2009 is drawing to a close….

Have you done everything you can to protect yourself in 2009 from the IRS tax hounds?

I’m not sure if you know this, but the federal government is gunning after small business owners and families to ensure they collect as much revenue as possible this year. It’s a simple function of the fact that revenues for the government are way down. That includes good families, like yours, unfortunately.

If families don’t develop a plan now, many will be faced with a big surprise when they have their taxes prepared.

And to make things worse, there are significant changes on the horizon which promise to increase that tax burden even more.

It’s not too late to make some last-minute changes to your situation. Call us by the 30th…you won’t be disappointed.

Now, before we get to this week’s Strategy Note, a few interesting news items

Filed under: Another celebrity tax scandal: The Black-Eyed Peas
http://www.thewrap.com/ind-column/black-eyed-peas-lawyer-business-manager-failed-pay-their-taxes-11780 
I can’t admit to actually knowing much about this band, but apparently they’re pretty famous. Enough so, that they were all over the “tax news” wires last week for failing to pay taxes. This one seems to be the fault of poor management, but the lesson is true even for families who don’t pay a business manager–have someone competent manage your taxes!

Filed under: Health Care Reform is coming
http://www.reuters.com/article/idUSTRE5B83ZG20091221
Well, this was just a procedural vote, but over the weekend in DC, our Congressional leaders inched closer (in a seemingly decisive move) to passing the much-discussed health care legislation. I’m going to reserve comment until the final bill is passed…but needless to say, the tax implications will be significant for families and business owners. We’ll keep you in the loop.

+++++++++

Now…to this week’s Strategy Note…one of the significant tax items under discussion has been a repeal of the “estate tax”. It’s still unclear what will occur, but it reminded me of something I’ve been meaning to write about for a while–estate planning for families. It’s a significant “missed base” for many people, often because of misconceptions about it. So, I’ve got a two-part series on “Estate Planning Myths” which might clear up some of the confusion. And I also know that the holiday season can be painful for families who are processing the loss of loved ones in years past, so this isn’t at all intended to chafe those wounds. Instead, I hope you can see it as an opportunity to make proactive steps to lessen any future impact of losses.

Let me know your thoughts…and if you’d like to be put in touch with someone who can help you get this important process completed on your behalf!

“Real World” Personal Strategy
Part 1: Common Myths About Estate Planning 

As of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.

One of the big reasons that most families don’t yet have this in place is because of some incorrect thinking about whether it’s right for them, or if it’s even necessary. And sure, some people just haven’t gotten around to creating a will or trust. Others think they don’t need an estate plan because they’re not rich. I’ve even heard from people that they don’t want to put it in place because when they do, it’s sending some sort of death wish into the universe (or some such).

Well, I’ll start by busting THAT myth: Preparing a plan for your succession will not speed your demise. Easy enough.

But here’s the problem–if you continue without an estate plan, you could leave a legacy of bad feelings and attorneys’ fees.

But, I’ll move off of that easy one, and speak to some of the more common misconceptions out there. I’ll start with two this week, and address three more in a future Note.

1. Only rich people prepare estate plans.

Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state’s “intestate succession” laws. That means your money and property could end up with family members you haven’t spoken to in years, instead of who you’d really like to see control your assets.

I won’t go into all of the different components of a will, trust, health care directive etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats. 

Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a lawyer to guide you through the process.

2. Everything goes to your spouse, if something happens.

Unfortunately, that’s not always the case. We deal with clients from different states around the country, and state laws vary. In fact, in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies intestate, the spouse gets the first $50,000 of the estate and what’s left is divided 50-50 among the spouse and the children.

You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.

I’ll send a few more in the weeks ahead, but I hope you can already see that things are not always as we “think”.

I hope this helps.  To your family’s financial and emotional peace…

With less than two weeks to go in the holiday season we can sometimes neglect the fact that it’s also less than three weeks left for the calendar year.

And that means that you’ve got a bunch of decisions to make these next few weeks which can directly affect your tax bill this coming season.

So…that being the case, I also wanted to remind you about Flexible Savings Accounts (FSA), and make sure you use everything you have in yours–as well as a few ideas for using your Health Savings Account (HSA).

