TOPICS COVERED IN THIS ISSUE:

Sales of gas, steam, electricity or heating fuel to any business which has five or fewer employees ARE EXEMPT FROM SALES TAX ON THOSE ITEMS.

For purposes of this paragraph, employees shall include partners, owners, officers and any other individuals who work for the business but shall not include any employee who normally works for fewer than thirty hours per week or who is hired for a period of less than five months. For purposes of this paragraph, a business shall include all members of an affiliated group, as defined by section 1504 of the Internal Revenue Code, and any other combination of related parties as the commissioner may define by regulation; provided, however, that the commissioner may by regulation require that such business shall have first obtained a certification from the commissioner stating that it is entitled to such exemption and shall maintain such employment and other records indicating its continuing eligibility for such exemption; that the vendor keep a record of the sales price of each such separate sale, and the number of such certificate; and any other conditions and requirements under which a business may qualify for this exemption; provided, further, that the burden of proving that such business qualifies shall be upon the vendor unless he takes in good faith from the purchaser such certificate to the effect that the business qualifies for this exemption and such certificate is received and made available to the commissioner not later than sixty days from the date of the notice from the commissioner to produce such certificate.

The race is on for the remainder of the 90's. Increased competition, shrinking markets, tighter margins all mean that the pressure of doing business is greater than ever before. Your company's profitability is seriously at stake. Everyone is looking for new ways to do business, because the old methods are no longer profitable. It's time to sit down, regroup, rethink and look forward to the future. It's time to study staffing, equipment upgrades and excesses and marginal product lines. Remember, "IT'S NOT WHAT YOU MAKE THAT COUNTS, IT'S WHAT YOU KEEP." You will find that clich in every edition of TAX TIPS AND FACTS. It's time to heed the warnings!

On May 12, I conducted a presentation to outside salespeople of CELLULARONE of Randolph. Here is that presentation:

As a "W-2" employee of CELLULARONE (gross wages with withheld taxes), your out-of-pocket costs related to business (net of any reimbursement) would be a part of Miscellaneous Itemized Deductions on Schedule A of the Form 1040 and deductible to the extent this category exceeded 2% of Adjusted Gross Income (yours, if single, or if married and filing jointly, 2% of the combined Adjusted Gross Income). So if your total earnings (AGI) were $50,000 of gross wages, your deduction in this category would be the amount in excess of $1,000.

However, this category of expense when added to your other Itemized Deductions listed in Schedule A, must exceed the 1997 Standard Deduction before you could use any Itemized Deduction and Schedule A.. The projected standard deduction for the 1997 tax year will be $4,150 for single taxpayers, $6,050 for heads of households, $6,900 for married taxpayers filing jointly and $3,450 for married taxpayers filing separately, although this deduction may be limited in some cases . Taxpayers who are blind or age 65 or over in 1997 are entitled to an additional $800 if married, or $1,000 if single, for each classification met.

Expenses of Outside Salespersons are reported on Form 2106, "Employee Business Expenses" and the net deductible amount carries over to your Massachusetts income tax return as a deduction against state taxable income. As rates go, you could be in either the 15% or 28% bracket for US taxes and would pay 5.95% Massachusetts income tax. That means you will save either 20.95% or 33.95% in taxes for every dollar of allowable deduction.

CAR EXPENSES
Non-leased vehicle without company lettering or logo: 31 cents per business mile, plus business percentage of auto excise tax. This rate includes all expenses of operating a vehicle including, but not limited to: gasoline, oil, repairs and maintenance, equipment, tires, registration, license, auto club, painting, waxing and washing). It does not include parking and tolls related to employment, which can also be deductible.

MEALS AND ENTERTAINMENT
One-half of the cost of meals or entertainment with customers/clients while discussing business either before, during or after the meal or entertainment function should be deductible. This includes the cost of meals, beverages, tips and a reasonable cost of entertainment and must be substantiated with a bill or receipt, showing the date, place, who was present and the business relationship. It is your responsibility to keep contemporaneous records to document these expenses.

