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TAX TIPS AND FACTS
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ROGER A. KAHAN Certified Public Accountant and Advisor Serving the tax and financial needs of individuals and small to medium sized businesses 11 Jeanne Road, Randolph, MA 02368 TEL: (781) 963-RAK-1 (963-7251) E-mail: kahan@rak-1.com Copyright © 1998 Roger A. Kahan, CPA ALL RIGHTS RESERVED |
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You are the person to access this issue!
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| RECORD RETENTION | |
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Many clients have asked for guidance on how long they should retain personal income tax records. These records may
have to be produced if the Internal Revenue Service or a state or local taxing authority were to audit your tax return
or seek to assess or collect a tax. In addition, lenders, co-op boards or other private parties may require that you
produce copies of your tax returns as a condition to lending money or extending credit, approving a purchase, or
otherwise doing business with you.
Keep tax returns and the proof of mailing indefinitely and the supporting records usually for six years (seven years
for legal and collection purposes). In general, except in cases of fraud or substantial understatements of income,
the Internal Revenue Service can only assess tax with respect to a year within three years after the return was due
for such year (or, if filed later, three years after the return was filed).
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| CREDIT REPORTS | |
When was the last time you checked your business and personal credit history? Is it more than one year? It's time to
check again. You will be surprised as to the amount of erroneous information that is reported to a credit reporting
agency. Some of those errors may appear in your own credit report. Here is how to reach some of the credit reporting
agencies:
Experian (TRW), PO Box 919, Allen, TX 75013 Equifax Credit Information Services, PO Box 740256, Atlanta, GA 30374
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| Roger A. Kahan is a Certified Public Accountant and Advisor with an office in Randolph, serving the tax and financial needs of individuals and small to medium sized businesses almost anywhere in the United States. And with the advent of the Internet, professional consultation extends to several other countries. Roger is always seeking additional clients and professionals wishing to save money and better manage their own, a friend, a relative or a client's personal or business life. | |
| INDIVIDUAL RETIREMENT ACCOUNT | |
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An Individual Retirement Account (IRA) is a savings plan that let you set aside money until retirement. The amounts
earned by the contributions you make to an IRA are not taxed until you withdraw the money, and it is presumed at
retirement you will be paying a lower tax rate than you do today. There are certain restrictions on who can qualify for an IRA. You can usually set up an IRA if you are under age 70½ and have taxable compensation greater than or equal to your contribution during the year. Individuals can generally contribute up to $2,000 a year to their IRA. This contribution may be tax deductible in full, in part or not at all. If neither you nor your spouse is covered by an employer retirement plan, the contributions will be fully deductible. If either you or your spouse are covered by an employer plan, your contribution may not be fully deductible unless your earned income is below certain thresholds. Generally, you cannot withdraw any of the money before you turn age 59½ without being penalized and taxed. Call 1-800-826-3676 and ask for Publication 590, Individual Retirement Accounts (arrangements)
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Remember, "It's not what you make that counts, it's what you keep."
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| DIVORCE | |
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Divorce can be traumatic. Why should anyone have to deal with taxes at a time like that? But deal with them, they
must. People who do not ask the right questions BEFORE the divorce goes through are very likely to find themselves
stuck with unexpected tax difficulties later. This problem concerns BOTH spouses.
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| FINANCING YOUR BUSINESS (101) | |
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Roger A. Kahan, a CPA and Vice President of the Randolph Chamber of Commerce was moderator of "A primer to show you
how to obtain financing for a new business or your existing business (for new products or for continuing, expanding or
growing)" The seminar was held on Thursday morning, September 17 at the Randolph Holiday Inn. Subjects discussed were: business plans; equity, financial statements and cash flows; credit requirements; guarantees and types of financing; and personal financing & alternatives. Participating were six local banks and the U.S. Small Business Administration.
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| INTERNET ACCESS | |
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We are kahan@RAK-1.com (that is a "one" and not a small
"L") and an active user of the INTERNET. You can E-mail us from any service connected to the
NET. Our Internet provider is The Xensei Corporation of
Quincy. For more information about Xensei and a reasonably priced and easy to use
unlimited-time, local internet access, call me at (781) 963-RAK-1 or Xensei at
(617) 376-6342, e-mail info@xensei.com.
TAX TIPS AND FACTS will appear on our World Wide Web page, at http://www.rak-1.com making it available the WORLD. Last month, 5,336 Internet surfers from 21 countries accessed our web page and read TAX TIPS AND FACTS on-line. Several of the readers asked to be added to the list to receive TAX TIP OF THE WEEK.
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| TAX TIP OF THE WEEK | |
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I am now writing a TAX TIP OF THE WEEK that is distributed over the Internet to a growing list of people
each week. Some items in the weekly version will appear in the printed monthly version. If you would like
to be included in the weekly electronic distribution, just send me your e-mail address with your City and
State (for statistical purposes) by e-mail, snail-mail, voice-phone or fax.
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| WE NEED YOUR SUPPORT | |
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If you like our work, recommend us to a friend. If you are not happy with our work, please call me and let's talk about it. We will both appreciate it.
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| FEATURES WANTED | |
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We want to feature our clients in future editions of TAX TIPS AND FACTS.
