http://www.c-gcpa.com/site/Viewer.aspx?iid=752&mname=ArticleGroup en-us 60 In August, the American Institute of Certified Public Accountants will issue a practice aid on litigation support. The practice aid, titled “Serving as an Expert Witness or Consultant”, will be a valuable tool for accountants and CPA’s around the country when they or their work product go to court. Three of the authors of the practice aid are litigation/fraud leaders at Chortek & Gottschalk. Dave Friedman (pictured on the left), partner, Paul Rodrigues (pictured on the right), principal, and Heidi Bucklew, manager, all contributed to the completion of this project. All three, who are on the AICPA task force, are Certified Fraud Examiners with a Certificate in Financial Forensics, in addition to being Certified Public Accountants. The practice aid gives accountants guidance when serving as an expert witness or consultant for litigation and dispute service engagements. The 90-page practice aid covers the various forensic accounting services such as dispute resolution, litigation support, bankruptcy support, and fraud and special investigations, among many other services. It also includes topics directing accountants to various current Federal, State and Local regulations, current laws and statutes, court orders and various other authoritative documents, including sections on alternative dispute resolution rules. The practice aid also focuses on areas such as conflicts of interest, the CPA’s role, and assisting attorneys as both an expert witness and as a forensic accountant. This includes required disclosures in expert witness reports. Dave, Paul and Heidi, have comprehensive experience as expert witnesses, with fraud prevention, detection and assessment, and forensic accounting. If you have any needs or questions in these areas call our Milwaukee office at 262/522-8227 or our Chicago office at 847/504-0450. Mon, 16 Aug 2010 13:22:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=28852&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=28852&mname=Article Did you know that there are numerous types of fees that are charged against your Company’s 401k plan for recordkeeping, administration, investment advice, brokerage and management services? These fees are allocated to participants and often buried with overall investment gains (or losses). New requirements set forth by the Department of Labor (DOL) will make it easier for 401k plan sponsors to know exactly how much the plan is paying in fees. Any service provider who is paid more than $1,000 from plan assets must provide detailed reports on fees. The new rules go into effect July 16, 2011. Plan sponsors have fiduciary duties to be informed of the ways fees are being charged to the plan and the services being provided. These new rules will improve transparency so that plan sponsors can make more informed choices regarding service providers. A second wave of regulation is expected to be released that will require employers to provide plan participants with details about fees charged for the investment choices available. Remember that all services have costs. The DOL has said that a one-percentage point difference in fees would reduce overall retirement income by 28% over a lifetime of savings. IRS Questionnaire The Internal Revenue Service (IRS) recently mailed questionnaires to 1,200 plan sponsors. The goal is to improve education, outreach and guidance provided by the IRS, but also compliance enforcement. Failure to respond or to provide complete information will result in further action or examination of the plan. If you have received this questionnaire and need assistance to complete it, please contact Julie Schroeder ….. Tue, 10 Aug 2010 14:11:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=28854&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=28854&mname=Article Starting with 2011 Form W-2s, employers are required to report the value of company provided health separately on the form. The amount is not taxed as income to the employee. Fri, 30 Jul 2010 12:59:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=28851&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=28851&mname=Article Prepare your business in anticipation that the IRS will require tax form reporting of almost all payments made in the course of your trade or business. You may need to issue Form 1099s to just about every company you do business starting in 2012. Check your accounting systems to see that all relevant identification information can be maintained. This includes the legal business name, address and employer identification number for every company you make payments to including office supply stores, vendors, airlines, hotels and possibly even restaurants. Stay tuned as further details unravel from the IRS and we will try to make the process less burdensome for you. Mon, 26 Jul 2010 12:56:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=28848&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=28848&mname=Article Beginning in 2010, small business employers may be eligible for a tax credit for providing health insurance to their employees. An eligible small business employer must meet three requirements. One, it must have no more than 25 Full-Time Equivalent (FTE) employees during its tax year. Two, it must pay annual FTE wages that average no more than $50,000. And three, it must provide a qualified health care plan to its employees where the employer is responsible for at least 50% of the premiums. For this credit, shareholders and partners are not considered employees, therefore they are not included in the credit calculations. The maximum credit available is 35% of the health insurance contributions the employer made during the year. This credit is phased out as the number of FTE employees increases between 10 and 25 and also as the average FTE wage increases from $25,000 to $50,000. Please use the chart below as a quick reference tool to estimate your potential credit amount. There are many additional rules involved with the new Health Insurance Credit. The credit is scheduled to stay in its current form from 2010 to 2013. 2014 will bring a slew of changes to how the credit is calculated. The current credit is claimed on the employer’s income tax return and may reduce the estimated tax payments required for the current year. Any unused credit can be carried forward 20 years to offset future taxes. If you believe you may be eligible for the Health Care Credit please contact Michele Horst, C&G Tax Manager, for more information. This credit also applies to nonprofit businesses. Please contact us for further details. Sun, 18 Jul 2010 13:39:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=28593&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=28593&mname=Article Changes in your life, changes in the economy, and changes in the life insurance industry all make a difference in the amount and type of life insurance that makes sense for you, your family, and your business. Due to the difficult economic conditions facing our economy, life insurance companies have been especially hard hit. Mutual policies (those that declare dividends) are experiencing reduced dividend scales. Policies that were projected to have future premiums paid by dividends are requiring those premiums to be paid for a much longer period of years. In addition polices that have had premiums stop are now requiring payments once again. Universal Life policies (those that depend on interest crediting) are facing the same challenges. Premiums are required for longer periods of time. Many universal policies that were purchased several years ago, unlike policies available today, do not have death benefit guaranties. This lack of guarantees along with lower interest rates means that the coverage is more likely to expire much earlier that anticipated. Every life insurance policy that was purchased five years ago or longer should be reviewed. An “In force” ledger should be gathered. This ledger will give the insured a current “snap shot” of how the policy will perform (how much needs to be paid in premiums) so that it will be there when it is needed. Economic conditions change the amount required to solve the problems posed by your death. For example, the amount of investable assets needed to replace your income and support your family may be dramatically affected by changes in interest rates and market returns. Our firm audits policies for our clients. In the 8 plus years that we have been doing this, we have recommended several changes. These changes resulted in coverage that in now guaranteed to be there when needed.  Contact C&G for a free consultation. Wed, 09 Jun 2010 12:28:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=27983&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=27983&mname=Article DON'T LET CONFUSION CREATE RISK - Retirement plans offer great benefits to both employees and business owners. However, retirement plans require a certain level of administration and management that are required by the Employee Retirement Income Security Act (ERISA). Who is a Fiduciary? Those who manage retirement plans and their assets are called fiduciaries. Your plan most likely has a team of fiduciaries that includes both outside administrators and trustees and individuals at your company that you have appointed. The key is that these people can exercise discretion over the plan. What are fiduciaries responsibilities? Act solely in the interest of the plan participants Carry out their duties prudently Follow the plan document Diversify plan investments Pay only reasonable plan expenses Fiduciaries that do not follow the basic standards can be held personally responsible to restore any losses to the plan. You can’t entirely delegate fiduciary responsibility. You are still responsible for choosing service providers and monitoring their activity. How can a plan fiduciary mitigate risk? Prove that your decision making process is both prudent and deliberative. Document & follow a written investment policy. Satisfy the requirements of Section 404(c). The basic requirements are: offering investment options with materially different risk and return characteristics, the ability for participants to transfer assets often and giving participants the opportunity to obtain enough information to make educated investment choices. Understand all plan fees, not just recordkeeping or administrative fees. Be sure you understand investment fees and then document your review of plan fees for reasonableness. Understanding fiduciary responsibilities can be confusing. Don’t let confusion create risk to you and your company. For more information, contact Julie Schroeder, Audit Manager, at jschroeder@c-gcpa.com Wed, 12 May 2010 11:50:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=27979&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=27979&mname=Article VIA TAX INCENTIVES FOR QUALIFYING US EXPORTERS - Small to mid-sized companies are encouraged to increase their international business to help U.S. companies compete in the global marketplace. Numerous tax consequences as well as tax benefits of international business exist. The structure of your export activity is important to maximize tax benefits using an Interest Charge – Domestic International Sales Corporation (IC-DISC). An IC-DISC is a domestic corporation that benefits small to medium, private exporters the most. It results in lower effective tax rates on foreign profits which ultimately increases cash flow. The IC-DISC can be traced back to the early 1970’s when the structure only provided a tax deferral opportunity. The popularity of the IC-DISC increased dramatically after the 2003 Bush tax cuts which lowered the tax rates on qualified dividends to 15%. Due to the gap between ordinary (35%) and qualified dividend tax rates (15%), the establishment of an IC-DISC is powerful enough to increase the after-tax margin on exports by ten percent. Even with the current 15% dividend tax rate facing an increase, the ordinary tax rates are expected to increase as well, allowing the IC-DISC structure to remain valuable. This is because the current administration provides the IC-DISC as a tax break to entice export of U.S . products and services. See our website for further detail on how an IC-DISC works. Your C&G tax advisor can walk you through the issues and opportunities of the global business environment and help implement the tax structure most beneficial for you. Tue, 20 Apr 2010 10:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=27967&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=27967&mname=Article HIRING INCENTIVES TO RESTORE EMPLOYMENT (HIRE) - The HIRE Act, recently signed into law, creates an immediate incentive for businesses to hire unemployed individuals by providing two new tax benefits: 1) a payroll tax exemption and 2) an income tax credit for retained employees. Employers who hire unemployed workers after February 3, 2010 will not have to pay the employer’s portion of social security tax (6.2 percent) on the qualified employee’s 2010 wages. The employee portion of social security tax and both the employer and employee portions of the 1.45 percent medicare tax still apply. A qualified unemployed worker is one who has not worked more than 40 hours in the 60 day period prior to the hiring. The employee must sign an IRS provided statement certifying such. Reinstatement of workers previously laid off may qualify. In addition, a business may claim a tax credit on its 2011 income tax return of the lesser of $1,000 or 6.2 percent of the employee’s wages for each worker retained for at least 52 consecutive weeks. Businesses also get an immediate tax benefit from the extension of Code Section 179 expensing limit of $250,000 for qualifying property purchased during 2010. However, the HIRE Act does NOT extend bonus depreciation. New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on IRS.gov. The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement. Please contact Michele Horst, C&G's Tax Manager, for more information and stay tuned for further tax bill extenders in future 2010 tax bill legislation. Fri, 19 Mar 2010 15:36:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=26937&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=26937&mname=Article On March 15, 2010, Governor Doyle signed 2009 Act 161. This Act adopts certain provisions of the federal Internal Revenue Code for Wisconsin tax purposes. As a result of this Act, effective for taxable years beginning in 2010 and thereafter, all taxpayers may convert a traditional IRA to a Roth IRA, even in those cases where the taxpayer’s adjusted gross income exceeds $100,000. No penalties will apply on the conversion. Taxpayers who make the conversion in 2010 may postpone payment of tax on the converted amount until they file their 2011 and 2012 income tax returns or they may elect to report the entire taxable amount on their 2010 returns. In addition, the pension and IRA contribution limits that will apply for federal tax purposes for 2011 will also apply for Wisconsin. Tue, 16 Mar 2010 15:07:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=26819&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=26819&mname=Article April 15 will come and go and another year of tax forms and shoeboxes full of receipts will be behind us. But what should be done with those documents after your check or refund request is in the mail? Visit the full article and Recordkeeping Retention Guide Sun, 21 Feb 2010 13:58:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=26933&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=26933&mname=Article If disaster struck your place of business, what would you need the next day to get the company up and running again? When considering your disaster planning needs, that question is a great place to start. And you’d be amazed at the many areas that will need to be addressed, including safe storage and access to documents, insurance considerations, getting hold of cash or a line of credit, and retrieving information about key contacts and processes. If you don’t have a formal disaster plan for your office—or if you haven’t updated yours in a while—our firm can help. Contact Michael Senkbeil 262-522-8248 to learn about the best ways to ensure your business can survive—and thrive—after an unexpected event. Review the Challenge and the Solution to Backup/Disaster Recovery Thu, 28 Jan 2010 14:07:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25968&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25968&mname=Article WASHINGTON — People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service. Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card. "Americans have opened their hearts to help those affected by the Haiti earthquake," said IRS Commissioner Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers who have made generous donations." Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds. The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both. To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible. Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID. The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities. Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions. This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004. Tue, 26 Jan 2010 10:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25874&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25874&mname=Article Recent headlines seem to include news of fraud every day. Trusted employees are accused of embezzling company money. Investment advisors concoct schemes to deceive investors. The impact on companies and individuals is potentially devastating. Frauds perpetrated on bigger companies get the most attention, but owners of small and medium size business should not let that lull them to sleep. It is much more likely for fraud to be committed against a small or medium size business and the impact on those businesses can be even more devastating. Consider: What should I as the business owner do? What is the most cost effective approach for my business? Where is my business vulnerable? The best way to safeguard your company’s assets is to recognize and improve weaknesses in your internal procedures. That may sound bureaucratic or intimidating but it does not have to be. The average financial professional is not the solution. Each of C&G’s Certified Fraud Examiners (CFE) has a Certificate in Financial Forensics and is a Certified Public Accountant. They have the technical knowledge and the practical experience to help clients build systems to prevent fraud and to assist in litigation when fraud has occurred. Two of our CFE’s are members of the AICPA task Force authoring the professional guidance designed to help accountants around the United States. Our CFE’s can help you build systems that are practical and effective. We are here to work with you to do one of the most important tasks an accountant can perform – keep your money in your pocket. Call Dave Friedman in our Northbrook, IL office at 847-504-0450 or Paul Rodrigues in our Waukesha, WI office at 262/522-8227 Fri, 15 Jan 2010 14:55:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25972&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25972&mname=Article One of the requirements for maintaining a corporation’s existence (and the liability protection that it affords) is that the shareholders and Board of Directors must meet at least annually. Although most people view this requirement as a necessary evil, it does not have to be a waste of time. An annual meeting, and the corresponding minutes generated, is an important tool to support your company’s tax positions. In the event of a tax audit, an IRS auditor is required to review the corporate minutes. Besides the election of officers and directors, other actions include the directors approving bonuses, retirement plan contributions, and ratifying key actions taken by corporate officers during the year. The directors should also specifically approve any loans to shareholders to lessen the opportunity for the IRS to reclassify the loans as taxable dividends. These are a few examples of why well-documented annual meetings can be an important part of a corporation’s tax records. We would be happy to be involved in your company’s annual meeting and to assist in making sure tax-effective minutes of the meeting are prepared. Mon, 28 Dec 2009 14:47:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25970&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25970&mname=Article The obvious benefit of a Roth IRA is that ALL future distributions from the account will be tax free! However, there are many issues to consider when deciding if and when it makes sense to convert from a traditional IRA. C&G can explain the pros and cons from a tax and estate planning perspective based on your unique situation Starting in 2010, anybody can convert all or part of their traditional IRA to a Roth. This conversion is taxable, but as an enhancement, the IRS will allow the income from the conversion to be deferred and reported one-half in 2011 and one-half in 2012. Pending a legislative change, Wisconsin has not yet adopted these new rules. As a result, Wisconsin tax will be due in the year of the conversion, and penalties will be assessed on current and future Wisconsin returns. Check C&G’s website for a news release if Wisconsin changes their position. Tue, 15 Dec 2009 16:47:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25939&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25939&mname=Article If your business is using QuickBooks software, there are several activities that should be performed on a regular basis to keep QuickBooks performing well and to protect its data:  Update your version of QuickBooks when prompted Set-up automatic backups of the company data file Regularly verify the integrity of the company data file Clean up company data Once your accountant has the files needed for 2009, it is an excellent idea to “lock down” the 2009 data by password protecting the file through 12/31/09. Doing so alerts users if they try to change prior year information, and requires a password to continue. Changes should NEVER be made to information that has already been used on a prior year’s tax return or financial statement. These are a few examples of how to make better use of QuickBooks. As Certified QuickBooks ProAdvisors, C&G can provide many other suggestions to better utilize the features of QuickBooks to make better business decisions by customizing it to your needs and enhancing management reports. Call Joan Brackman 262-522-8264 in our Waukesha office or Dave Jungen 262-522-8256 in our Mukwonago office to schedule a free consultation. Thu, 10 Dec 2009 16:26:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25938&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25938&mname=Article Does your company have a current business plan? Most business owners have created this important map of where their company stands and where they’d like it to go in the future. However, changes in your business—including new developments in the economy—may undermine some of the assumptions that you made in the past. This is a good time to update your plan, including your expectations for future sales, expenses, growth, staffing and many more elements of your business. Remember that your CPA firm can help you analyze your current situation and future prospects, and determine what they mean for your future. Wed, 02 Dec 2009 16:49:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25140&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25140&mname=Article You no longer have to be a first-time homebuyer to take advantage of the tax credit for buying a new home! New legislation passed in November provides a $6,500 tax credit to current homeowners who purchase a replacement principal residence prior to April 30, 2010, and who close on the purchase prior to June 30, 2010. To qualify for the credit, taxpayers must have lived in the same principal residence for a consecutive five year period looking back over the past eight years. The new law also extends the $8,000 credit for first-time homebuyers (which also includes anybody who has not owned a home for the prior three years) to April 30, 2010. For both credits, the maximum credit is 10% of the purchase price for homes priced under $800,000. For purchases after November 9, 2009, the credit phases out for married couples with income exceeding $225,000, and single taxpayers with income exceeding $125,000. Mon, 30 Nov 2009 16:48:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25139&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25139&mname=Article As your company’s profit or loss picture for 2009 becomes clearer, year-end tax planning presents a final chance to strategically fine-tune your income tax liability. With these trying economic times, and the uncertainty of where income tax rates are going in the future, year-end planning becomes even more important, and having C&G assist with that project is an investment in time well worth considering. Strategies to consider for your business: Take Advantage of Depreciation Tax Breaks Section 179 Depreciation: Your business may be able to deduct more in depreciation due to an increase in code Section 179. For 2009, the maximum Federal Section 179 deduction is $250,000 (if acquired assets do not exceed $800,000). 50% First-year Bonus Depreciation: In addition to Section 179, your business may deduct 50% of all NEW equipment and software acquired and placed in service before the end of the year. Unlike Section 179, Bonus depreciation can be taken even if your business will show a loss for 2009. Planning point – not all states allow the increase in Section 179 and bonus depreciation. Expanded Net Operating Loss (NOL) Carryback NOL carrybacks are valuable when taxpayers are operating at a loss. NOLs can be used to obtain a refund of taxes paid in previous years and generate a much needed infusion of cash into the business. Under normal circumstances, the carry back period is two years. Under new law, NOLs may be carried back up to 5 years. Strategic planning to actually maximize your current year loss may increase your refundable tax. See our article “Net Operating Losses – An Opportunity to Generate Cash?” Avoid The Hobby Loss Rules Many individuals are opening “side-businesses” to help supplement cash flow needs. Of course, the IRS will assess income and self-employment taxes on the profits from these activities. However, the IRS has rules that will disallow the deduction of losses from these activities if the owner cannot prove that the activity is a legitimate business, and is entered into for a profit motive. If the side-business generates consistent losses each year, the IRS will most likely examine your income tax return and disallow the loss. Proper documentation, planning and presentation on your tax return may prevent the IRS from disallowing such losses. Consider Paying a Dividend from your C Corporation in 2009 Now is the perfect time to convert some of your C corporation wealth into personal wealth cash at a very manageable tax cost. If the company pays you a taxable dividend, it is taxed individually at a maximum federal rate of only 15%. Better yet, if the stockholder’s (or children’s) income is low enough, there may not be any tax on the income, assuming “Kiddie” tax does not apply. The maximum federal rate on dividends is scheduled to skyrocket from the current 15% to 39.6% starting in 2011. Especially during 2009, a year of tumultuous change for our economy and our tax laws, we consider a year-end tax checkup an essential service for our clients. If you would like more information on any of the planning strategies, or if you would like to explore how year-end tax planning can be customized to your company specific circumstances, please don’t hesitate to contact us. CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Wed, 25 Nov 2009 16:27:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25134&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25134&mname=Article There is still plenty of time to decrease your 2009 tax bill! Once New Year’s Day rolls around, your tax liability is set in stone. By taking certain steps now, before 2009 draws to a close, you can reduce the size of your tax bill due when you file your return next year. Especially this year, where there are temporary tax breaks to get the economy moving again, you do not want to overlook any deduction or credit that you can take in 2009 to lower this year's tax bill. With that in mind, tax reform is on the horizon, and tax increases are definitely expected in 2011 for higher income taxpayers. Depending on the structure of health care reform, higher income taxpayers may also be subject to increased tax rates in 2010. Thus presents the challenge - managing the timing of income and deductions to balance your tax rates