Knight Accounting and Technology

I have to send a shout-out to VPI Pet Insurance (vpipetinsurance.com).  We have used their insurance for the past 8 years, ever since we adopted our dog, Joe.  We pay approx $300 in premiums each year and have received our premiums back and far more!  We have never had trouble filing a claim, and unlike “other” insurance agencies we’ve dealt with (I won’t name names, but it begins with an F and ends with an S!), they have never lost a single piece of paperwork we’ve sent them!  It’s as simple as taking our dog to the vet, filling out a simple claim form, mailing or faxing it in, and a check arrives 2 weeks later!  If you have a pet without pre-existing conditions, I highly recommend them!  (pre-existing conditions can be tough, but it’s still worth checking them out!)

A new law requires landlords to give 1099s if they pay $600 or more a year for goods or services, starting with payments made in 2011.  In the past, only small businesses faced this requirement, but beginning 1/1/11, if you own a rental property you will need to have each vendor that you purchase from submit a W-9 with their name, address, tax ID# and business formation.  There is talk of only requiring this for service vendors (plumbers, CPA’s, lawyers, repairmen, etc), and not for goods purchases, but that is yet to be hashed out in Congress.  So, if you own a rental property, don’t spend any money after 1/1/11 without first getting form W-9 filled out!

I read an interesting blog the other day regarding accounting software…if you or someone you know is considering a career in accounting, there’s some good information here: http://www.softwareadvice.com/articles/accounting/which-tech-skills-help-accountants-land-jobs/. As I’ve said for many years, I love being an accountant and I think it’s a great career for young, computer-saavy students.  It allows you to develop skills that every company needs!  Love food, like myself, become a restaurant accountant!  Love sports, work for a sports team!  The opportunities are endless!

Just wanted to share the news that I am now a Certified QuickBooks Point of Sale consultant, so if you need any assistance with your QB POS software, or know someone who does, I’m happy to help!  The newest version of the software has some pretty powerful tools, including the ability to sell online, add item pictures, and start a customer rewards loyalty program, so if you are running a retail location and haven’t checked out QB POS yet, now’s the time!  I can get significant discounts for my clients, so let me know if I can help!

The IRS just announced a new webinar for non-profits called “Starting off Right – What New 501(c)(3) Organizations Need to Know.”  The event will occur on November 18th at 2pm EST.  To register for the event, click the following link: http://www.visualwebcaster.com/IRS/72679/reg.asp?id=72679

Topics to be discussed include:

Attention Moms, Dads, Pet Owners and anyone else who shops for diapers, cleaning and pet supplies.  I can’t believe it took me this long to stumble upon this, but amazon.com has a service called “Subscribe & Save.”  It allows you to purchase items that you buy regularly at a 30% discount!  For example, the diapers that I normally buy at Target and Wal-Mart for $39.98 are available for only $28.06!  Plus, as of now, there is no sales tax or shipping, so that saves another $3 – $4 versus buying at a local store!  You can imagine the savings when I have 2 little ones running around in diapers!  Is there a catch?  Only a small one in my opinion…you need to sign up for the Subscribe & Save program, which asks you to committ to having the same item shipped to you every 1, 2, 3 or 6 months.  HOWEVER, you can stop your subscription or change your item at any time.  So, I signed up to have my Size 5 diapers shipped every 6  months, and I just need to log in between now and then to change my order to Size 6 or cancel my subscription.  I don’t lose the super low pricing that I got on my original purchase.

To find this service, just go to www.amazon.com and type in Subscribe and Save in the search box.  You’ll see some sample items, and also a link to the program.  As a note: the items on those sample items don’t reflect the full discount you get, so you need to click on an item.  Instead of ordering by clicking on “Add to Cart” click on the “Subscribe Now” button to see your subscription price!

My heart goes out for the fire and natural disaster victims around the country, especially those close to home in Colorado.  I just want to share a thought on my mind as I am glued to the news lately…have you protected your vital tax records?  To help protect your family, please consider the following:

1) Take an hour to walk through your house with a digital camera.  Take detailed pictures of each room.  In the event of a loss, these pictures will be very helpful in filing a claim for loss with your insurance company.

2) Scan important documents into your computer, and also store the hard copies in a folder that is easy to grab in the event of a quick exit.  In our family, those important documents include our wills, life insurance paperwork, a photocopy of the contents of our wallets (front and back for credit cards, etc, so that the customer service numbers are visible), and special photos of our parents, grandparents, etc that were taken before the digital age.

3) Once you have everything scanned in, BURN IT TO DISK or STORE IT ON A THUMB DRIVE, and then store those files offsite!  This is the most important step…all too often, people keep great records, but if they aren’t able to get to those records in their time of need, their work is lost.  By sending your disk or drive to a relative or friend’s house, they will be available for you when you need them.

Can’t believe a whole month has passed by, but we are thrilled to welcome Ethan Lee Knight to this wonderful world!  Ethan was born on July 11, and we’re all doing great.  Pictures are posted at http://cpamichele.com/blog/about-us/jacob-and-ethan:

Tax law is once again making news in Washington.  Congress is trying to finalize a few bills before the election season heats up, but what’s at stake and what should you know as a taxpayer?  I’ve alluded to a few of these issues in other articles, but let me try and give you an up to date summary.  I use the word “try” because by the time I put pen to paper (or fingers to keyboard, as is the case), much of the information could be out of date as it changes on a daily basis!