TRAVEL AND LODGING WHILE AWAY FROM HOME
Your costs of travel that are related to company business should be deductible. In some cases, your spouse or significant other's costs may also be deductible, either partially or fully. The determinate factors include length of stay vs. days for business; location; domestic vs. foreign; reasonable cost. If you take a business trip, and must include a Saturday night stay to get the best airfare, that weekend stay will be deductible if the savings differential is more than the cost of the Saturday stay. Any travel costs must be substantiated with a bill or receipt, and must show the date, place, and the business relationship. It is your responsibility to keep contemporaneous records to document these expenses.

OTHER EMPLOYMENT DEDUCTIONS
Conventions and seminars.
Commissions paid to others.
Dues to business and professional organizations (no lunch or social clubs).
Liability insurance (non-auto).
License or registration fees (non-auto).
Office supplies and postage.
Professional fees and costs (including tax planning as it relates to your CELLULARONE employment).
Promotional costs.
Property used primarily for CELLULARONE.
Repairs to business property.
Subcontract payments.
Subscriptions to professional or industry publications.

ADDITIONAL TAX CONSIDERATIONS
You may be able to make and deduct as much as $2,000 in contributions to your Individual Retirement Account (IRA). If married, you may also be able to make and deduct spousal contributions. Limitations and restrictions do apply, however.

My thanks to CELLULARONE of Randolph for inviting me to speak to their sales staff.

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The graduate with a Science degree asks, "Why does it work?"
The graduate with an Engineering degree asks, "How does it work?"
The graduate with an Accounting degree asks, "How much will it cost?"
The graduate with a Liberal Arts degree asks, "Do you want fries with that?"

At the cocktail party, one woman said to another, "Aren't you wearing your wedding ring on the wrong finger?"
The other replied, "Yes I am, I married the wrong man."

Man is incomplete until he is married. Then he is really finished.
Compliments of: The Gag-O-Mactic Joke Server 2.0

(This is a rhetorical question. .. don't send me answers!) How did the "wisdom teeth" get their name? If they were so smart, why would they come in sideways, impacted, into a crowded mouth? And who decided that they always have to be extracted? I mean, if they are teeth of wisdom, shouldn't we keep them in our mouths? Wouldn't we stop saying all those stupid things if we had wisdom teeth in our mouths? Things like ... "Yeah sure, I'll stay late." or "She doesn't look that much thinner than you." or "I promise I'll pay all the bills on time."

In recent years, Congress has taken steps to limit eligibility for Medicaid as the level of claims have exceeded available. funds. One step which limits access to Medicaid is the imposition of a period of ineligibility for applicants who have transferred assets for less than full and adequate consideration in an attempt to reduce the value of available assets below the maximum allowable. There is a "look-back period" of five years for transfers in trust and three years for transfers to individuals.

In the Health Insurance Portability and Accountability Act of 1996, Congress added another obstacle to Medicaid eligibility by imposing criminal liability on any who: "knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance under a State Plan under Title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance." The potential reach of the statute is not limited just to the Medicaid applicant. Federal law imposes criminal liability on any who "aids, abets, counsels, commands, induces, or procures: the commission of an offense by another. Under this standard, anyone who advises someone else to take steps to qualify for Medicaid could be found criminally liable if the actions of the applicant result in the imposition of a period of ineligibility for medical assistance. Although many feel it may be held unconstitutional and the Clinton Administration has urged Congress to repeal it, it is still the law. Don't be upset with your financial or tax advisor if they fail to give you "Medicaid planning advise."

Thanks to Phil Peterson of Northwest Mutual Life.

If you would like to have a FREE spot in TAX TIPS AND FACTS to tell us about your company, its products or services, simply send us a brief story, an overview of your company's products and future plans. We may edit the information and include it in a future edition. Send the information to Roger A. Kahan, CPA via mail, e-mail or FAX it.