A couple items of note:

Filed under: This is a little ridiculous
http://seattletimes.nwsource.com/html/dannywestneat/2010435946_danny06.html 
Don’t EVER believe that you’re immune to an IRS audit…and I don’t write that to scare you. It’s just that when we see that a woman who makes less than $20K per year can get audited–well, anyone can. Ask us about our different options for “Audit Protection” for this coming tax season when you meet with us.

Filed under: The IRS’ Delta Squad (or some such)
http://www.reuters.com/article/idUSTRE5BA45320091211 

I’m not exactly sure why the IRS is positioning this special task force this way, but last week there was a bunch of publicity about gathering a couple hundred agents specifically tasked to pursue tax fraud and high-earners with “aggressive tax strategies”. It remains to be seen how they’ll define this (we’ve always been pretty aggressive about helping our clients keep money in their pocket, after all!)… but it’s a good reminder that it’s always nice to have someone in your corner when the IRS comes a ‘knocking.

Now…to this week’s Strategy Note.

Next week, I’ll be letting you know of some last-minute moves you can make, as well as information on expiring deductions to know about.

And listen: I know that we get paid to take care of all of this so you don’t have to think about it, but the point in my sending you this information is that we’d like to see you be *pro-active* about your spending and financial decisions BEFORE we get to “cleaning it up” for you.

Yes, we’re pretty skilled at cleaning up financial messes on behalf of our clients (with minimal tax implications), but we can’t spend your money for you. So, unlike many other tax professionals, we don’t send you “re-heated leftovers”. As you can tell, we put a bit more effort into our notes so that you are prepared and we can serve you best.

That’s why we’re known as the most trusted tax professionals in our area.

Anyway…to the Strategy Note. And, as always, I would love your feedback!

“Real World” Personal Strategy
Don’t Waste YOUR Health Care Spending

It’s a fact: the average American family spends $2,000 on personal health-care expenses each year.

But the majority of these families miss out on the tax benefits available to them through that spending.

You see, if you contribute that amount to a Flexible Spending Account (FSA), you can reap a federal tax savings of more than $500 (assuming the average 27% tax bracket). The kicker, though, is that if you don’t use all of the funds in one calendar year, the money vanishes. Make sure this doesn’t happen to you; try spending some of it on these handy, healthful items.

Now, this is NOT the case if you have a Health Savings Account (HSA)–those never expire. However, they must be linked to a qualifying “high deductible” insurance plan, which is not the case for an FSA.

Yet those who don’t have an HSA often forget about the FSA option. The tax savings really can add up.

What makes these accounts so great is what you can purchase, and cut your tax bill at the same time. Here’s just a few often-overlooked items which qualify…

Cold Remedies: FSA often reimburses for over-the-counter cold remedies, including cough drops and syrups, throat lozenges, and multi-symptom cold medicines. Buy now and avoid the rush, particularly if you require a formulation that doesn’t exacerbate high blood pressure.

Hand Sanitizer: Does anybody NOT have a pump-bottle of hand sanitizer on their desk anymore? Not only can you purchase a desktop version, but there are also portable formats as well. A recent study shows that only about 50% of middle-school and high-school students wash their hands regularly. Pack your kids off to school with an FSA-approved sanitizer spritz and wave bye-bye to H1N1.

Gym-Bag Essentials: Keep your athletes healthy and fit by spending your flex dollars on bandages, antibiotic ointments, and even anti-fungal athlete’s foot treatments. Maximize your FSA dollars by purchasing a variety – boo-boos come in all shapes and sizes, as do bandages.

Sunscreen: You knew this was coming, right? Dermatologists recommend wearing sunscreen year-round to protect against UVA and UVB rays, and, thankfully, sunscreens with SFP ratings of 30 and above are typically covered by FSA. SPF moisturizers are not covered, though, so try to find a sunscreen product that is lightweight enough for year-round, everyday use.

And yes, I’m a business owner–I have nothing against people spending money as a way to communicate their love. It’s just…a tad ironic, isn’t it?

