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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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| A HUGH PAYOFF | |
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If an IRA earns 8% annually, a child who contributes $2,000 to it each year starting at age 18 and for ONLY ten
years, and then never contributes another dime to it will have almost as much money in the IRA at
retirement age as a person who starts making $2,000 contributions at age 26 and does so every year until
retirement. Because you (or your child) are young and will have a long time until you, he or she can access the money invested in an IRA, it may be better to consider the Roth IRA instead of the traditional IRA. You, he or she will not get an income tax deduction for contributions to a Roth IRA, but the earnings could be TAX-FREE (if the holding period requirement is met). Additionally, IRA holder will probably be in a low tax bracket at age 18 (when the tax deduction is forfeited) and in a higher tax bracket in later years (when a distribution is taken. Remember, under current law and under the right circumstances (age and holding period), distributions from a Roth IRA (BOTH YOUR CONTRIBUTIONS AND THE EARNINGS) WILL BE TAX FREE and not tax deferred like distributions from a traditional IRA. Call us to set up either a traditional IRA or a Roth IRA for your benefit or for the benefit of your child. We are also licensed to help you decide on the type of investment portfolio to be maintained in that account.
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| TOO MUCH INVENTORY IS NOT TOO GOOD | |
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Carrying too much inventory hurts cash flow. It lowers a company's profitability - and not just because of the
money spent to produce all those goods that are sitting unsold on your shelves. Excess inventory also eat up
additional warehouse space; boost needs for security, production, and warehouse staff, and require the
purchasing of additional hazard insurance (with the resulting cost).
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| BETTER THAN PEDRO! | |
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Group benefits are hot!!! Our affiliate, US Financial Services, LLC, is currently running at a 92%
close ratio on group benefit cases where affiliated CPAs, have presented a benefits analysis to their corporate
clients. Your need for this kind of service is clear and my value to you as your trusted advisor will increase
dramatically through my active participation in the fulfillment of this compelling need. Call us to discuss
doing a group benefit analysis for your company.
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| SOCIAL SECURITY STATEMENTS | |
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Many taxpayers have received "Your Social Security Statement" from the Social Security Administration giving you an
estimate of your expected Social Security benefits when you retire. It also offers you a statement of your
annual earnings. If you are a Kahan tax client and want to compare the amounts on the Statement to your income tax records on file in our office, send us a copy of the four-page Statement and request a free review. Remember, we can only compare the statement to income tax years in our file. Whether you want a review or not, we would appreciate a copy of the statement for our files. Mail the copy to:
Roger A. Kahan, CPA,
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Remember, "It's not what you make that counts, it's what you keep."
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| TAX LOOPHOLE | |
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People in marketing, advertising or public relations may be able to take tax deductions for consumer products they or
members of their family use. In what appears to be a true story, an ad man who represented an athletic footwear
manufacturer needed to buy sneakers made by his client and their companies to evaluate issues like style, acceptance,
retail sales positioning, and wear and tear. In this case, the cost of sneakers for the ad man, his spouse and
his children became tax deductible as a business research cost.
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| A DRAMATIZATION | |
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Joe is one of our clients with a net worth of about $4,000,000. He already has $250,000 of insurance that he
bought from his cousin Vinny who has since moved onto another business. We decided to check out Joe and
Martha's estate tax exposure. We discovered if Joe and Martha died today without proper planning, their
children would owe somewhere around $1,200,000 (yes, that's 1.2 MILLION DOLLARS) in federal estate taxes. Even
if the $250,000 of insurance that Vinny sold them were gifted out of the state and used to pay these taxes, the
children would still owe about $1million more to the US Treasury within nine months of the second death. This
is a reduction of about 25% in the total amount Joe and Martha really wanted to leave for their children. Here are our options:
We can help Joe, Martha AND YOU develop an estate tax plan that will preserve values for your family by providing tax, insurance and portfolio management to you and your family. Call for an appointment and find out more.