between 2009 and 2010 and beyond, with the uncertainty of tax reform. I Want to Lower my Tax Bill What should you do if you are trying to lower your tax bill in 2009? Aside from the obvious answer of deferring income and accelerating expenses, here are few items to consider: Charitable Gifting Maximize noncash contributions by making donations of household goods, clothing, etc. to your favorite charitable organizations. Make charitable gifts of appreciated stock and avoid paying tax on the appreciation and deduct the donated stock’s full value. Obtain receipts for all charitable donations – do not overlook the strict substantiation requirements. Maximize The Benefit Of Itemized Deductions Charging year-end charitable contributions to a credit card creates a deduction in 2009 that will not have to be paid until 2010. Accelerating real estate or state income tax payments. Just watch out for Alternative Minimum Tax (AMT), as real estate and state income taxes are not deductible when computing AMT. If your total itemized deductions each year are about equal to your standard deduction, maximize your tax savings by bunching deductions to every other year. Cluster Deductions Subject To Adjusted Gross Income (AGI) Limitation Both miscellaneous itemized deductions (such as unreimbursed employee business expenses) and medical expenses are subject to limitations. To lessen the effects of these limitations, consider bunching these expenses into every other year. Maximize Your Contributions to IRA or 401(k) Plans Maximize your IRA contribution. The contribution limit for 2009 is $5,000, or $6,000 if you are age 50 or older. If you participate in a company-sponsored retirement plan, your IRA contributions may not be deductible, based on your income levels. Maximize your 401(k) contribution. For 2009, the 401(k) limit is $16,500, or $22,000 if you are age 50 or older. Postpone Minimum Distributions from Retirement Accounts Due to the severe decline in value of retirement accounts, (such as IRA’s and 401(k)’s) the required minimum distributions rules have been waived for 2009 for those taxpayers over age 70-1/2. If you have recently received your 2009 required minimum distribution, you have until 60 days from the date you received the distribution to change your mind and repay it back to your retirement account. Other Opportunities Splurge and purchase a new vehicle in 2009. The sales tax on a NEW vehicle purchased between February 17 and December 31, 2009 is deductible for federal income taxes Only applies to the first $49,500 of the purchase price. The deduction phases-out for married couples with AGI over $250,000 and single taxpayers with AGI over $125,000. Increase your home’s energy efficiency and claim up to a $1,500 credit on your federal income tax return for certified expenditures. My Income is Already too Low What strategic opportunities can you take advantage of if your income is already very low in 2009, or even a loss situation? Defer Deductions into Next Year Do not pay your real estate taxes in December. Take advantage of paying the real estate taxes in the installment plan specified on your real estate tax bill. Defer charitable contributions until 2010. Take Advantage of 0% Capital Gain Rates For 2009, federal income tax rate on long-term capital gains and qualified dividends is 0% in 10% or 15% regular federal tax brackets. There is a phase-out income limit of $67,900 for married filing joint or $33,950 for single taxpayers. Take Distributions from your IRA With Minimal Tax Consequence For taxpayers over age 59-1/2, distributions can be made without incurring early distribution penalties. The IRA may be a well needed source of funds that will take advantage of your low tax rate situation. For taxpayers under age 59-1/2, consider “Hardship Withdrawals From Retirement Plans” to provide an additional source of funds. Convert your Traditional IRA to a Roth IRA If your 2009 AGI is less than $100,000, you are eligible to convert all or part of your traditional IRA to a Roth IRA. Typically, this is very advantageous for taxpayers that are expecting negative taxable income for 2009, due perhaps to losses generated from business activities. See our article “Should I Convert my IRA to a Roth?” Especially during 2009, a year of tumultuous change for our economy and our tax laws, we consider a year-end tax checkup an essential service for our clients. If you would like more information on any of the planning strategies, or if you would like to explore how year-end tax planning can be customized to your specific circumstances, please don’t hesitate to contact us. CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Wed, 25 Nov 2009 12:17:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25126&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25126&mname=Article In these difficult economic times, many businesses are unfortunately operating at a loss. For Federal income tax purposes, the net operating loss (NOL) can be carried back in order to recoup income taxes paid in prior years. Under normal circumstances, taxpayers can only carryback a federal NOL two years. However, for 2008 only, the carryback period was extended to five years for businesses with average gross receipts under $15 million. New legislation passed in November, 2009 extended and expanded the carryback as follows: Qualifying small businesses can make an additional election to also use the five-year carryback period for 2009 NOLs. All larger businesses can now elect a five-year carryback. A larger business can take the expanded election for NOLs incurred in either 2008 or 2009, but not for both years. The election can be made to strategically carryback the NOLs either three, four or five years, depending on the taxpayer’s specific situation. Most states do not allow NOLs to be carried back. However, these losses can be carried forward to offset future taxable income. Any Federal losses that are not utilized in carryback periods will also be carried forward. The C&G Tax Department can assist you in determining the most advantageous use of an NOL. Should the NOL be carried back to generate a much needed cash infusion, or should the NOL be carried forward to reduce taxable income in future years, when the tax rates may be substantially higher than they are at the present? CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Sat, 21 Nov 2009 13:42:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25127&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25127&mname=Article Year end is upon us once again and that means it is time to start thinking about fringe benefits that must be included as wages on Form W-2. The following need to be considered for those employees who own a 2% or greater interest in an S Corporation: Accident and health insurance premiums. Group-term life insurance coverage on an employee’s life. Tax-free benefits provided under a cafeteria plan (Section 125 plan). Other items that should be included on every employee’s W-2 are: Employer’s contribution to an employee medical savings account. An employee’s salary reduction contribution to a SIMPLE retirement account. Group-term life insurance on an employee’s life in excess of $50,000. Personal use of company provided vehicle. If you require any assistance with these calculations, please contact one of our tax specialists at Chortek & Gottschalk, LLP. Wed, 18 Nov 2009 16:46:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25138&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25138&mname=Article The most obvious benefit of a Roth IRA is that future distributions from the account will be forever tax free – you or your heirs will never pay a dollar of tax on the account appreciation. Also, unlike traditional IRAs, there are no required minimum distributions for the account owner or the surviving spouse. These benefits may provide substantial tax and estate planning opportunities, but they don’t come without a cost if you are converting from a traditional IRA. Federal and state income taxes will be payable on the amount converted and in 2009, you may only convert to a Roth IRA if your modified adjusted gross income is less than $100,000. However, starting in 2010 that income limitation is removed making it possible for anybody to convert all or part of their traditional IRA. As a further enhancement for 2010 conversions only, the income from the conversion can be deferred and reported on your 2011 and 2012 income tax returns. So, is it beneficial to pay the conversion tax, which could be as high as 40%? What will be the source of the funds to pay the tax? Do you pay all of the tax in 2010 at known income tax rates, or do you defer the reporting of income to 2011 and 2012 when tax rates may be higher? Pending a legislative change, Wisconsin has yet not adopted these new rules for 2010, so all of the Wisconsin tax will be due in the year of conversion, and penalties may be assessed on your Wisconsin return. C&G can assist you by modeling various alternatives of tax rates, investment returns, and payout periods to reach an informed decision on whether to convert your traditional IRA to a Roth. CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Tue, 17 Nov 2009 16:16:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=25132&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=25132&mname=Article The Worker, Retiree and Employer Recovery Act of 2008 waives required minimum distributions from certain retirement plans, including IRA’s, for 2009. If you have already received your 2009 required minimum distribution, you have until November 30, 2009 or as long as 60 days from the date you received the distribution--whichever is later--to roll over the distribution, if you change your mind and decide not to take a distribution for 2009. For further explanation, please contact C&G Sun, 15 Nov 2009 07:48:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=24849&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=24849&mname=Article This economy is forcing many companies to cut costs where ever possible, including staff reductions and reducing or discontinuing matching contributions. There are very complex rules that govern your plan. Taking a few minutes to review your plan will ensure that you are following those rules. Here are few things to think about: Partial Termination- As a general rule, partial termination occurs when an employer-initiated action results in a significant decrease in plan participation. As an example, a partial termination may be deemed to occur when an employer reduces its workforce by 20%. The law requires that all affected participants be fully vested in their account balance, which includes employer matching and profit sharing contributions. Employer contributions- Employers should review their plan documents to determine whether amendments need to be made to discontinue matching contributions. If your matching contribution is specifically noted in your plan document, you may need to amend and inform plan participants. If your contribution is entirely discretionary, you will not need to amend the plan. Look at how you are making your matching contribution, whether on a per-pay-period basis, quarterly or annually. From this you can determine at which point your can halt contributions. Hardship withdrawals- A participant must have exhausted all other available resources to be eligible for a hardship withdrawals. Hardship withdrawals are typically available to pay for medical expenses, purchase of principal residence, cost of tuition for post-secondary education, to prevent eviction or foreclosure and funeral expenses. If your plan allows for hardship withdrawals review your plan document carefully. Review documentation prior to approving a withdrawal. Also, it is common for plans to require suspension of salary deferrals into the plan for some period taking a hardship withdrawal. Be sure you have procedures in place to ensure this happens. A better option than a hardship is a participant loan, especially since it avoids the 10% premature distribution penalty. Employee contributions- Do not hold onto employee contributions. Small plans (under 100 participants) must now submit contributions with seven business days of the payroll date. Large plans (over 100 participants) must pay contributions into the plan as soon as administratively possible. Holding 401(k) funds too long could affect the performance of employees’ investments and may constitute fraud in the eyes of the Department of Labor. To ensure fiduciary responsibility, we suggest that you submit employee 401(k) contributions simultaneously with payroll taxes. Audit Requirement- The general rule is that plans with 100 or more participants at the beginning of the plan year are considered “large plans’ and are required to have an audit. Participants are not only those that are participating, but also employees who are eligible to participate but chose not to. If your plan currently requires an audit, but you have had a significant reduction plan participants, you must be under 100 participants at the beginning of the plan year to forgo an audit. Remember, terminated employees who still have account balances, count as a participant. Thu, 05 Nov 2009 12:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=24860&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=24860&mname=Article Subject to Taxes in Another State? As tax revenues decrease, state revenue departments are becoming more aggressive in identifying out-of-state businesses that are not filing tax returns with their state. Not filing can lead to severe assessments of taxes, interest and penalties. We recommend that you review your business activities in other states to determine if you have filing requirements. The easy question of “What determines if my company is conducting business in another state?” has a very difficult answer. Laws are confusing, and vary state to state. To further the confusion, filing obligations for sales tax can be different than income tax. Federal law prohibits states from taxing businesses whose only activity in the state is the solicitation of orders, as long as the orders are accepted and delivered from a point outside of that state. But what if a company delivers into that state using company trucks? What if the company has a sales agent in that state working out of a home office? Is the sales agent an employee or independent contractor? Does the sales agent have a company computer? Does the company participate in