Anyway, I’ve put together a little note which may actually be somewhat controversial about holiday shopping, but before I get to that–some tax news (which I know you’re just dying to learn about. Ok…feel free to skip to the article about holiday shopping!)…

Filed under: Hidden Taxes in Proposed Health Care Reform:
http://wellness.blogs.time.com/2009/11/30/bo-tax-a-levy-on-nips-and-tucks/?xid=rss-topstories
Looks like one of the ways with which Congress is looking to fund the Health Care Reform package is that there are specific items which will be taxed. One of them is elective cosmetic surgery. That might not be a bad thing (unless you’re a cosmetic surgeon)? We’ll see what happens…and will, of course, keep you in the loop.

Filed under: How To Pay For War
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4130ih.txt.pdf
This one is getting a lot of commentary–a proposed bill which would have high-earners pay MORE percentage for the Afghanistan conflict than would lower-earners. Too much politics to wade through on this one–but that link will show you what a Congressional bill really looks like. (Note: That link is to an online PDF and may give you a warning, but it’s a safe file; may just take a couple of clicks to view.)

Filed under: “I Guess It Pays to Be a Snitch?”
http://www.forbes.com/forbes/2009/1214/investment-guide-10-ubs-irs-spondello-tax-informants-on-loose.html
Among other well-publicized similar initiatives, this one is aiming to reward people for informing on their friends and neighbors who hid money in offshore accounts. Quite a moral conundrum, eh?

Now…to this week’s Strategy Note. It’s on shopping…but it may not *quite* give you what you think it will. You’ll see what I mean.

And, as always, I would love your feedback, as I read every comment that comes my way!

“Real World” Personal Strategy
Are You Wasting “Value” With Gifts?

Many people spend more during the holiday season than they can afford. Among other things, sometimes guilt or shame can drive a lot of big-ticket gifts–though not always, of course. But the satisfaction can be both short-lived and shortsighted.

Well, in a new book, Wharton School professor Joel Waldfogel’s book, “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.” says that people are the most efficient when spending their own money, producing at least a dollar in satisfaction for every dollar they spend. But spending money on those we don’t know well results in what Waldfogel calls a “deadweight loss” of value–about 20%.

You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash. With Christmas & holiday spending in the United States at $100 billion, this loss results in “an orgy of wealth destruction” to the tune of about $20 billion. Ouch.

Waldfogel’s study found that givers with infrequent contact were those most likely to give less appreciated gifts. This group includes aunts, uncles and grandparents who live in another town. According to economists, people are better off when they make their own choices. For this obvious reason, Waldfogel suggests giving money or gift cards instead.

To the criticism that he had taken the joy out of Christmas, he responds that after watching desperate last-minute shoppers, he thinks the joy was taken out of Christmas long before his critique.

Of course railing against the commercialism and waste of the holidays is pretty common these days. So, let’s further breakdown what happens during this gift-giving season…

Some gift giving is driven by social expectation and becomes a test of the relationship. For example, for couples who are dating seriously, the message is much more important than the medium. Give a book the other person despises, and you have revealed how little you pay attention to your loved one’s opinions. But a pair of gloves, with a heartfelt note saying, “These will keep your hands warm when I’m not there to hold them” would show your affectionate side. Or perhaps the receiver doesn’t like romantic mush, and you are expected to know better.

Parents can help extended family members select gifts for their children by providing specific wish lists to ensure that what they buy will truly be appreciated. If you aren’t confident, include a gift receipt. You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash.

And in families where children don’t have any spending money, cash may be the best possible gift. Handling cash with all the complexity of choice is an experience that offers irreplaceable life lessons.

Try asking people, “What present changed the course of your life the most?” to see how much influence you can have. A pair of binoculars sparks a love of ornithology. A telescope fuels a fascination with astrophysics. A microscope leads to a biology career. An electronic toy prompts your daughter to join a robotics competition.

Not all presents need to be academic. A graphics tablet can lead to a design career. A guitar can inspire your son to form a new band. Or a video camera can lead to a later career choice in filmmaking.

