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TAX TIPS AND FACTS
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ROGER A. KAHAN Certified Public Accountant, Business Advisor and Financier Serving the tax and financial needs of individuals and small to medium sized businesses Randolph, MA 02368-1865 VOICE: 781.963.RAK-1 (963-7251) E-mail: kahan@rak-1.com Copyright © 2000 Roger A. Kahan, CPA ALL RIGHTS RESERVED |
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| WE KEEP ADVANCING! | |
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The Massachusetts Division of Insurance issued a license to me as an Individual Broker. I can now offer you
support for life, disability or accident & health insurance coverage. Included in this variety of life
insurance coverage are universal life, split-dollar life and fixed and variable annuities. Coverage will be
placed through a major insurance carrier. Let's discuss your life, health or disability insurance needs and
let me offer a quote for your next policy.
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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 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 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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Remember, "It's not what you make that counts, it's what you keep."
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| WHY DO I NEED A CPA? | |
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CPAs do much more than just prepare tax returns and count beans. A CPA can assist 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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| THE TAX RETURN TRANSCRIPT | |
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What is a tax return transcript?
It's a copy of tax return information that can be used for a loan, scholarship or other financial aid. A tax
return transcript is a quick way to verify your tax information from the IRS - a line-by-line printout of the
information on the original tax return. Dial 1-800-829-1040. If you reach a customer service representative, tell them you wish to order a transcript of your tax return. If you reach an automated voice message, you will hear a menu of options. Listen for the option that includes. . "For questions about your personal tax records.. " Press the number for that option. Continue to follow the voice prompts until you are asked to enter your Social Security Number. (If you filed a joint return, enter the first SSN that you entered on the return.) You will hear a voice prompt". . to request a transcript of your tax return . . Press the number for that option. Your transcript should arrive by mail within 10 to 15 days. Paper request for a transcript: Complete IRS Form 4506 (Rev. 5-97), Request for Copy or Transcript of Tax Form. Form 4506 is available from the IRS Web site at www.irs.gov or by calling 1-800-829-3676. The taxpayer's signature is required. Remember, there are no charges for tax return transcripts - they are free from the IRS.
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| THE SILVER LINING TO HIGHER INTEREST RATES | |
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Well, Mr. Greenspan did it again. And while the equity markets will continue to cower from future rate
changes, there are terrific opportunities for greater profit from higher interest rates. Namely, fixed
annuities haven't looked this good in nearly a decade. We have AAA rated insurance companies willing to
guarantee you a 7.6% annual return for 5 years, with no surrender penalties at the end of the 5th year. With the May 16th Fed rate increase, this may get even better over the next few weeks.
You may be looking for alternatives to bank CD's and bonds - you may be currently working with low rate annuities that would greatly benefit from replacing those older, lower paying annuities. These high yield fixed annuities may also look attractive to those looking to take profits from equity portfolios and lock in guaranteed rates. All you need to do is answer question number 11... "Do you have annuities?"
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| RETIREMENT PLANNING OPTIONS | |
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Take advantage of your retirement account options. Except in the case of the Roth IRA, the earnings in
retirement accounts are technically tax-deferred, not tax-free. However, funding them as soon as possible
allows you to defer more taxes for 2000. Thus you benefit by keeping more finds invested for a longer period
of time.
When deciding where to put your retirement dollars this year, it's hard to beat a Roth IRA because of the availability of tax-free distributions if you satisfy certain conditions, the lack of mandatory distributions at age 70½ , and the option of withdrawing your contributions tax and penalty free at any time. However, if you are eligible to participate in a 401(k) or SIMPLE IRA plan, you will probably want to contribute enough to that plan to receive a full employer match before contributing to the lesser of your earned income or $2,000 to a Roth IRA. If you have earned income but do not qualify for a Roth IRA (because you file a joint return and have income of more than $160,000 or you are single with income of $110,000), you may still want to make a contribution to a traditional IRA. If you (or your spouse) are not covered by a retirement plan at work, contributions up to the lesser of $2,000 or your (or your spouse's) earned income are deductible regardless of your income. Call us for more information about retirement plans or to establish an IRA or retirement plan.