trade shows? Does the company install or repair its product? C&G can proactively assist you in determining your company’s tax nexus exposure. To start the process, ask for our questionnaire. Not only could your business avoid severe non-filing assessments, it may also SAVE TAXES by shifting income to a lower tax rate state. Mon, 05 Oct 2009 07:41:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=24848&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=24848&mname=Article There have been hundreds of thousands of job losses in the last year as companies cut back on staff in light of dwindling revenues, tight credit conditions or other signs of an economy in distress. If your company is facing declines in sales or other problems associated with the recession, you may be considering layoffs yourself. Before you take that step, however, it’s important to realize that there are other alternatives. Although staff salaries are a big-ticket item in any company’s budget, your people are also an important resource and they understand your business’ unique needs. Once the economy turns around, that insider knowledge and experience will be a real advantage. So before you give up that advantage, here are some other ideas to consider: What Else Can We Cut? Begin by taking a careful look at your budget to identify any possible unnecessary expenses. If you’re uncertain how some cutbacks may affect your business, our firm’s experienced professionals can help with the analysis. As part of this process, remember that many suppliers—and even landlords—are willing to negotiate on prices in this tough economic climate. Between eliminating unneeded items and getting a better deal on outlays, you may find it’s easier to continue paying your current payroll costs. Consider Furloughs and Sabbaticals There are many ways to hold on to your employees while trimming your payroll expense. Some businesses have instituted unpaid furloughs, for example, in which employees take a day or a week off without pay during the company’s slowest periods. Unpaid sabbaticals are another option that involve lengthier periods off during downtimes. Trim Salaries and Raises Furloughs and sabbaticals work best for companies that have regular peaks and declines in business. If that’s not how your company works, another choice might be to roll back salaries and eliminate raises for the time being. This temporary step will make it possible for you to decrease payroll expense without losing any staff. Our firm can help you examine your overall compensation costs and develop a strategy that lowers your expenses and ensures you have the staff you need at peak times. Make Strategic Cuts Even after taking all these steps, you may still find it necessary to lay off some of your people. If that’s the case, be sure to make strategic cuts that are in the company’s best long-term interest. That involves not only evaluating your staff to find the poor performers, but also analyzing the company to identify the parts of the business with the lowest long-term potential. Although these cuts are tough, if they are part of a sound strategic plan, you may find that they strengthen the business and make it better positioned to thrive when the economy turns around. Part of an Overall Plan Staff cutbacks are not the only issue facing small businesses in recession. No matter what challenges you are wrestling with, remember that our firm can help. We can work with you to create a strategic plan that will eliminate unnecessary expenses, make the most of your existing resources and build a solid foundation for the future. Tue, 29 Sep 2009 07:34:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=24847&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=24847&mname=Article The 30th annual Alliott Group Worldwide Conference was held this year in Boston, during the week of September 15th and, despite the rough worldwide economy, the conference was well attended. Among the several new members who were first-time attendees were members in Turkey, Mexico and Spain – countries not previously served by Alliott Group. The conference included the usual mix of business speakers and networking opportunities as well as the first (and hopefully) annual Alliott Cup – a Ryder cup style golf event. Sadly your American author has to report that the cup ended up in the hand of the internationals – we will look to its return next year in Singapore. The C&G companies were well represented at the conference, with partners Greg Junek, Dave Friedman and Rick Sovitzky representing C&G and C&G Consulting and Tony Alongi representing CGK Investment Banking. For the first time ever, two of the conferences’ technical session presentations we led by our own representatives. Rick Sovitzky, a frequent presenter at Alliott Group meetings and currently the Alliott Group Worldwide Chairman for IT, led an interactive IT technical session and covered topics including virtualization, video conferencing and the effective use of CRM for professional service firms. Tony Alongi, a first-time presenter, led the Corporate Finance/M&A technical session with a review of worldwide M&A activities over the last 12 months, a comparison of how both bank lending and private equity investing has changed over the past year and a discussion on how private equity can best be used as a source of growth capital in the current, challenging environment. Both presentations were very well received by those in attendance. We look forward to our continued involvement with the Alliott Group. Remember, if your business takes you out of the country or even out of state and you require the same expert level of business services that you receive from us, please let us know. Through our Alliott Group affiliation, we can very likely introduce you to a high-quality, like-minded firm that can take care of your needs wherever you find yourself around the World. Tue, 22 Sep 2009 07:26:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=24846&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=24846&mname=Article On June 29, 2009, Governor Doyle signed into legislation the 2009-2011 Wisconsin Budget Act. As part of the budget, there are several tax law changes for 2009. Highlights are: Property Taxes - WI 09 Property Tax Changes Sales Taxes - WI 09 Sales Tax Changes Individual Income Taxes – WI 09 Income Tax Changes The top income tax bracket increases from 6.75% to 7.75%, for married couples with taxable income exceeding $300,000, or single taxpayers with taxable income exceeding $225,000. This increase is effective for all of 2009. The long-term capital gain exclusion is reduced from 60% to 30% of the gain. Again, this increase is retroactive to January 1, 2009, so all capital gain transactions for the year are subject to the higher tax rates. Combined with the increase in the top marginal tax rate, the maximum tax on long-term capital gains increases from 2.7% to 5.4%! Business Income Taxes – WI 09 Income Tax Changes Pass-through entity withholding for nonresidents must be remitted quarterly beginning in 2009. A refundable capital investment tax credit of up to 10% is available for significant capital expenditures in an qualified “enterprise zone”. Future Opportunities – There are several opportunities that go into effect in 2010 and later years, such as deferring tax on up to $10 million of gain on the sale of capital assets, if the proceeds are reinvested in a qualified new business venture. Jobs credits and Research and Development credits will also expand in 2010 and 2011. Details of all of the Wisconsin tax law changes will be forthcoming once more information is released by the Wisconsin Department of Revenue. CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Tue, 07 Jul 2009 13:35:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=23167&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=23167&mname=Article On June 24, 2009, President Obama signed legislation aimed at boosting new vehicle sales. The time period for the program will run from late July, 2009 to November 1, 2009. The program will offer a $3,500 or $4,500 dealer rebate on the trade-in of an old vehicle for a new, more fuel efficient model. Highlights of the program are: The trade-in vehicle must be no more than 25 years old. The original fuel efficiency of the trade-in vehicle must be under 18 MPG combined highway/city. The vehicle must be in drivable condition, and insured and registered by the same owner for the full preceding year. The new vehicle may be purchased or leased, and the cost cannot exceed $45,000. The new vehicle may be domestic or foreign. Your trade-in vehicle is required to be destroyed. As such, the trade-in value of your vehicle is not likely to exceed its scrap value. Full details are available at the website: www.cars.gov CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Thu, 25 Jun 2009 13:32:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=23166&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=23166&mname=Article Preparing and using a cash flow forecast is considered a best practice for successful businesses. Necessary in today’s difficult economic situation, the purpose of a cash flow forecast is to provide the business owner with projected figures that are calculated to ensure the survivability of the company. Slow or nonexistent payments from customers and more restrictive lending practices by banks force owners to focus on ensuring they have the cash to keep the doors open tomorrow as well as take advantage of opportunities in the coming years. A cash flow forecast indicates the company’s available cash balance at any given point. The timeframe used for the forecast varies depending on what makes the most sense for your business. Generally, a forecast should be prepared to show cash flow week-by-week for the first three months and then month-by-month for the following nine months. The forecast should be updated regularly so that you always have a rolling twelve months of future cash flows planned for. Ideally, the cash flow forecast will be supported by and a part of the company’s strategic plan and financial plan/budget. Questions to consider in advance of preparing the cash flow forecast include: Who will use the forecast and for what specific purposes? How precise does the forecast need to be? In what format should the forecast be presented? Building the forecast involves making assumptions and estimates about the when and how much of cash inflows and outflows. To ensure that the cash flow forecast is a valuable tool for management, consider the following as you construct the models: Document how assumptions and estimates were arrived at and by whom, from what sources of data. Keep the model simple; complexity does not necessarily equate to accuracy. Build the model in a way that it can be easily updated. Compare the forecast to the actual results and find out what the sources of the differences are and validate your assumptions and the logic you used. Complete or update the forecast in time for it to be useful. Mon, 01 Jun 2009 14:37:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=22504&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=22504&mname=Article The question might be considered funny or rhetorical. Unfortunately, you probably aren’t aware if it’s occurring in your own company since fraud is, by its very definition and nature, a clandestine activity. So how do you detect the warning signs and protect against it? Telltale signs of fraud may include bad cash flow when business is good, margins that are declining for no apparent reason, or employees or vendors with low income and a high standard of living. To prevent fraud, you need to identify your weaknesses and put anti-fraud controls in place. This is best done by knowledgeable, experienced professionals. Contact our team of Certified Fraud Examiners and let us find the most cost efficient method to minimize your company's vulnerability to fraud. Tue, 05 May 2009 14:20:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=22501&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=22501&mname=Article "Employee theft is a major and growing threat that may take your business down before any recession ever will. The environment is ripe. With the economoy continuing to slide, the temptation for ordinary people to steal to make ends meet is becoming greater and greater every day. You want to avoid being viewed as an easy target. To do so, you need to investigate things that don't make sense to you. Let everyone know you're watching and will get to the bottom of things. Adhere to proper segregation of accounting duties, enforced mandatory vacations and a no-exception adherence to company policies (especially in travel and entertainment). Consistent and ongoing attention to detail will enable you to help prevent theft or embezzlement from your company. In summary, trust but verify." - David Friedman, CPA and partner, and Paul Rodrigues, CPA and principal, Chortek & Gottschalk, LLP in Milwaukee BizTimes Milwaukee, April 3-16, 2009 Fri, 03 Apr 2009 10:07:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=22084&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=22084&mname=Article In today's financial crisis, people may need to take withdrawals from their retirement plans to cover costs such costs as mortgage payments, medical expenses, tuition, or everyday bills. The tax implications relating to these withdrawals vary: In general, distributions from most retirement plans will be subject to Federal and state income taxes, and if the person is under age 59-1/2, they will be subject to penalties unless an exception applies. Knowing, and taking advantage of these exceptions can mitigate the tax bite. IRAs An individual can withdraw from their IRA at any time they desire. However, a withdrawal made from a traditional IRA is always subject to Federal and Wisconsin income taxes. A 10% Federal penalty (and 3% Wisconsin penalty) is assessed for early distributions (individuals younger than age 59-1/2). However, the penalty can be avoided if: You're unemployed, have received unemployment benefits for at least 12 weeks, and use the money to buy health insurance. You use the money to cover unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. You use the money to pay college expenses for yourself or a member of your family. You're a first-time home buyer. You can withdraw up to $10,000 from your IRA to pay for purchase-related expenses. You are a reservist serving on