Finally, some parents who are still unemployed will disappoint their children if they are hoping for expensive gifts this year. I’ve known a few families who had to tell their children that celebrating a traditional American credit card holiday would jeopardize the family’s financial security. Many parents are experiencing the first economic setback in their adult lives. Being financially cautious doesn’t mean you love your children any less. And if you can be positive and reassuring, you needn’t try to shelter you children from household economics.

The greatest joy of the holiday season is not bought in a store and does not increase your credit card debt. There is a better way to celebrate that builds long-lasting family ties.

Make a list of all the things you have gotten right in past holidays and make them annual family traditions. Add a few new ideas every year. The best holiday traditions don’t cost a lot of money, and they aren’t wrapped and put under a tree.

Rightly so, people inherently recognize that gratitude is so critical for emotional well-being. Well, I tried to make the case that it’s also linked to *financial* well-being as well. In my opinion, money is a simple demonstration of what is valued–no more, no less. And there’s a certain kind of logic in how it moves through the system, and the hands of its bearers.

If, somehow I wasn’t clear in my last blog, I’ll say it now very clearly to you: We deeply appreciate your trust, and are honored by the opportunity to help you realize your dreams. We understand that money is the fuel for those dreams–and not their fruition. Which is why we work so hard to help you keep more in your bottom line…so your REAL dreams can come true.

Sure, it may seem a bit lofty for a simple accountant-type, like me…but it’s how we remember that every dollar and cent matters. Your dreams are important, and worth protecting–zealously. So again…thanks for letting us help.

Now, to my Strategy Note for the week…as you may be staring at some debt, I further want you to know that we do NOT “judge” you for the decisions you’ve had to make during these tough times. Simple…we’d just like to walk alongside you, and help you out. That’s why I’ve put together some strategies for beating back that debt.

And, as always, I would love your comments, as I read every one that comes my way!

“Real World” Personal Strategy
Beat Back That Debt

First, some sobering numbers–and they may be worse now: by the end of 2008, the average credit card balance per household in America was $8,329 and the average balance per card was up 11 percent over the previous year to $1,157. 

You may be in a better situation…it may also be worse. So, to answer the questions we often get around here, some basic strategy for you:

1. If you ever hope to pay off your credit card debt, pay more than the minimum payment each month.
If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization”–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.  

2. Implement a regular *system* for credit card debt reduction.
With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records. 

3. You can negotiate with your credit card company.
No, you do not need to be an attorney or other professional to negotiate with your credit card company (you will need patience and persistency though). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are willing to make deals.

4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.
Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt problem rather than hiding will not only help your financial problem but make you feel better about yourself.

5. Keep track of what you are able to pay each creditor every month.
If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.

Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.  

6. Don’t fall prey to intimidation tactics
No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there and don’t let this tactic intimidate you. 

Lastly–don’t let the IRS be one of those creditors. Let us help you this tax season, and THAT will be one less creditor to worry about. I guarantee it.

No, as your family’s Personal Financial Guide, I’ve got some words to say about your peace-of-mind–and what leads to TRUE wealth. THIS week–this happy week–I want to point you higher, and to what keeps regular families rich.

You see, “rich” is a state-of-mind. And many families that YOU might consider very wealthy are (frankly) miserable. I’ve got first-hand testimony to that, as I deal with a wide variety of people on every point of the economic spectrum.

But before I go into all of what I mean, let’s get some pertinent news items for you to munch on, shall we?

So…we’ve got this:
http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200911201556dowjonesdjonline000589 (some tax deductions are being extended, it seems). And we’ve got this: http://taxprof.typepad.com/taxprof_blog/2009/11/17-tax-increases.html (tax increases in the Senate Health Care bill).

What’s a regular family to do, to keep their head from swiveling like crazy with all of these competing events? Well, the simple answer, of course, is to walk with a competent guide. As these proposals actually turn into law…we’ll keep you updated.

Next, we’ve had news of hundreds of thousands of college parents inaccurately claiming deductions. They’re in for a nasty surprise, unfortunately.
(http://www.usatoday.com/money/perfi/taxes/2009-11-19-college-credit_N.htm )

Again…it quite literally pays to have someone in your corner to manage these items for you. Now is the time to ensure you’re protected during next tax season.