If you would like to have a FREE spot to sell us on your company, its
products or services, simply send us a brief story about your company, 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.
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| CERTIFIED? | |
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Your doctor is certified. Your lawyer is certified. Is your accountant certified? If your accountant isn't a Certified Public Accountant, think twice about where you are getting your advice. Who do you want handling your financial and business matters? If your accountant isn't a CPA, it's time to seek professional help.
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| WHY DO I NEED A CPA? | |
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CPAs do much more than prepare tax returns. A CPA can help you with all of your Personal Financial Planning
needs to help you achieve your goals.
Whether you're saving to buy a house, send your children to college or secure your retirement, you need a member of the Massachusetts Society of CPAs to assist you. Roger A. Kahan is an active member of the Massachusetts Society of CPAs.
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| ENERGY TAX EXEMPTION FOR SMALL BUSINESSES | |
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All Massachusetts business entities with five or fewer employees can be exempt from paying a sales tax on purchases of
gas, steam, electricity and heating fuel. To qualify for the exemption, a business must submit Form ST-13, Small
Business Energy Exemption Certificate to the vendor. Employees also include any other person who is an employee as
defined for federal withholding purposes. There are special rules for groups of companies (intended to prevent
companies with multiple locations or separate corporations owned by the same individuals from qualifying for the
exemption).
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| Many accountants view their goal as minimizing their clients' taxes. NOT ME! I like to see my clients pay more taxes - because their earnings and profits are increasing dramatically. I can make a major difference in achieving those profits. Talk to me and find out more. | |
| HAVE YOU GOT THE TIME? | |
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Jake is struggling through a bus station with two huge and obviously heavy suitcases when a stranger walks up to him
and asks "Have you got the time?"
Jake sighs, puts down the suitcases and glances at his wrist. "It's a quarter to six," he says. "Hey, that's a pretty fancy watch!" exclaims the stranger. Jake brightens a little. "Yeah, it's not bad. Check this out" - and he shows him a time zone display not just for every time zone in the world, but for the 86 largest metropolises. He hits a few buttons and from somewhere on the watch a voice says "The time is eleven 'til six" in a very West Texas accent. A few more buttons and the same voice says something in Japanese. Jake continues "I've put in regional accents for each city". The display is unbelievably high quality and the voice is simply astounding. The stranger is struck dumb with admiration. "That's not all", says Jake. He pushes a few more buttons and a tiny but very high-resolution map of New York City appears on the display. "The flashing dot shows our location by satellite positioning," explains Jake. "View recede ten", Jake says, and the display changes to show eastern New York State. "I want to buy this watch!" says the stranger. "Oh, no, it's not ready for sale yet; I'm still working out the bugs", says the inventor. "But look at this", and he proceeds to demonstrate that the watch is also a very creditable little FM radio receiver with a digital tuner, a sonar device that can measure distances up to 125 meters, a pager with thermal paper printout and, most impressive of all, the capacity for voice recordings of up to 300 standard-size books, "though I only have 32 of my favorites in there so far" says Jake.
"I've got to have this watch!", says the stranger. Jake stops to think. He's only put about $8500 into materials and development, and with $15,000 he can make another one and have it ready for merchandising in only six months. The stranger frantically finishes writing the check and waves it in front of him. "Here it is, ready to hand to you right here and now. $15,000. Take it or leave it." Jake abruptly makes his decision. "OK", he says, and peels off the watch. They make the exchange and the stranger starts happily away. "Hey, wait a minute", calls Jake after the stranger, who turns around warily. Jake points to the two suitcases he'd been trying to wrestle through the bus station. "Don't forget your batteries." Thanks to Norm Rubin of Watch Hospital Jewelers of Boston, MA (by way of Lake Worth, FL.) for this joke.
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| BUSINESS REAL ESTATE | |
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It is better for corporate business property to be owned directly by the shareholder/owners (or a trust on behalf of
the owners). There are several good tax reasons for doing this.
Reasonable rental income paid by the corporation to the owner should be payable without Social Security or Medicare
tax withholdings, and the income received is not considered "earned income" for the definition of the annual maximum
earnings under Social Security (the one where you have to give back $1 for each $2 in excess of the maximum). The
income may also be sheltered through the use of depreciation. The main reason to put real estate into a personal name or a grantor trust vs. the corporate name, is the capital gains you pay when you sell the property. While current law limits your long-term capital gain rate to 28% (or to a lower rate), there is no limit to the rate of corporate income taxes. The current maximum corporate income tax rate is 34%.
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| WORDS OF WISDOM IN TODAY'S MARKET | |
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"It doesn't matter where you are today, it only matters where you are on the day you need the money."
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TAX TIPS AND FACTS is published periodically by Roger A. Kahan, CPA.
Subscription is free to clients, prospective clients and friends of Roger
A. Kahan, CPA. If you know of someone interested in a subscription to TAX
TIPS AND FACTS allowing him or her to obtain valuable comments on
national, Massachusetts or local tax issues, call (781) 963-RAK-1.
The information contained in this publication has been obtained from sources I believe to be reliable at the time of writing, but I do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by me of the purchase or sale of any securities or other investment. This material, or any portions thereof, may not reproduced without prior written permission of Roger A. Kahan, CPA. |
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