active duty for at least 180 days. You set up what's known as a "substantially equal periodic payments" plan from your IRA. Employer Plan/401k Withdrawals from employee sponsored plans have slightly different rules than the IRAs. If you lose your job, you should be able to withdraw money from your employer-sponsored retirement plan. However, if you are still employed, withdrawals can only be made from a qualified plan if there is a "hardship". The IRS approved hardships that will allow you to take a withdrawal are: Expenses for medical care previously incurred by the employee, the employee's spouse, or any dependents of the employee or necessary for these persons to obtain medical care Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments) Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the employee, or the employee's spouse, children or dependents Payment necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence Funeral expenses Certain expenses relating to the repair of damage to the employee's principal residence As with IRAs, any distribution from a qualified plan will always be subject to income taxes. Distributions can also be subject to early distribution penalties. Those penalties can be avoided if: You separate from service after age 55. You use the money to cover unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. You are a reservist serving on active duty for at least 180 days. You set up what's known as a "substantially equal periodic payments" plan from your account. Roth IRAs Unlike traditional IRAs, Roth IRAs are funded with after tax dollars. This provides opportunities to tap funds while potentially avoiding a large hit from income taxes or penalties. In general: Any Roth distribution made after an individual turns age 59-1/2 is completely tax free if the Roth has been open for at least 5 years. If that criteria is not met, income taxes and likely a penalty will be due - but only on the income/earnings portion of the withdrawal. Any portion of the withdrawal that is considered a return of money you put in is tax-free! CIRCULAR 230 DISCLAIMER To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Thu, 12 Mar 2009 09:44:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=21249&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=21249&mname=Article $300 BILLION IN TAX RELIEF UNDER NEW STIMULUS BILL The stimulus bill provides immediate federal tax relief to both individuals and businesses. Many of the incentives are retroactive to January 1, 2009, and most of the tax relief dollars are frontloaded into 2009 and 2010. However, many of the individual tax incentives phase-out for higher income taxpayers, generally defined as single taxpayers with adjusted gross income (AGI) over $75,000 and married couples with AGI over $150,000. On February 17, 2009, the American Recovery and Investment Act was signed into law. BUSINESS TAXPAYER INCENTIVES Bonus Depreciation. The stimulus bill extends the 50% first-year bonus depreciation through December 31, 2009. Only purchases of new assets qualify for bonus depreciation, including automobiles and light trucks and vans. Section 179 Expensing. The increased Section 179 limitations have been extended into 2009. This allows small business with asset purchases under $800,000 to immediately expense the first $250,000, regardless of whether the asset is new or used. 2008 NOL Carryback. The new law increases the net operating loss (NOL) carryback period from two to five years. It is effective only for 2008 net operating losses and only for businesses with average gross revenues under $15 million. Refundable Credits. For 2008 and 2009, business may elect to utilize unused AMT and R&D credits instead of taking bonus depreciation. Cancellation of Indebtedness. In general, for certain businesses that renegotiate their debt at a discount in 2009 or 2010, the Stimulus Act allows the business to delay the recognition of cancellation of debt income until 2014, then recognize the taxable income over the next five tax years. Qualified small business stock. The new law increases the exclusion for gain from the sale of certain small business stock (assets under $50 million) held for more than five years from 50% to 75% for stock issued after the enactment date and before 2011. S Corporation holding period. The new law temporarily shortens the holding period to seven years for assets subject to the built-in gains tax imposed after a C corporation switches to S corporation status. This incentive applies to S corporations recognizing built-in gains in 2009 and 2010. COBRA benefits. Workers laid off between September 1, 2008 and December 31, 2009 will pay only 35% of the COBRA health insurance premium. The former employer pays the remaining portion (65%) of the premium for up to nine months. The employer will be reimbursed for its share by reducing the remittance to the IRS of wage withholdings and payroll taxes. Careful planning is required to take full advantage of the benefits available in 2009 and beyond. We encourage you to call or e-mail our office to discuss in more detail how the American Recovery and Investment Act applies to you and your business. CIRCULAR 230 DISCLAIMER~To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Mon, 23 Feb 2009 10:41:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=20998&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=20998&mname=Article $300 BILLION IN TAX RELIEF UNDER NEW STIMULUS BILL On February 17, 2009, the American Recovery and Investment Act was signed into law. The stimulus bill provides immediate federal tax relief to both individuals and businesses. Many of the incentives are retroactive to January 1, 2009, and most of the tax relief dollars are frontloaded into 2009 and 2010. However, many of the individual tax incentives phase-out for higher income taxpayers, generally defined as single taxpayers with adjusted gross income (AGI) over $75,000 and married couples with AGI over $150,000. INDIVIDUAL TAXPAYER INCENTIVES Making Work Pay Credit. An individual with earned income (wages or self-employment income) will receive up to a $400 credit in 2009 and 2010. For a married couple, where both spouses work, the maximum credit will be $800. (Phases-out) Economic Recovery Payment. Individuals on a fixed income (primarily Social Security recipients) will receive a one-time payment of $250. AMT Patch. Similar to prior tax acts, this stimulus bill does not eliminate alternative minimum tax (AMT), but simply extends the “patch” of an increased exemption, consistent with prior year amounts. First Time Homebuyer Credit. This credit, first enacted on April 9, 2008, allowed for a $7,500 “credit” for first-time homebuyers with one catch – the $7,500 had to be repaid to the IRS. Effective for purchases of first homes between January 1, 2009 and November 20, 2009, the credit is increased to $8,000, and no longer needs to be repaid if you stay in the home at least three years. (Phases-out) New Car Deduction. For NEW cars purchased between February 17, 2009 and December 31, 2009, a tax deduction will be allowed for sales tax paid. The sales tax deduction will be capped on the first $49,500 of purchase price. Sales tax paid on the lease of a new car is not deductible. (Phases-out) Education Credit. The HOPE education credit is renamed the “American Opportunity Tax Credit” and is increased to a maximum of $2,500 per year for tuition paid in 2009 and 2010. In addition, up to 40% of the credit is refundable for taxpayers with minimal tax liability. (Phases-out) Unemployment Compensation. For 2009, the first $2,400 of unemployment compensation received is excludable from taxable income. Qualified Tuition Program Distributions. For 2009 and 2010, the law expands the definition of qualifying expenditures to include computers and computer technology, including internet access. Estimated Tax Payments for Business Owners. For individuals where 50% or more of their 2008 AGI is generated from small business income, the safe harbor estimate for 2009 has been decreased from 100% of prior year tax to 90%. The taxpayer’s AGI must be under $500,000. Residential Energy Credits. The new law increases the residential energy credit from 10% to 30% of qualified expenditures in 2009 and 2010, subject to a cap of $1,500. Eligible expenditures include insulation, windows, exterior doors, central air and furnaces. CIRCULAR 230 DISCLAIMER~To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Mon, 23 Feb 2009 10:32:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=20997&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=20997&mname=Article Chortek & Gottschalk Announces Firm’s Expansion into Chicago and Beverly Hills; Dave Friedman Joins as Partner Waukesha, WI (January 22, 2009) – Chortek & Gottschalk LLP, a full service accounting, tax, information technology and business consulting firm, announces its expansion into the Chicago and Los Angeles area with the addition of Dave Friedman as a new partner. Mr. Friedman is a Certified Public Accountant and a Certified Fraud Examiner with a Certificate in Financial Forensics. He is a charter member of the American Institute of Certified Public Accountants Litigation Support and Forensics committee. He will head up both the Chicago office, located in Northbrook, and the Los Angeles office, located in Beverly Hills. The expansion brings the firm’s number of Certified Fraud Examiners with Certificates in Financial Forensics to five, demonstrating Chortek & Gottschalk’s continuing commitment to helping clients navigate the situation where fraud has been detected or suspected and minimize the risks of fraud on an ongoing basis. “We have been serving clients in Wisconsin for over 60 years and we’re excited to expand our presence in Illinois and California under Dave’s leadership, “ said Firm Managing Partner Greg Junek. “The addition of Dave and the professional staff he brings with him allows us to expand our offerings and better serve our clients. Dave is long established in the Chicago and Los Angeles areas and his specialization in the entertainment industry is a great fit for Chortek & Gottschalk,” said Mr. Junek. “I’m excited to be joining Chortek & Gottschalk” said Mr. Friedman. “Their depth and professionalism will enable us to better serve our client base. Our expertise in fraud matters and the entertainment industry complements their expertise in tax, technology and business consulting.” ABOUT CHORTEK & GOTTSCHALK LLP Headquartered in Waukesha, Wisconsin near Milwaukee, Chortek & Gottschalk LLP offers audit and accounting services complemented by tax compliance and planning, consulting valuations, IT, merger and acquisition, entertainment accounting, and fraud prevention and litigation support services. The firm is an active member in the Alliott Group, one of the leading international groups of accountants, auditors, tax advisers, lawyers and consultants, with more than 150 members worldwide. Chortek & Gottschalk is recognized for its emphasis on helping closely held companies and their owners achieve financial success by focusing on all levels and types of profit enhancement, asset protection and business planning. For more information contact: Rick Sovitzky, Partner Chortek & Gottschalk, LLP (262) 522-8251 or (414) 698-8226 rsovitzky@c-gcpa.com www.c-gcpa.com Thu, 22 Jan 2009 14:12:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=20615&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=20615&mname=Article Almost everyone's portfolios have taken a hit in 2008 with the slowdown in the economy. The recently-passed Worker, Retiree and Employer Recovery Act helps individuals who must take required minimum distributions (RMDs) from their retirement accounts. The Act suspends RMDs for 2009. A RMD is the amount that an individual must take from his or her qualified retirement account on an annual basis over the course of his or her life expectancy after retirement. Generally, distributions must begin not later than April 1 of the year following the year in which the individual retires or attains age 701/2 . The RMD rules are intended to prevent individuals who have no current need for the funds from extending the tax subsidy for retirement savings indefinitely. The suspension applies to all qualified defined contribution plans, including 401(k), 403(b), 457(b) and IRA accounts. The suspension will allow seniors to keep more of what's left of their tax-deferred retirement savings intact until the markets rebound. If you have any questions about RMDs and the Worker, Retiree and Employer Recovery Act, call C&G today at 262-522-8227. CIRCULAR 230 DISCLAIMER - To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Fri, 19 Dec 2008 16:50:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=20300&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=20300&mname=Article Pertinent tax strategies for individual taxpayers include based on President-elect Obama's Tax Agenda include: Long-Term Capital Gains- Discuss with your financial advisor the selling of appreciated securities before the end of the year, in order to offset capital losses incurred, and/or to avoid the proposed increase in capital gains tax to 20% or higher. Also, consider selling real estate or other assets before the end of the year to take advantage of the lower 2008 tax rates. If you previously sold assets on an installment sale, consider accelerating the collections on the installment note into 2008 to avoid the proposed increased capital gains rates. Retirement Plans- Due to the proposed suspension of required minimum distributions for 2008 and 2009, consider delaying any distributions not yet taken for 2008 until the status of this proposal becomes clear. However, if you are in the top tax brackets, be aware that this may result in shifting income to future years with higher tax rates. Gifting of Closely Held Stock- Many business owners gift company stock or Family Limited Partnership (FLP) interests to their heirs on an annual basis and take advantage of combined discounts of 20-40% when computing the gift’s value. These valuation discounts may be severely limited in the future. Hence, consider accelerating gifts of company stock or FLP interests into 2008. Call C&G today to see how these strategies can impact your situation, 262-522-8227. CIRCULAR 230 DISCLAIMER - To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Thu, 20 Nov 2008 16:38:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19929&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19929&mname=Article