Now, to my Strategy Note for the week…would love your feedback, as I read every email that comes my way!

“Real World” Personal Strategy
Why Thanks-Giving Matters

First, a short history of this week’s holiday…

According to scholars, the first known Thanksgiving took place on September 8, 1565 in Saint Augustine, Florida when Spanish settlers held a Mass of Thanksgiving after arriving safely in the New World. English settlers in the Virginia Colony held a similar day of thanks in 1619. Two years after that, the colonists at Plymouth Plantation celebrated the most famous Thanksgiving, during 1621.

It wasn’t until October 3, 1789, that it actually became a holiday, when then President George Washington proclaimed a day of Thanksgiving…but just for that year. In 1795, Washington again proclaimed a day of Thanksgiving, and President John Adams also declared Thanksgivings in 1798 and 1799. After a decade and a half without the celebration taking place at all, President James Madison renewed the tradition in 1814, and even went so far as to declare the holiday twice in 1815! In 1863, President Abraham Lincoln finally proclaimed the last Thursday of November as a national day of Thanksgiving that should take place every year.

Now…President Lincoln struck on something very important. You may have noticed the date–the country was mired in civil war, and the national mood was bleak. But President Lincoln understood that the mindset of a nation (and a family) is to be protected at all costs. Yes, it may have *seemed* a ceremonial gesture, but I can assure you that if  a war-torn nation can turn its eyes upward–so can you and your family.

And, herein lies the wealth secret of Thanksgiving: When you walk in gratitude, you never feel poor.

I told you that I’ve worked with families with seven, eight figures in their bottom line…but some of them are flat-out miserable. Why? They’ve forgotten gratitude, and they can never get enough. Yes, they may *seem* wealthy, but they sure ain’t rich.

“Rich” is a state-of-mind–and it’s tied into gratitude. It can affect how you see savings, retirement and investment. And, of course, gratitude is the enemy of fear. It’s like an opposite magnet for it–walk in gratitude, and fear just melts away.

So, here’s my advice for this week: Whatever financial situation you happen to find yourself in, be thankful. There are hidden blessings in any adversity…and hidden fear-traps in any windfall. Find them, savor the blessings…and watch your family thrive.

Can you feel the holiday “crunch” beginning? In our house, the calendar is beginning to fill up with parties, family activities and much more. Around this time of year, my family sort of begins to brace itself–I’m rather busy once January hits (as you might imagine).

As for the country, well the good news for the economy continues to sort of trickle in…we just found out that retail spending in October was up about 1.4% (driven mostly by some recovery in the auto industry) and, if you’re curious, you can get the full details here:
http://www.bloomberg.com/apps/news?pid=20601103&sid=aSkgY5qdX7B4

And the stock market seems to be moving in a good direction, and that’s always a nice thing for the national psyche (though not always indicative of real economic health, as we have learned).

“Real World” Personal Strategy
Behavior & Attitude Traits of the Poor

In my line of work, I get to conduct a real-time analysis of what creates wealth in the lives of regular families…and what drives it away. I’ve written in the past about some of the commonalities found in the financially secure…and I thought it might be useful to now focus on what I see in those who can’t ever seem to crack those ranks.

And this year is proving to be no exception, as the calendar here at the business is also filling rapidly–end-of-year appointments, tax planning consultations, etc. Do make sure that you contact us to guarantee that we can help you keep your tax bill down for 2009, while there’s still time!

But no matter how much things turn around in the national picture, regular families can continue to wallow in debt and struggle–and sometimes it’s their fault.

Now, the last thing I want to do is shame my clients and friends about the kind of behavior which leads to this situation…so, instead, I’d like to address it in my Personal Strategy Note for the week. That way, you can hold it up as a “mirror” to your own family’s financial habits and make the changes necessary.