The biggest tax news right now is the potential expiration of the Bush tax cuts.  What are they, and why should you care?  Good question.  In 2001 and 2003, under then-President George W. Bush, tax brackets were lowered to a range from 10% to 35%, and capital gains (including sales of stock, land, rental properties, etc) and dividends were taxed at a maximum of 15%.  Among many other provisions, the child tax credit was increased to $1,000 per child.  These provisions were all set to expire in 2010, and politicians at the time were certain that Congress would act during those 9 years to find more permanent solutions.

Let’s fast forward to 2010.  We are quickly approaching 2011, and these provisions are still set to expire on December 31^st, 2010.  If this happens, tax brackets will jump back to the Clinton-era tax rates ranging from 15% to 39.6%, capital gains taxed at 20% and higher, and dividends taxed up to 39.6%.  This means a family with income less than $40,000 may pay about $400 in extra taxes, but someone making $80,000 might pay four times that in additional income taxes.  When you consider that the child tax credit will decrease to $500 per child, families could be hit the hardest.

Before we all panic, it’s important to remember that tax brackets are quite different from tax rates.  Many of us fall in the 25% tax bracket, but only pay an effective tax rate of 10 – 15%.  And, naturally, no one in Congress is campaigning on a ticket of raising taxes on lower income working families.  There is every expectation that Congress will intervene and not allow these rates to revert to the fullest increases possible.  However, as I’ve mentioned in the past, we all thought that Congress would fix the Alternative Minimum Tax and Estate Tax by now, so without a crystal ball, none of us know for sure.  (I published an article about these 2 changes back in April, and have reposted it at www.cpamichele.com if you are interested).

Two other issues being debated are the S Corporation requirement to pay payroll taxes on owner’s distributions in addition to their salary, therefore an extra 15.3% tax, and the new 1099 law that was passed as part of the healthcare reform.  As it is currently written, beginning in 2012 business owners will have to issue 1099 forms to all vendors they pay more than $600 for goods and services, rather than only unincorporated vendors that are paid for services.  Both of these new laws represent a significant burden to business owners and there is a good chance that new legislation will be passed to get rid of the requirements before they ever take hold.  Then again, there is a chance that disagreements in Washington will continue to overshadow any progress made on tax law, so all we can do for now is watch the news, keep our fingers crossed, and vote!

Now that April 15^th has come and gone, it’s time to start thinking about your 2010 taxes.  If you’re like most taxpayers, you want to put off thinking about taxes until next year, but I am a firm believer that the best way to save money on taxes is to make tax planning a year-round effort.  I would love to fill this column with tips for 2010, but unfortunately Congress has yet to finalize many important tax laws that are hanging in the balance and tax planning is more challenging than ever right now. 

Let’s back up a bit.  At the end of each year, Congress is expected to vote on several tax laws that expire from year to year, or require dollar amount adjustments.  Tax geeks like me wait anxiously for the news before Congress takes their holiday break, the figures are published, and we all move forward with advice for our clients.  But, with the push for health insurance passage this year Congress never got around to voting on the necessary issues before year end, and we’re now at the end of April and still anxiously awaiting decisions.  What hangs in the balance, and how does it affect you? 

For starters, over 50 tax provisions expired on 12/31/09.  The most commonly seen provisions from this package include the standard deduction for real estate taxes, the option to deduct sales tax instead of state and local taxes, tuition deductions, and the $250 deduction for educators.  These provisions were expected to be renewed at the end of 2009 for 2010, but that never happened.  

The Alternative Minimum Tax, a tricky tax penalty on high income earners with big deductions, is also set to strike if Congress doesn’t take action.  While I would need to write a book to fully explain the AMT, it was basically a tax penalty put into place decades ago to prevent uber-wealthy individuals from taking so many deductions that they didn’t have to pay a fair share of taxes.  When taxpayers with high incomes also had large itemized deductions, the AMT was an additional tax added to their bottom line to force them to pay the tax they would’ve paid without the benefit of the large deductions. 

The problem is, when the AMT was first put into place, uber-wealthy meant income above $150,000.  Each year, Congress passed patches to effectively increase the income level considered subject to AMT.  But, without a patch passed in December of 2009, the AMT is set to affect almost 40% of married couples in the US.  To put it in perspective, in 2009 several million taxpayers will be forced to pay higher taxes due to the AMT, but according to the Congressional Budget Office this figure jumps to over 30 million taxpayers in 2010 if a patch is not put into place.

As if the 50 tax provisions and AMT aren’t enough, the elephant in the room is the Estate Tax.  To summarize a highly complex issue, as of January 1^st, the estate tax disappeared.  If your loved one died on December 31^st, 2009, their estate would owe 45% tax on any assets greater than $3.5 million.  If that same loved one passed away on January 1^st, 2010, their estate wouldn’t owe a penny of estate tax.  While the leading proposals in Washington range from a 35% to 45% tax on any assets great then $3.5 to $5 million, no legislation has been passed at this point.

It’s hard to believe the first quarter of the year has come and gone with no resolution on these issues.  For now, the best advice I can give is to make sure that your 2009 returns are filed correctly, and to hang on tight for 2010!  Will all 3 be passed and made retroactive to January 1^st?  Will these provisions be passed with a July 1 effective date, causing unimaginable complications for 2010 tax returns?  Or, will Congress avoid making any big tax cuts during an election year and allow these taxes to remain unchanged until 2011?  As tax laws are determined for the year, I will make every effort to publish them in this column, but until the new tax rates and tax laws are set, the best you can do is keep paying your taxes and keeping an eye on the news as it comes out of Washington.