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| SOCIAL SECURITY BENEFITS | |
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July 31, 2000, is the deadline for applying for social security benefits for some who qualify for retroactive
payments. If you are age 65 through 69, and did not sign up for social security benefits this year because of
the old earnings limit ($17,000 for the year 2000), you must apply for 2000 social security benefits by July 31, 2000,
in order to be eligible to receive retroactive benefits to January 1, 2000. Those who were age 65 before January 1, 2000, qualify for payments back to that date. Those who turned age 65 after that date qualify for payments back to the date at which they turned 65. But those who do not apply by July 31, 2000, will forgo those payments. Working retirees who were already drawing social security will automatically receive retroactive payments for the year 2000 if their benefits had been affected by the earnings limit. If you want more information on this deadline, contact your local Social Security Administration office.
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| CUT PERSONAL PROPERTY TAXES | |
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Many state and local property taxes are imposed on the value of business assets. But many kinds of business equipment often are carried on local property tax rolls at a value HIGHER than the equipments' real market value, inflating the company's property tax bill. This occurs when depreciation schedules used by local property tax assessors are not kept up to date, schedules that understate the rate at which equipment loses its market value. As an example, consider the cost of computers and computing equipment. Property tax schedules typically reduce the value of computers to a minimum amount using an even rate over a period of five years. But in real life, computers lose 50% or more of their value in just six months and have an average useful life of less than three years. In our case, we usually replace, update or upgrade our computers each year.
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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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| BEWARE OF CREDIT REPAIR SCAMS | |
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Wouldn't you like to have all the bad or negative information about you erased from your credit history reports?
Many Americans have paid hundreds of dollars to "credit repair" companies who promise to do just that. Unfortunately, they may not be getting enough for their money. You can challenge negative and inaccurate information yourself at no cost, usually by filling out a dispute form supplied by a credit bureau. Negative and accurate information generally will remain for as long as seven years. Under the law, a "credit repair" company must tell you about your legal rights in a written contract. The contract must also spell out the services to be provided, the total cost and the guarantees. The contract must also explain that you have three days to cancel at no charge. Thanks for this tip from Kegan, Werlin & Pabian, LLP, attorneys of Boston.
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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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| 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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| TAX STRATEGIES FOR INVESTORS | |
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Keep track of distributions you reinvest in a mutual fund. If you forget about reinvested dividends and capital
gains distributions, you have to pay taxes twice. Keep careful records of reinvestments and add them to your
tax basis (cost) in the shares. This will lower your gain or increase your loss on the sale of those shares.
. When you sell, give your tax preparer a schedule of each purchase and all reinvested dividends (ordinary or capital
gain). Specifically identify shares of securities that you buy and sell. This will work when you own shares in a company or mutual fund that you bought at different times, and you sell less than your entire holding in that company or mutual fund. That way, you can select for sale, those shares in which you have the highest or lowest tax basis. If your goal is to minimize gains, you will want to sell the shares with the highest tax cost. Other times, you may want to specify older shares to make sure your gains are considered to be long-term. Invest in mutual funds that are tax efficient (that is a new term). Funds generally make taxable gains distributions at year-end (on gains they realized during the year). Some low-turnover funds, such as index funds, this tax charge is usually much smaller than with actively traded funds. Deduct bad debts and worthless securities against capital gains. A last minute reminder: Past performance is no guarantee of future results. The investment return and principal value will fluctuate so an investor's shares, when redeemed, may be worth more or less than the original cost.
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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. | |
| BANKS WANT TO LEND MONEY! | ||||||
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Planning for the future is a lot like planting a tree. You've got to do it today if you want your family to enjoy
it tomorrow.
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| DO YOU PAY YOUR CHILD AN ALLOWANCE? | |
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Have your child work for you in your business and pay him or her a reasonable wage for time spent. Instead of
paying a nondeductible allowance, you may be paying an "ordinary and necessary" business expense. Tasks like
answering the phone, filing papers and doing simple maintenance jobs for a parent's business should qualify.
This may also qualify your child for an IRA contribution. Call us for more benefits to this provision in the
law. By the way, hiring an over age 14 family member and paying a reasonable wage may also be a benefit to the family as a whole by allowing you to deduct the wages at your HIGHER tax rate.
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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 Certified Public Accountant 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 and maintains the financial planning licenses and experience to help you.
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| DEFER INCOME | |
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Instead of paying cash interest, US Treasury Bills are sold at a discount and redeemed at face value upon maturity.
The difference between their higher redemption value and what you pay for them is your interest. Because
you receive no income from Treasury Bills until they mature, you can use them to defer income. Six month Treasury
Bills acquired after June 30 defer income into 2001.
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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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