As always, making change away from these habits can be difficult–but we’re here to HELP, not make you feel badly about it. So call or email us, and let us know what we can do to walk more closely alongside you in the road to financial recovery…

In my experience, the financially-strapped typically…

* Spend money on things they don’t need:  I’m sure we’ve all got one of those friends who just loves to spend money, and buy things just to say they have them.  The newest iPhone just came out? They buy it even though they already have an older version.   A new TV came out with a higher refresh rate than their current one? They buy one so they can say they have the newest and latest technology.
* Don’t know where their money is going: Far too often people who are broke find themselves short because they’ve never tracked their monthly cash flow and their small expenses are adding up to consume everything they bring in.  They really need to track their expenses for a month or two so that they can set up a plan.
* Like to blame their problems on outside forces:  People don’t like to see themselves as the source of their problems. While people certainly have problems that aren’t caused by something they’ve done, far too often they will also try to shift blame when they should be looking at themselves.  They blame their friends, family and the government.  They believe that “the little guy just can’t get ahead”.
* They would rather have others think they are wealthy, than actually be wealthy: People who are always broke like to be seen as wealthy and successful, even if looking that way to others means that they’re actually forfeiting the possibility of being wealthy in reality.
* They don’t plan ahead: Money is short because they haven’t set up a family budget and a saving and spending plan.  If you set up a monthly cash flow forecast, and know exactly what you’re going to spend in what categories -they’ll do much better.  If you fail to plan you can plan to fail.
* They use credit habitually for “lifestyle” purchases: Delayed gratification isn’t something that they’ve heard of, and if they want something they just put in on credit.  After all – it’s at a 0% interest rate for the first 3 months!   One purchase leads to another, and before they know it they’ve got thousands in credit card debt!
* Always pay more than they have to: Often people who are broke have gotten there because they don’t know how to shop for a deal, negotiate or ask for a discount.  You can get a discount on just about anything – from electronics to health care.  Never pay more than you have to!
* Fall prey to lifestyle inflation and “keeping up with the Joneses”:  Often people with higher incomes have problems with staying ahead in their budget as well because they fall prey to lifestyle inflation.  Instead of banking and saving raises, they raise their standard of living – buying a bigger better house, a new car and a new wardrobe.  They feel like they have to keep up appearances with everyone in their neighborhood.
* They rely on others to fix their problems:  We’ve probably all known someone who is always going to their parents, family or friends to bail them out.  They create a pile of debt, and then rely on the kindness of others to get them out of their bind.
* They forfeit future gains for fun today:  These people often have a hard time visualizing how saving and hard work will pay off down the road, and instead live for the fun and pleasures of today.  They don’t realize how saving for tomorrow can improve their quality of life today!

Obviously, I’d like to help you move past these behaviors. You may not carry every one of these traits, but just one or two can get you into hot water. If you feel that you’re slipping into any of these traps, please do let us know…we’re  here to help as your Family’s Personal Financial Guide.

Your family’s Personal Financial Guide is here, and we’ve got some bad news to start the week…as well as some good news for many from the past weekend.

(Btw, I’m not referring to the healthcare bill passing the House, as I’m not going to wade in to that debate right now–I’ll save my advice for when we finish the legislative process. I’ll just say for now that I’m glad attention is being paid to the issue and leave it there for now. Feel free to send questions, but know that we won’t have any details until a bill is signed by the President, if one makes it through.)

Before I get to the good news, some links and commentary about what it all could mean for your family:

Unemployment hit the not-so-magic 10% threshold last month:
http://www.usatoday.com/money/economy/2009-11-06-jobs-october_N.htm
For many, this is just more noise–and that’s how it should be. It does NOT profit you to fix your eyes on what you cannot control, *especially* when it’s bad news. Keep your head focused on what YOU need to do in order to grow in your job or business…and let the politicians worry about how to respond.

Don’t fall into the trap of letting malaise settle into your heart because of outside factors.

(If YOU are among that 10+%–my heart goes out to you.)

A nice article about year-end tax moves to make sure your 2009 taxes aren’t higher than they should be: http://money.cnn.com/2009/10/27/pf/taxes/year_end_tax_moves.moneymag/index.htm?section=magazines_moneymag
I won’t go into my specific advice for YOU from that, as we’d really need to meet in person for that–so my MAIN advice from this is to give us a call and set up an appointment before year-end.