While only a few of President-elect Obama's proposed tax changes affect the business directly, many of the proposed changes affect the shareholders and owners of the business. Corporate Dividends - C corporations or converted S corporations with large retained earnings positions should consider paying a dividend in 2008 to avoid the proposed 5% increase in the tax rate on qualifi ed dividends. While a dividend is not tax deductible to the company, it is a strategic method to distribute excess company cash. Paying a dividend now at a 15% tax cost may be more advantageous than paying future bonuses to the owner, when they will likely be subject to higher individual tax rates and the proposed 4% FICA surtax. Compensation Planning - Consider accelerating bonuses to the business owners into 2008 to take advantage of lower individual tax rates. This will also minimize the impact of the proposed 4% FICA surtax on wages in excess of $250,000. Combat the FICA surtax by utilizing an S corporation rather than a partnership or LLC. An S corporation is only subject to payroll taxes to the extent it pays wages to the owner, whereas the partnership owners are subject to payroll taxes on every dollar of profit. Sale of Company - If you are in the process of selling your company, it may be wise to conclude the transaction before December 31, 2008 to take advantage of lower capital gains rates. Call C&G today to discuss how these strategies might help your business, 262-522-8227. CIRCULAR 230 DISCLAIMER - To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Thu, 20 Nov 2008 16:35:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19928&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19928&mname=Article President-elect Barack Obama has pledged to cut taxes for the middle class, increase taxes on higher-income taxpayers, and lower corporate tax rates. Certainly, Obama’s proposals make tax planning for 2008 and 2009 challenging because of the uncertainty of which tax changes will actually pass into law and what the effective date of those changes will be. History indicates that major tax legislation passed in the year following a presidential election is often retroactive to January 1! Consult C&G when considering the implementation of tax strategies, some of which this newsletter addresses, before the end of 2008. INDIVIDUAL PROPOSALS Tax Rates- Obama promised that families making less than $250,000 would not see their taxes increase. Obama may not change the lower income tax rates, but he proposes to increase the top rates (currently at 33% and 35%) to 36% and 39.6%. Obama also proposes to eliminate all income taxes for senior citizens making less than $50,000 per year. Capital Gain and Dividend Tax Rates- The favorable maximum 15% tax rate on long-term capital gains and qualifying dividends will continue, but for those families with income over $250,000, the tax rate may increase to 20% or higher. Payroll Taxes- Obama supports an increase in payroll taxes. For 2009, employees and self-employed individuals will pay FICA taxes on the first $106,800 of earnings, but Obama proposes a 4% FICA surtax on all wages and earnings in excess of $250,000. Alternative Minimum- Tax (AMT) It appears that AMT will not go away, as the current proposal is to continue the increased AMT “patch,” which provides a higher exemption when computing AMT. Retirement- Because many taxpayers have seen their personal wealth decrease (especially in their retirement plans), Obama has proposed to temporarily suspend the provision that individuals over the age of 70½ must take required minimum distributions from their retirement accounts in 2008. Obama is also proposing that up to $10,000 of early distributions could be made in 2008 and 2009 without penalty, although these distributions will still be subject to income taxes. BUSINESS PROPOSALS Tax Rates- Obama endorses lowering the corporate tax rate, as long as certain tax “loopholes” are closed. While Obama has not identified all of these loopholes, limiting the deductibility of executive compensation has been discussed, as well as limiting tax incentives for businesses moving jobs out of the U.S. New Employee Credit For 2009 and 2010- Obama proposes a $3,000 tax credit for each new full-time employee added to the workforce by existing businesses. Section 179 Expensing- Obama proposes to extend to 2009 the increased first-year expensing limitation of $250,000 for qualifying fixed asset purchases. ESTATE TAX PROPOSAL Exclusion- For 2008, the exclusion for estate taxes is $2 million, with a scheduled increase to $3.5 million in 2009. Current law repeals the estate tax completely for the year 2010 but reinstates the tax in 2011 with a $1 million exclusion and a top tax rate of 55%. Obama’s plan will set the exclusion at $3.5 million per person with a top tax rate of 45%. Call C&G today to discuss how these possible changes impact your situation, 262-522-8227. CIRCULAR 230 DISCLAIMER - To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Wed, 19 Nov 2008 16:31:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19927&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19927&mname=Article The thought of preparing a budget or projecting profits and losses probably doesn’t fill you with a sense of anticipation. While you may have an informal budget in mind, a formal, well-prepared budget in writing can serve many useful purposes. This type of budget should be included on every business owner’s action list for next year. A formal budget serves as a tool for Implementing your business plan--the who, what, when, and, most importantly, the how much Communicating your business and operating plans to your organization Controlling costs. A system for alerting you when budgets are about to be exceeded is important. Assessing your team members’ performance. Meeting quantitative goals isn’t everything, but you need to be able to hold your people accountable to some objective measurements. The budgeting process is also important. Consider including your team members in the process in order to obtain their input regarding what goals should be and how to achieve these goals. Their involvement in the process increases the likelihood of their commitment to company goals. Wed, 05 Nov 2008 15:25:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19847&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19847&mname=Article Is there a benefit in the recent downturn in the stock market and the resulting decrease in the value of your IRA? Probably not, but the situation increases the attractiveness of converting the depressed value in your traditional IRA to a Roth IRA. As the market rebounds over the next several years, wouldn’t it be fantastic to know that the appreciation in the value of your IRA will be forever tax-free? For 2008 and 2009, there is an income limitation on who qualifies to convert traditional IRAs to Roth IRAs. If modified adjusted gross income, excluding the amount being converted, is less than $100,000, you will be eligible to convert. If eligible, you can convert some or all of your traditional IRAs, and on conversion, any previously untaxed money in the amount converted will be taxed at ordinary income tax rates. The conversion must be completed by December 31. What if you convert now and then find out later your income exceeds the $100,000 threshold? The IRS will allow you to return the money to the traditional IRA without penalty prior to April 15 of the following year. For a more in-depth discussion on conversion considerations, read Should You Convert Your IRA to a Roth IRA? Sat, 25 Oct 2008 15:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19846&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19846&mname=Article It appears that the recent credit crisis is pushing us into a global recession. Many economists feel that this economic downturn could last a year. Visit C&G's 17 starting points to help you begin to assess your current financial condition and rethink your business plan in response to economic challenges. While we understand that each business situation is unique, we hope the starting points will spark further analysis, discussion and decisions. Tax planning is also critical during the remainder of 2008 so that appropriate tax strategies can be implemented. We at C&G know and understand the challenges you face, and we can work with you to navigate these turbulent times. We’ll help you gauge your current situation and create a sound plan in response. Contact us for objective guidance to help you make intelligent financial decisions for your future. Mon, 20 Oct 2008 13:09:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19843&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19843&mname=Article In today’s business environment, we continually hear about regulations, best practices, oversight, accountability, codes of conduct, and establishing good corporate governance. There is a strong case to be made that privately held companies should indeed create a board of directors. Companies that do not have this “outside influence” can put themselves at a competitive disadvantage. It is very important that the owner of the business understand that boards of directors are intrusive, they ask a lot of hard questions and expect honest and forthright answers, and they bring discipline and accountability to the forefront. Benefits of a board of directors include: 1. Providing In-House Experience and Expertise. 2. Encouraging Self-Discipline and Accountability in Management. 3. Providing a Sounding Board to Aid in Evaluating Business Owners’ Ideas. 4. Offering Honest, Objective Opinions on Performance, Strategy, Compensation and Other Business Matters. 5. Assisting in Strategic Planning and Monitoring Implementation. 6. Offering Insight into Key People. 7. Asking Challenging, Penetrating Questions. 8. Giving Confidential and Empathetic Counsel. 9. Aiding Creative Thinking and Decisionmaking. 10. Enhancing Cooperative Relations with Constituents Including Employees, Suppliers, Customers and the Community at Large. 11. Rendering Sound Business Advice Read the article on the need and benefits of having a Board of Directors, written by long-time client and associate of C&G, Walter Winding. Wed, 15 Oct 2008 16:42:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19770&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19770&mname=Article On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was signed into law. The rescue plan is designed to restore liquidity to the financial markets. At the same time, it includes some valuable tax incentives covering a wide spectrum of activities. They are designed to put money back into the pockets of taxpayers during these difficult days. Highlighted below are some of the key incentives and we invite you to discuss them with us in more detail. INDIVIDUAL TAXPAYER PROVISIONS AMT. The rescue package has some good news for individuals who are liable for alternative minimum tax (AMT) The AMT was created nearly 40 years ago as an alternative tax to the regular income tax to ensure that very wealthy individuals pay their fair share of taxes. However, the AMT was not indexed for inflation and it is ensnaring middle-income taxpayers. To prevent this, Congress created an AMT "patch." The 2008 patch is similar to past patches but with some important differences. The 2008 patch raises the AMT exemption amounts to $69,950 for married couples filing jointly and surviving spouses, $46,200 for single taxpayers and heads of household and $34,975 for married couples filing separately. The rescue package also allows taxpayers to take nonrefundable personal credits to reduce their AMT liability. Additionally, and this is a new feature to the patch, the rescue plan abates AMT liability stemming from the exercise of incentive stock options along with interest and penalties on the unpaid amounts. The rescue package also allows individuals, including those who paid their ISO AMT liabilities, to accelerate the refund of the minimum tax credit that has not been used. Homeowners. When a lender forecloses on property, sells the home for less than the borrower's outstanding mortgage and forgives all or part of the excess mortgage debt, the Tax Code treats the cancelled debt as taxable income to the homeowner. The Mortgage Forgiveness Debt Relief Act, enacted in late 2007, excludes from federal tax discharges involving up to $2 million of indebtedness ($1 million for a married taxpayer filing a separate return) secured by a principal residence and incurred in the acquisition, construction or substantial improvement of the residence. The new law extends this treatment from the end of 2009 through 2012. The rescue package also extends the additional standard deduction for real property taxes. Individuals who do not itemize their deductions may take this deduction in 2008 and 2009. This deduction is not an above the line deduction that lowers your adjusted gross income. It is an addition to the standard deduction, and can reduce your taxable income by as much as $500 ($1,000 for those filing joint returns). Child tax credit. The rescue package also enhances the child tax credit. Before the new law, the child tax credit was refundable to the extent of 15 percent of the taxpayer's earned income in excess of approximately $12,050 (reflecting inflation adjustments from the original floor of $10,000). Under the new law, the floor falls to $8,500. This treatment will result in an increase in the amount of the refundable credit for more taxpayers. Additionally, the rescue plan changes the definition of a "qualifying child" with respect to age and joint returns, clarifies the tiebreaker rules and ties the child tax credit to the child dependency exemption. Charity. In 2008 and 2009, an individual age 70 1/2 or older can distribute up to $100,000 of his or her IRA balance to charitable organizations, including churches, without recognizing income and without taking a charitable deduction. This special tax break had expired at the end of 2007. The rescue package also includes some provisions related to donations to charities helping victims in disaster areas. Energy. Rising fuel costs are pinching many people's wallets. If you install qualifying energy conservation property, such as exterior windows and doors, in your home you may be eligible to a tax break. The new law extends a number of energy conservation tax incentives and creates a new tax credit for