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| COMPONENT DEPRECIATION | |
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The first thing a business should do is carefully identify and categorize the assets they own. Small
businesses and many businesses miss out on valuable depreciation deductions from real estate that they acquire or
improve by failing to assign component parts to correct depreciation categories. Business real estate is usually depreciated over 39 years. But business assets that qualify as personal property (such as business equipment) are depreciated over much shorter lives and may qualify as Section 179 expense recovery property. Many items that look like they are part of a building may be in fact, equipment. If the business mistakenly treats them as a part of the real estate, they will forfeit faster deductions that are available. If it is movable (such as wall dividers, raised floors, lights, air conditioners, generators) or installed to support specific items of equipment, it is not part of the real estate. Special wiring or plumbing to support specific equipment or machinery may be treated as a part of the equipment or machinery, subject to quicker depreciation lives than the building. Planning can be complex, and if the dollars are large enough, consult an expert.
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| Roger A. Kahan is a Certified Public Accountant, Business Advisor and Financier 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. Please let us know if we can use your name in an introductory letter to the prospective client. Thank you. | |
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I thought you might find this interesting.
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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 clients in future editions of TAX TIPS AND FACTS. If you would like a FREE spot to tell
us about your company, its products or services, send a brief story about your company, an overview of company
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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| 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 high quality web hosting solutions,
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 to the rest of the WORLD.
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| INSURANCE REVIEW TIME????? | |
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When was the last time you reviewed your liability and catastrophic insurance coverages? You know you should
review both coverages and premiums at least every three years. This risk and its related cost is usually the
least item looked at by a businessperson, but is normally a big cost item on the P&L. Since you have not
looked at it in a while, now is the time to call in your insurance agent or broker to review coverages and quote
the renewal or change of existing coverages. It would also be wise to ask two other insurance agents or
brokers to review coverages and offer a quote. You may be very pleasantly surprised to see what is wrong
with your existing coverage or premium costs. Be sure to tell your current insurance agent that you will be
soliciting two other quotes so he or she knows where he or she stands.
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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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| IRS AUDIT STUFF | |
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The following Internet site lists the IRS audit staff's guides for specific industries.
http://www.irs.ustreas.gov/plain/bus_info/mssp/index.html The IRS created the Market Segment Specialization Program (MSSP). This group studies particular businesses to learn how they operate. The information is then assembled into an audit guide to assist agents across the nation in performing audits of those specific business types. One function of the audit guides is to help the agent determine unreported income. Since the audit guides show the agent what to look for during an audit, the guides are also helpful to accountants and business people. Knowing what the agent will be looking for can assist the business in keeping records that will satisfy the audit requirements. The above site currently has over 40 audit guides and more are being added regularly. This is a good site to bookmark for future review.
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| TAX TIP OF THE WEEK | |
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Yes, even a CPA and Computer Guru can suffer a virus loss. Recently, we found the Chernobyl virus and lost
one of our hard drives. That drive included a remote file of email addresses and we no longer have the
database for our Tax Tip of the Week mailing list. If you would like to be returned to our new list, please
send your email address, city and state to kahan@rak-1.com. Thanks.
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| CHECK WRITING HABITS | |
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Do your checks indicate that you are signing in your official capacity as an officer of your corporation or
Limited Liability Company? Do you know you could be held personally liable for a check that does not?
By placing the words "Authorized Signature" just under the signature line may prevent that breach of the corporate
veil. We strongly suggest you look at each company check and have those words added to the check at the next
printing. Until then, be sure to write your title next to your name. This tip is not given to you as legal advice. It is from years of experience with clients.
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| NEW PUBLICATIONS FROM THE IRS | |
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People 16 to 23 years old may not be required to have federal tax withheld. See Publication 3136.
A description of the Earned Income Credit is in Publication 596. Pension and Annuity Income is explained in Publication 575. To obtain copies of IRS publications, call 800-829-3976 or go to the web site: www.irs.gov.
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No one is required to pay more in taxes than the law demands. If you pay
too much, you have less resources to meet your other financial goals. We
can help find tax deductions and credits, and help you plan so your taxes
will be as low as possible, year after year. And we can also assist you
with business and estate tax planning.
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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