Our calendar is RAPIDLY filling, so don’t delay on that…it could make hundreds or even thousands of dollars of difference in your bottom line.

So…this week’s Strategy Note is about another bill which was actually passed into law, and something I’ve been talking about for a few weeks. Read on and leave your comments:

“Real World” Personal Strategy
Breaking Down the New HomeBuyer Tax Credit

Last week, a new Homebuyers Tax Credit bill was actually signed into law. The new bill extends the tax credit for first-time homebuyers (FTHBs), as well as opens it up to current homeowners who are looking to buy. And even if you aren’t looking to purchase – pass on this article to anyone you think might be in the market to do so. This is information that might benefit them greatly, and I’ll be happy to be of service to them.

So, here’s what you need to know about the new bill…

NEW Tax Credit for Current Homeowners
This is what’s new and special about this. The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Call us to see if you qualify–it might be the right time to finally make the move you’ve been thinking about…we’ll help you determine if it’s a smart move–or not.

Tax Credit for First-Time Homebuyers
FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Deadlines For The New Credits
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available. Again, we’re here to help.

Credit Vs. Deduction
The benefit of a tax credit is that it’s a dollar-for-dollar benefit, rather than a “tax deduction”, or reduction in a tax liability. If it were simply a deduction, it would only save you $1,000 to $1,500 when all was said and done.

This credit DIRECTLY “pays” your taxes for you. For instance, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

So, it really is like money in your pocket.

Now, there are some income caps, as well as some purchase price caps ($800,000 to be specific).

But if you have any questions…I’m here to help as your Family’s Personal Financial Guide.

Phew! I’m feeling rested this week–how about you?

Sure was nice to wake up Sunday morning with an “extra” hour of sleep, thanks to Daylight Savings–well, Daylight “Losings” in this case.

And I’ve got some insight about the current economy–as well as a special offer for you at the end of the email– but I wanted to share some stuff I found about some interesting history with Daylight Savings/Losings…but rather than re-hash its origins (like all of the media), I found these stories about how different people have used it to their advantage…or not:

* A man was actually able to avoid the draft for the Vietnam War using a Daylight Saving Time loophole. When he was born, it was just after midnight, DST. When he was drafted, he successfully argued that in his home state of Delaware, standard time – not DST – was the official time for recording births. So he was technically born on the previous date–which had a much higher draft lottery number – and he was able to avoid being drafted.

* In September 1999, the West Bank was on Daylight Saving Time, while Israel had switched back to standard time. A group of West Bank terrorists prepared some timed bombs – but misunderstood the time change – and the bombs exploded early, killing the terrorists themselves, rather than the intended victims – two busloads of innocent citizens.

* In the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul – which are considered one metropolitan area – didn’t agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches seven times in 35 miles!

* To keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks “fall back” in the fall, all trains that are running on time actually stop at 2 am – the official time of DST change – and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time.

It’s a funny little world we live in, right?

So…this week’s Strategy Note is about some good news we’re starting to see, and what it might mean for you. As usual–we’re here to help with your situation.

“Real World” Personal Strategy
Eye On The Economy

The U.S. Department of Commerce estimated a 3.5 percent jump in annualized GDP growth for the third quarter of 2009, a strong signal that we may be nearing the end, or even be out of, the recession. But this good news is not all it’s cracked up to be.

First, a 3.5 percent jump is a huge rebound from the earlier 6.4 percent and 0.7 percent declines. If anything, the new positive numbers suggest this is a very volatile and uncertain time for the economy.
 
Second, some of that boost in spending is largely a paper increase because it reflected spending from the Cash for Clunkers program which did little (if anything) to boost long-term economic growth. Consumer spending was simply advanced into the third quarter. While some manufacturing inventories have increased (a good sign) the economy will need to build on sustainable consumer buying power and increased efficiency. We haven’t seen that yet.
 
Third, uncertainty still hangs over whether the U.S. can manage the debt it’s taken on to bail out the financial sector and the economy. Consumers and businesses are still pessimistic, and talk in Washington of adding more to our debt with a second stimulus isn’t settling any nerves about the long-term prospects of the economy.
 
