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
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Major Tax Deadlines
For April 2001
* April 16
Individual income tax returns for 2000 are due.
* April 16
2000 partnership returns are due.
* April 16
2000 annual gift tax returns are due.
* April 16
Deadline for making 2000 IRA contributions.
* April 16
First installment of 2001 individual estimated tax is 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
What's New in Taxes
Legislation Update: What's going on in Congress
Congress is likely to pass tax-cutting legislation this year. The $64
question is: when will the cuts come, and how big will they be? Here's
a summary of tax proposals on Congress's agenda.
Cutting marginal income tax rates. President Bush has proposed sweeping tax-rate cuts which would reduce the current five income tax brackets (15%, 28%, 31%, 36%, and 39.6%) to four lower rates (10%, 15%, 25%, and 33%). Some of the rate reductions would be phased in over several years, while others could take effect as early as January 1, 2001.
* Rebating the surplus. In an effort to stimulate the economy, Congress is considering an immediate $60 billion tax rebate. One proposal would deliver a $300 rebate check to each taxpayer.
* Reducing or eliminating the marriage penalty. Millions of American couples pay higher taxes simply because they're married. Congress is considering several measures that would alleviate the "marriage penalty," such as increasing the standard deduction for married taxpayers or excluding a portion of the second working spouse's wages from tax.
* Increasing the child tax credit. Another family-friendly proposition includes doubling the child tax credit from the current $500 to $1,000.
* Promoting charitable giving. One proposal under consideration would allow all taxpayers to deduct charitable donations, even those who don't itemize their deductions. Older taxpayers would be allowed to take tax-free and penalty-free withdrawals from their IRAs to make charitable donations.
* Eliminating the death tax. Legislation has been proposed that would phase out the estate tax over a ten-year period.
* Increasing contribution limits for retirement accounts. Congress is considering an increase in the annual contribution limit to 401(k) plans from $10,500 to $15,000 and to IRAs from $2,000 to $5,000. Older taxpayers would be able to contribute even higher amounts.
* Expanding education tax breaks. Pending legislation would expand tax-favored education IRAs to cover education expenses from kindergarten through college. Other proposals include increasing the annual contribution limit to education IRAs from $500 to $5,000, adding a $400 tax deduction for teachers to defray out-of-pocket costs, and creating a $1,000-per-child tax credit for certain educational expenses.
* Overhauling the alternative minimum tax (AMT). The AMT rules require taxpayers who claim many credits and deductions to calculate their tax using two different methods, then pay the IRS the higher of the two calculations. Unless the AMT rules are revised or eliminated, it's estimated that 10% of all taxpayers will be subject to the AMT by 2010.
You should consider 2001 tax reform as you do your tax planning this
year. Give us a call if you have questions, or if would like to check the
current status of any of these proposals.
Keep your taxes under control
Taxes make up the single largest expense for many American households, so it pays to keep them under control. While your 2000 taxes are fresh in your mind, this may be a good time to review the things you did right and the things that could be improved upon from last year.
* Refunds. Did you make an interest-free loan to the IRS last year? If you receive a large refund on your 2000 tax return, that's exactly what you did. Consider changing your W-4 form so your employer can withhold the amount of income tax that is closer to what you are going to owe for 2001. If you allowed the IRS to save for you last year through overwithholding, consider using your 2000 refund to make your 2001 IRA contribution.
* Penalties. If you incurred penalties for underpaying the tax on your 2000 return, take steps now to prevent this from happening to you this year. If you end up owing more than $1,000 when you file your 2001 return, you may be subject to penalties. Generally, in order to avoid penalties for 2001, you must prepay at least 100% of your 2000 tax or 90% of your 2001 tax. Taxpayers with a 2000 adjusted gross income of more than $150,000 ($75,000 for married couples filing separately) have a higher payment requirement: 110% of their 2000 tax or 90% of their 2001 tax.
You can prepay your taxes either through withholding or by sending estimated tax payments directly to the IRS. If you make estimated tax payments, consider sending only the minimum required amount to the IRS each quarter. But put enough money away in your savings account to equal the additional taxes you'll owe when you actually file your 2001 return.
* Missed opportunities. Informed tax planning, accurate return preparation, and complete records will help ensure that you pay the lowest tax allowed by law. Don't wait until tax time to begin looking for deductions and credits. Set up a recordkeeping system early this year to capture the information you'll need for your 2001 tax return. Contact us for advice before you proceed with any major financial transaction.
* New tax legislation on the horizon. The likelihood of midyear tax legislation should be taken into consideration as you do your 2001 tax planning. It's impossible to predict what will actually be included in the final tax bill. Be sure to stay aware of changes that could affect you.
Take control of your taxes and your financial future. Call us for assistance
with your 2001 tax planning.
