroll costs.

Letting employees know how much the company spends on the employees’ behalf can have a positive effect on worker morale and productivity.

If you haven’t informed your employees about their total compensation package, consider this approach. This year when you prepare W-2s for employees, prepare a summary of each employee’s benefits. Include such items as the following:

  • Salary
  • Bonus
  • Pension plan contribution
  • Deferred compensation
  • Medical and dental insurance
  • Life insurance
  • Disability insurance
  • FICA (social security taxes)
  • Worker’s compensation
  • Unemployment insurance

Total wages and benefits paid



Also indicate for the employee’s benefit the number of paid vacation days, personal days, and sick days and the value of employer-provided benefits such as work clothing, parking, and meals.

Some companies have found that it works well to itemize these benefits in a personal letter to each employee. Your letter might conclude with an expression of appreciation for the employee’s contribution to the company. Whatever format you choose to use, consider the end of the year an opportune time to communicate the value of company-paid benefits to your employees.


Smart Business

Business Expenses: Go for the base hit

American managers have a tendency to look for killer solutions to controlling business costs, bypassing cost-effective, but smaller-scale alternatives. This is akin to the baseball team that relies on home runs rather than base hits to score.

Opportunities for controlling costs are often missed because individually they don’t account for much. However, over time, they can accumulate to significant savings. That’s the idea behind continuous improvement.

Try these suggestions -

Make cost control an objective in your business, with a goal of incremental cost reduction every day. Go for base hits; it may be a long time between home runs.


What's New in Financial Planning

The IRS will let you use a credit card, but should you?

The Taxpayer Relief Act of 1997 directed the IRS to begin accepting tax payments by credit card starting in 1999. Individuals can use a credit card to pay the balance due on their 1998 tax returns by making a toll free call under a system run by U.S. Audiotex. The IRS can’t pay any credit card fees (as merchants do), so those using the system will be charged a fee by the credit card and processing companies.

Though it might seem convenient to use a credit card to pay taxes, think twice before doing so. Unless you pay the credit card promptly, the card’s interest rate, in addition to the fees paid to process the payment initially, could exceed what the IRS would charge in interest and late-payment fees.


Looking for something special for a child on your gift list?

Want to give a long-lasting gift to your child or grandchild this holiday season? How about stocks, mutual funds, or U.S. savings bonds? These may not have the immediate appeal of traditional gifts, but they can provide pleasure long after the holiday season passes.

Instead of giving toys, for example, give stock in a toy manufacturer or distributor. Or give stock in an entertainment company. Consider giving stock in a company that has a dividend reinvestment plan, so the dividends are automatically reinvested in the company. That way, the child will learn the valuable lesson of plowing back earnings for increased growth.

Mutual funds may be even better because the child can own part of several companies instead of just one. Moreover, the child will receive the benefits of a more diversified investment.

Gifts of U.S. savings bonds can help the child become interested in the financing of the federal government while he or she is building a college fund. The rates are currently competitive, so the child’s fund for college education will not only be safe, but faster-growing than some other investments.

As a reminder, gifts worth over $10,000 are subject to gift tax and should not be given without a professional review of the tax consequences. We would be happy to discuss tax-saving ideas with you should such a large gift be on your list this holiday season.


Chuckle of the Month

"What are we going to do?" said Baby Tiger to Mama Tiger in the jungle, "Here comes a hunter, and he has five rifles, three special sighting scopes, and devices to allow him to see in the dark!" "Hush!" answered Mama Tiger, and she taught her cub how to sneak up from behind and pounce. The hunter was never heard of again. All of which goes to prove that technology may be fine, but it will never be a substitute for a good basic education.


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