We need to remember it took the National Bureau of Economic Research 12 months to officially declare that the economy was in recession because the data was so hard to read. It’s no different now.

As a result, we will need to wait at least until Fourth Quarter GDP results are in before we can even make reasonable speculations about the economy’s health.

I hope this helps!

(By the way, I hope you had a great weekend. Mine was nice and slow at home and outside with the family–enjoying the fall weather. Only a few more weeks until things start to really change…and then indoors we go!)

With this economy still not yet recovering, there are still plenty of families that are doing just fine–even thriving. But it’s not considered very kind to demonstrate one’s prosperity in this environment, which is perfectly understandable.

But, whatever your specific situation, I suggest that you make a clear and sustained effort to keep your eyes off the situation of those around you–and continue to focus on what YOU can do to grow your family’s wealth and joy. Really, it’s the only thing which you can actually control.

Envy truly sucks the joy out of your life…but it could be much worse than it is in this country. We could live in Norway.

Last week marked the annual release of EVERYBODY’S tax records to the general public in Norway–giving any interested party a precise picture of their neighbor’s annual income and wealth.

(Story here: http://news.yahoo.com/s/ap/20091022/ap_on_bi_ge/eu_norway_money_roll )

How do you think that would be for feeding envy, huh?
*********
Now, before I move on to this week’s Strategy Note I couldn’t help but show you this:
http://taxprof.typepad.com/taxprof_blog/2009/10/accuracy-rate.html

The IRS’ program to assist people in their taxes at no charge wasn’t very effective. Certainly, we can all get behind the *concept * of helping low-income families, but is it really “helping” when errors abound? Further, many upper income families availed themselves of this service–often to their detriment.

Sometimes it’s best to stick with a professional…

And, on to my Personal Strategy Note. I’ve put together a list of often-overlooked deductions. This is one to forward to your friends.

And, as usual–we’re here to help. Call us for any questions or concerns.

(And, again–please do feel free to leave comments. I read every one that comes my way!)

“Real World” Personal Strategy
Little-Known Tax Deductions & Credits!

Here is a handy list of items to make sure you’re covered on this upcoming tax season…

1) Military Reservists’ Travel Expenses:  Military reserve forces and National Guard troops are allowed a deduction for travel expenses attending drills or meetings provided you travel more than 100 miles and stay overnight for the training exercise. This deduction includes mileage reimbursement at 55 cents per each mile traveled. Parking toll fees also qualify. You receive this deduction whether or not you itemize your deductions.

2) Charitable Volunteering: If you volunteer for a charitable organization you may have deductible expenses. Did you purchase supplies or required equipment? Perhaps you volunteer in a hospital and need to purchase a uniform. The costs for the apparel AND the costs to clean the uniform can qualify as charitable deductions. And don’t forget mileage, it too can often be deducted. 

3) Child and Dependent Care Credit:  Did you know the popular Child and Dependent Care tax credit also applies to summer day camp costs? As long as the camp is a day-camp and camp officials supervise the child while the parents work you can claim the credit for the camp costs.

4) Moving Expenses:  While job related moving expenses are a well known deduction, many clients don’t realize moving expenses for a first job may also be deducted if the job passes a 50 mile distance test from the place the newly employed person has been living.

5) Mortgage Refinancing Points:  If you refinance your house or buy a second residence, any “points” you pay for the loan can be deducted proportionately each year over the life of the loan. If you sell your home or refinance before you have deducted the full cost of your “points”, you can then deduct the remaining amount in the year of the refinancing or sale. Warning: The lender in the subsequent refinancing must be different to deduct points this way.

6) Job Hunting Costs:  Workers can often deduct job hunting costs provided the expenses are associated with looking for a new job in your present occupation. Qualifying costs include resume preparation, printing, postage, phone calls and outplacement/employment agency fees. Remember these costs, along with other miscellaneous itemized expenses, must exceed 2 percent of your adjusted gross income before they produce any tax savings.

I hope this helps!