Bankruptcy reform likely to become law
Congress recently passed legislation that will make it harder for individuals to erase their personal debts. If this legislation is signed into law by the President, more individuals would be moved into a debt repayment plan.
The personal bankruptcy rate in America has nearly doubled over the past ten years. The banking and retail credit industries lobbied Congress for bankruptcy reform, claiming that individuals were taking advantage of the law to avoid debts that they could afford to repay.
Under the proposed reform, individuals would have to meet a "means test." If it is determined that an individual has the ability to repay, he/she would be steered toward a payment plan that would provide for debt repayment over several years. This reform would also decrease the amount of home equity that individuals could protect when they file for bankruptcy protection.
The House and Senate versions of bankruptcy reform are now headed to
a conference committee that will reconcile the differences between the
two bills. A final bill will then be sent to the President to sign into
Internal controls can make or break your business
A prevailing characteristic of successful businesses in today's dynamic marketplace is a strong system of internal controls. Many small business owners have found that establishing and maintaining appropriate controls can greatly improve the effectiveness and efficiency of operations.
An organization's control structure is typically dependent on the entity's size and complexity. Small and mid-sized companies generally implement an informal system to ensure that internal control objectives are achieved.
Internal controls provide a system of checks and balances that keep dishonest employees from stealing from you and keep honest employees from making mistakes that cost the company money.
Examples of internal controls which are useful to small businesses include:
* Cash receipts. All checks received should be immediately stamped "for deposit only." Different individuals should be responsible for recording cash receipts, preparing deposits, and reconciling bank accounts. Bank accounts should be reconciled monthly.
* Cash disbursements. Blank checks should be stored in a locked cabinet, and access to blank checks should be limited.
* Accounts receivable. Customer credit-worthiness should be evaluated. Receivable balances should be aged, and customers with past due accounts should be contacted regularly. Balances should be written off once they reach a certain age or are determined to be uncollectible.
* Fixed assets. Furniture and equipment should be secured and properly accounted for. Purchases and disposals of fixed assets should be approved by the appropriate individuals.
* Inventory. Storage facilities should be locked and inventory should be counted periodically.
* Accounting records. Computer passwords should be used to restrict access to data. Backup tapes should be made nightly and stored off site.
The lack of adequate internal controls is the number one cause of fraud
against business. Call us for assistance in reviewing your current system
of controls or establishing procedures to protect your business.
What's New in Financial Strategies
Watch your mail for privacy notices
If you are concerned about your privacy, watch your mailbox for an important
piece of mail to hit before July 1, 2001. A new federal regulation requires
then. This includes banks, insurance companies, mutual fund companies,
brokerage firms, and other financial institutions with which you do business.
The notice must disclose the kinds of information these institutions collect about you and who they share your financial information with. Equally important, they must provide you with the opportunity to "opt-out" of having your information shared with unrelated parties without your consent.
Visit the Federal Trade Commission's Web site at http://www.ftc.gov/privacy/protect.htm
to learn more about the choices you have to protect your personal information.
Handling the financial issues when a loved one dies
The death of a loved one is a stressful event. In addition to the emotional turmoil, survivors must deal with a number of financial and tax issues, some of them mundane and some quite complex.
Here are some suggestions to help you through this difficult time.
* After a death, you should try to locate your relative's key legal and financial documents. If he or she had a will, notify the executor(s). In the case of a trust, contact the co-trustee or successor trustee. You should also notify anyone who holds a power of attorney.
* If you have been named as executor or trustee, you will probably need tax, financial, and legal advice. Therefore, one of your first calls should be to our office. You will also want to retain an attorney who is experienced in settling estates. This will often be the person who drafted the decedent's estate planning documents, but you are free to use anyone else you wish.
* If you relied on the deceased for financial support, make sure that you have enough money to cover your expenses for the next few weeks. If you have any doubts, give us a call.
* Once you have taken the preliminary steps above, you can generally put financial matters out of your mind for a few days. Soon, however, it will be necessary to send notifications to a number of parties including banks, brokers, lenders, and insurance companies. We can help you prepare a complete list.
* As executor or trustee, you may be required to oversee the probate of the decedent's estate, file a final income tax return, or file an estate tax return. If so, your next job is to gather all of the decedent's financial records. Working with your attorney, we can help identify the documents you need and make sense of them once they are located.
* Depending on the nature of the estate, it may be necessary to hire other experts, such as appraisers, investment advisors, and business valuation specialists. If these people are needed, it helps to get started as soon as possible.
We can help, so when you need assistance in this area, give us a call.
Chuckle of the Month
Several years ago, as an April Fool's joke, Burger King ran an ad in USA Today to announce its new left-handed Whopper. Though it was obviously a joke, the company said thousands went to Burger King to request the new "lefty" burger.