individuals who purchase a plug-in electrical vehicle. Significant take breaks for "going solar" are also available in connection with home improvements. State and local taxes. The rescue package gives individuals who itemize their deductions the option of deducting state and local income taxes or deducting state and local general sales taxes. This election was available in past years but expired at the end of 2007. The new law makes it retroactive to January 1, 2008, and extends it for 2009. Education. The Tax Code provides many incentives to help individuals with educational expenses. The higher education tuition deduction is one of the most popular. The rescue package extends it but does not make it permanent. Nonetheless, it can be a valuable incentive. As previously, however, the amount of the deduction depends on your adjusted gross income. Teachers. The Tax Code also gives teachers and other education workers a special deduction. Teachers may deduct up to $250 of qualified classroom expenses above-the-line. This special treatment expired at the end of 2007. The rescue package makes it retroactive to January 1, 2008, and extends it through 2009. Disasters. Many individuals across the country are recovering from tornadoes, hurricanes and other natural disasters in 2008. The rescue package targets tax relief for individuals affected by flooding and tornadoes in 10 states and also helps victims of Hurricane Ike in Louisiana and Texas. For the first time, Congress authorized temporary national disaster relief. Broker basis reporting. Starting in 2011, brokers will be required to report to the IRS not only their customers' gross proceeds from the sale of most corporate stocks but also the investor's cost basis in those shares. This will encourage the more accurate computation of capital gains each year. Broker basis reporting is expected to raise $6 billion over 10 years to partially offset the cost of the tax incentives in the rescue package. The reporting requirement takes effect for stocks acquired in 2011, mutual funds acquired in 2012, and other securities acquired in 2013. BUSINESS TAXPAYER PROVISIONS Research Tax Credit. The rescue package extends the research tax credit to amounts paid or incurred in 2008 and 2009. It also increases the alternative simplified research credit to 14 percent starting next year, a tremendous incentive now for smaller firms to finally use the research credit to grow their businesses. Leasehold improvements. Many businesses remodel or otherwise make improvements to their facilities on a regular schedule. Under the new law, qualifying restaurant improvements and leasehold improvements will be eligible for 15-year cost recovery rather than a 39-year period for two more years, through December 31, 2009. Similarly, Congress authorized a 15-year recovery period for depreciation of certain improvements to retail space. This treatment is extended through December 31, 2009. It applies to both owner-occupied businesses and restaurants, as well as leased establishments. Energy conservation. The new law extends a host of energy tax incentives, some targeted to consumers (including businesses) and others to producers and manufacturers. Many of the extensions go beyond the one or two year periods that Congress authorized for non-energy extenders. Most notable are the extension of the special deduction for energy efficient commercial buildings, through December 31, 2013; and the substantial, long-term tax breaks given to businesses that develop or use solar energy. For businesses in urban areas, a $20/month transportation fringe benefit may be set up for employees who bicycle to work. Charitable contributions. The Tax Code gives businesses enhanced deductions for contributions of food to charitable organizations, as well as contributions of books and computer equipment to qualifying schools. The new law extends these tax breaks through December 31, 2009. Additionally, Congress extended the temporary suspension of limitations on charitable contributions in the case of a qualified farmer or rancher contributing food before January 1, 2009. S-corporation shareholders are also eligible for special tax treatment when making charitable contributions of qualifying property. The new law extends, through December 31, 2009, the special rule allowing S-corp shareholders to take into account their pro-rata share of charitable deductions even if such deductions would exceed such shareholder's adjusted basis in his or her S corporation. New Markets Tax Credit. The new law extends the New Markets Tax Credit through December 31, 2009. The New Markets Tax Credit is one of the few incentives in the Tax Code to encourage taxpayers to invest in or make loans to small businesses in economically distressed areas. In today's credit crunch, extension of the New Markets Tax Credit may help small businesses secure financing that otherwise would not be available. Other business extenders. The rescue package also targets a whole host of extended, enhanced and expanded tax breaks to certain specific businesses. If your operations touch upon one of these areas, please contact our offices for further details. These targeted tax breaks includes: l Farming business machinery and equipment treated as five-year property; l Brownfield remediation; l The Code Sec. 199 domestic production activities deduction for qualifying activities in Puerto Rico; l Qualified Zone Academy Bonds; l The Subpart F active financing exception; l Look-through treatment of payments between related controlled foreign corporations (CFCs); l Enhanced expensing for U.S. film and television production; l District of Columbia first-time homebuyer tax credit; l . . . and over ten other targeted measures ranging from tax breaks for mine safety, to special deductions for NASCAR racetracks, to an excise tax exemption for manufacturers of wooden arrows. As with most tax incentives, however, they can be realized only if you take the time and effort to plan for them. All told, the Emergency Economic Stabilization Act of 2008 is one of the largest tax laws in recent years, containing something for almost everyone. Some of these breaks, however, require quick action before the 2008 tax year ends; others call for careful coordination with standard year-end tax strategies; and still others require planning now to maximize the benefits available in 2009 and beyond. We encourage you to call or e-mail our office to discuss in more detail how the new Emergency Economic Stabilization Act of 2008 applies to you and your business To ensure compliance with Treasury Regulations governing written tax advice, please be advised that any tax advice included in this communication, including any attachments, is not intended, and cannot be used, for the purpose of (i) avoiding any federal tax penalty or (ii) promoting, marketing or recommending any transaction or matter to another person. Fri, 10 Oct 2008 13:55:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19463&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19463&mname=Article On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was signed into law. While the headline-maker relates to the bail-out of the financial markets, over 100 tax provisions are included. Many of these provisions simply extend expiring tax laws. Key provisions for individual taxpayers include: Maintaining the increased alternative minimum tax (AMT) exemption Allowing dependent care and education credits to reduce AMT Extending the higher education tuition deduction Extending the $250 deduction for teacher’s expenses Extending the exclusion from income for charitable contributions directly from IRA’s Extending residential energy credits Key provisions for businesses include: Extending the research and development credit Limiting executive compensation for businesses participating in financial bail-out relief. Check back soon for additional, detailed information. Sat, 04 Oct 2008 09:48:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19018&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19018&mname=Article Paul Rodrigues, our Certified Fraud Examiner (CFE), recently participated in a roundtable on fraud facilitated by The Business Journal of Milwaukee, where two other industry experts joined him. Topics discussed included: What is fraud and how big of a problem is it? What types of fraud are prevalent? How do economic conditions impact the frequency of fraud? What is the impact of technology on fraud? How can a company reduce its expose to fraud? Visit our website at www.c-gcpa.com for the full article. Contact Paul if you suspect fraud in your business or would like to learn ways to allay fraud. Join him for a complimentary webinar—Not Worried About Fraud? Learn What is Happening Out There!—on October 29, from 10:00-10:30 am. Call 262-522-8260 to register. Fri, 12 Sep 2008 12:40:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19030&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19030&mname=Article With year-end planning quickly approaching, keep in mind that additional bonus depreciation is back. Section 179 expense limits were also increased for 2008. The Economic Stimulus Act reinstated additional first year 50% bonus depreciation for qualifying new assets placed in service in 2008. The Stimulus Act also increased the Section 179 expense election from $128,000 to $250,000 and increased the overall investment limit from $510,000 to $800,000. Call to learn which assets qualify. Timely tax planning can help maximize these deductions. Wed, 10 Sep 2008 10:49:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19024&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19024&mname=Article Recession, tighter credit, loan covenants, commodity prices, surcharges, business inefficiencies and inadequacies—are these issues that keep you up at night? If so, your company could benefit from an operational review. Operational reviews are designed to improve profitability and pinpoint operational inefficiencies as well as system inadequacies within your organization. CGK’s approach includes: Learning about your organization; how operations function; how problems are addressed, and how operational resources are managed Understanding your business objectives, processes and information systems and how they interface Gathering and evaluating information from management, staff, business processes, procedures and performance measurement perspective Assessing your total operation environment, its capabilities, and comparing all to industry standards Performing a cost and profitability analysis Developing recommendations to improve performance and productivity CGK presents a comprehensive and objective review of your company’s personnel, processes, systems, operations, and strategies to identify areas for improvement and improve your bottom line. We are also available to assist with the implementation of our recommendations. Thu, 04 Sep 2008 10:43:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19022&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19022&mname=Article Data backups have traditionally been performed using two technologies: tape drives and file-based backup software. There are problems with these technologies that have caused alternative technologies to rapidly gain popularity with small and medium businesses. Tape drives have several weaknesses. They require human intervention, usually on a daily basis. The tape media wear out over time - often going unnoticed until attempted restore of data. The drives themselves are susceptible to malfunction due to dust and other environmental issues. Maintaining a library of historical backups is a manual process, often prone to failure. File-based backup software adds additional risks. File-based backups can skip files that are left open or locked open by software running during an attempted backup. Restoring a server from a file-based backup requires installing the operating system, hardware drivers, and backup software first, and only then can actual restoration of file data begin. Image-based backups, combined with disk-based backup appliances, improve on the weaknesses of the tape drive/file-based backup solution. Image-based backup software makes “snapshots” of the data that changes on the drive of the server, allowing a true copy of the entire server (operating system, drivers, and data) to be backed up. Disk-based backup appliances removes the need for manual intervention and changing of tapes. Backups are sent across the network from one or many servers to the backup appliance on an ongoing basis. Using the Internet connection, the appliance can store the images at a remote data center, or the images can periodically be taken off site using a USB-attached hard drive. Restoring a full server to using an image-based backup requires simply booting the server from a CD and pulling the backup image off the hard drive appliance, restoring the machine to whatever moment in time snapshot is desired. Individual file restores are also possible from any of the images stored on the appliance by picking the file in a web-based browser of the images. A disk-based image backup system can even run the backup image temporarily from the appliance itself, allowing the appliance to be act as a “spare server” until hardware repair of the main server is performed. A reliable data backup system is a key component of a disaster recovery plan. It is important to remove as many of the risks of system failure as possible for the data backup system. Image-based backups and disk-based backup appliances help reduce these risks dramatically as well as massively decreasing the recovery costs in the event of a disaster. Fri, 29 Aug 2008 10:40:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=19020&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=19020&mname=Article Positive Pay, a cash management service offered by many banks, is designed to detect and minimize check fraud. The process is relatively simple: a company sends its bank a list of checks issued each day, typically through a file upload process. As checks are presented to the bank for payment, they are matched electronically against the previously submitted lists of transmitted checks. The check number, account number and dollar amount of each check must match exactly. If a check is presented that does not match, it becomes an exception item. The bank then typically sends a fax or an image of the exception item to the company. The company reviews the image and instructs the bank to pay or return the check. Banks may or may not charge a fee to the company for the Positive Pay service. C&G Consulting helps companies generate the Positive Pay files to meet their bank requirements. Many companies do not consider the need for Positive Pay until they are victims of check fraud, a major financial crime resulting in billions of losses annually. When used together with a highly secure check form, Positive Pay can dramatically cut fraud losses, assuming there is proper segregation of duties and no collusion. Positive Pay is a particularly strong antidote against stolen or forged check stock. We recommend that all our customers strongly consider the costs and benefits of Positive Pay. For more details, contact Rick Sovitzky (rsovitzky@c-gconsulting.com). Wed, 20 Aug 2008 11:31:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11992&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11992&mname=Article Have you, as the owner of a company, been limited in the ability to defer the maximum amount of 401(k) contributions into your own account? Are you not able to take advantage of deferring up to $15,500 (or $20,500 if you are over 50) of your wage into the 401k plan? If you are limited, blame something called the “top-heavy” rules. Basically, these rules penalize the top group – typically the owners – if the employee group does not defer a high enough percentage of wages into their 401(k) plans. With certain changes to the design of your retirement plan, these limitations can be avoided. Contact Pat Wirth (pwirth@c-gcpa.com) for more details. Thu, 17 Jul 2008 11:30:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11991&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11991&mname=Article As computing power continues to double every 18 months on average, new technologies with far-reaching impact on how servers and networks are designed are now available. Once solely available for the largest data centers of large enterprise businesses, server virtualization for Microsoft-based server networks has now reached small and midsized businesses. Today, server virtualization is fast becoming a key requirement for every server. Server virtualization is an important step toward improving overall IT efficiency. It’s the return of a technology from mainframe computing, now applied to the world of Microsoft-based servers. In its simplest form, server virtualization reduces the complexity of disparate server hardware—instead allowing multiple copies of Windows Server operating systems to run on one piece of computer hardware. The network and its users "see" multiple servers, but physically one server machine runs all the operating systems together. Server virtualization helps businesses: Consolidate multiple older servers onto newer server hardware to reduce risk of downtime due to old server hardware failures Gain failover coverage of entire servers to minimize downtime Save money: virtualization software is free for stand-alone servers Tue, 01 Jul 2008 11:20:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11990&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11990&mname=Article We strongly recommend that those companies who have an outside Board of Directors form an audit committee as a subset of that Board. If your company does not have an outside board of directors you can still benefit from the process that an audit committee uses. Why form an audit committee? • An audit committee can be instrumental in improving a company’s financial reporting. • An audit committee can improve the independence of the company’s auditors, provide assurance that the auditors’ services are used effectively, as well as maintain an open channel for communications from the auditors. • An audit committee can initiate changes in a company’s internal control systems. • An audit committee helps the larger board meet its fiduciary responsibility to the shareholders. Who should be on the audit committee? Members of the audit committee should be composed of directors who are not part of company management. What are the responsibilities of the audit committee? • Be involved in the selection of the external auditor. • Review the overall audit plan. • Review the annual financial statements. • Review the results of the audit. • Review the audit firm’s required communications with the audit committee and work with management to implement changes. • Report to the full board. The benefits of an effective audit committee can be realized by privately held companies and non-profit groups just as they have been at large, publicly held organizations. If you have questions about audit committees, contact us for resources. Sun, 15 Jun 2008 12:57:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11917&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11917&mname=Article We assist customers with addressing the following basic security issues on a regular basis. Please call us today at 262-522-8226 for more information. Get Patched Run all security updates from Microsoft's windowsupdate.com web site. Get a Good Firewall A low-end firewall is simply a "traffic cop" but a high quality firewall is no longer cost-prohibitive (starting at $350). Check Your Antivirus Verify that the network-based antivirus software is protecting your servers and computers. Have a Password Policy Changing passwords regularly reduces the risk of passwords being used by unauthorized users. Use a Spam Filtering Service Provider Block viruses and spam email before they are downloaded to your network. Thu, 05 Jun 2008 11:15:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11915&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11915&mname=Article The Small Business Administration (SBA) considers a change in ownership to be a “new” business because it will result in new, unproven ownership/management and increased debt unrelated to business operations. A lender’s loan documentation must include: • A business valuation (not to include any real estate) by the lender or an independent third party hired by the lender with proven experience in business valuation. The valuation must be based on a generally accepted valuation method used for the industry in which the business operates. • The purpose of the independent valuation is to ensure that the buyer is not overpaying for the business which would result in overburdening the business with new debt that cannot be supported. Chortek & Gottschalk has credentialed CVAs (Certified Valuation Analysts by the National Association of Certified Valuation Analysts) on staff to address your business valuation needs. A valuation engagement includes the following fundamental analysis: • The nature of the business and the history of the enterprise • The economic outlook in general and the condition and outlook of the specific industry in particular • The book value of the interest to be valued and the financial condition of the business • The earning capacity of the enterprise • The dividend paying capacity of the enterprise • Whether or not the enterprise has goodwill or other intangible value • Sales of interests and the size of the block of interests to be valued • The market price of interests of enterprises engaged in the same or a similar line of business having interests actively traded in a free and open market • and all other information deemed to be relevant. To discuss how our services will fit your business valuation needs, please contact Pat Wirth, CPA, CVA or Michael Radtke, CPA, CVA at 262-522-8227. Thu, 29 May 2008 10:58:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11914&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11914&mname=Article CGK is pleased to announce the addition of Terry Wacker, who will lead CGK's manufacturing, logistics and engineering consulting business. Manufacturers are facing tough challenges; with increased competition here and overseas, quality issues, etc., companies must remain competitive, control costs, become more efficient and innovative. Terry assists clients with quality improvement efforts, cost reduction, improving manufacturing efficiencies, outsourcing, and engineering projects. Terry has more than 35 years of manufacturing experience and a successful track record with international procurement, ISO 9000, TS 16949, quality control, lean manufacturing, CNC machining, stamping, injection molding and estimating. Previously, Terry was the VP of Engineering and VP of Sales and Marketing of a large, privately held manufacturing company where he was responsible for domestic and international sales, production and outsourcing. In that position, Terry successfully grew the company an average of 26 percent per year over a ten-year period. In addition, Terry diversified the customer base from five customers to 27, thus reducing customer concentration levels while simultaneously increasing sales to all current customers. Should you have any manufacturing issues to discuss, or if you are interested in a general review of your manufacturing operations, please contact Terry at twacker@cgkib.com or 262-522-8223. Thu, 15 May 2008 10:40:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11912&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11912&mname=Article The most common method of misappropriating funds from the payroll is the overpayment of wages. In companies that use time clocks to collect timekeeping information, payroll fraud is relatively simple. Control is often overlooked. If employees or their accomplices can gain access to payroll records, the records can be fraudulently adjusted. Commissions - There are two ways employees on commission can fraudulently increase their pay: (1) falsify the amount of sales made, or (2) increase their rate of commission. Review Payroll Information to Detect Fraud Reviewing payroll information regularly is one way to detect fraud. Start by taking these steps: Supervise the beginning and end of shifts to ensure that timecards are not mishandled. Summarize payroll activity by specific criteria for review. Identify changes to payroll or employee files. Compare timecard and payroll rates for possible discrepancies. Prepare check amount reports for amounts over a certain limit. Check proper supervisory authorization on payroll disbursements. The above discussion does not cover other sophisticated methods such as using ghost/phantom employees and ways to discover these schemes. Please contact Paul Rodrigues, CPA, MST, CFE at our firm regarding these important issues. Paul, a Certified Fraud Examiner, heads our Fraud & Litigation division. Fri, 25 Apr 2008 15:55:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11899&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11899&mname=Article C&G offers a turnkey budgeting service. One component of the service features Sage Active Planner software to streamline your budgeting process. Businesses benefit from Sage Active Planner because it creates a structured approach to a process that is often very unstructured. Instead of emailing around static spreadsheets that lack security and central control, Sage Active Planner provides the 'glue' to securely distribute and pull together all relevant data. Sage Active Planner connects to accounting, sales, forecasting, and other software to build and distribute plans, facilitate electronic approvals, and write-back financial budgets into existing accounting applications. Detailed, live queries can be designed to create 'ground-up' plans based on existing data combined with various assumptions and scenarios. C&G will help you set up Sage Active Planner for quick deployment and a prompt payback, saving time and improving your budgeting process. Call C&G today for more details or for a personalized demonstration. Tue, 22 Apr 2008 15:53:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11898&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11898&mname=Article In the age of ever-increasing reliance on information, there are serious risks to running a business without a comprehensive technology use policy. Employees may sue the business if they are offended by inappropriate Internet use by other employees. Customers or suppliers may sue if their sensitive data is disclosed. A technology policy must be thorough and enforceable. Technology changes quickly and laws vary widely by state. C&G Consulting has teamed up with a major local law firm to provide a template that takes into account Wisconsin law and provides a framework for a comprehensive business technology policy. The template is complete with a memo which can be distributed to employees, informing them why the company has developed the policy and requiring each employee to sign off that they will adhere to the policy. C&G Consulting will help you implement the policy and plan the enforcement tools. The policy template will be fine-tuned to express the desire of your business management team. Enforcement tools will be planned including web site content filtering, Internet application blocking (e.g. Instant Messaging or streaming video), and technology usage monitoring. A typical turnkey engagement ranges from $2,000 to $4,000, relatively minor compared to the cost of potential litigation resulting from a nonexistent, loose or poorly enforced technology policy. Mitigate your risks by contacting C&G today. Tue, 15 Apr 2008 15:51:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11897&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11897&mname=Article More and more business owners are taking advantage of a financial tool known as a recapitalization or “recap,” for short. Could a recap work for you? One of the advantages of a recap is that it allows the owner to take a sizeable chunk of money off the table at today’s low capital gains rate and still take advantage of the continued growth of the company into the future. A recapitalization is basically a partial sale of a company, whether it is a minority or majority stake. A large number of private equity funds are currently looking for companies to invest in—so much so that there are now funds that specialize by industry, by minority or majority (control) stakes, as well as numerous other investment subsets. One of the advantages of a recap is that it allows the owner to take a sizeable chunk of money off the table at today’s low capital gains rate and still take advantage of the continued growth of the company into the future. This is especially true of companies or owners that view today as too soon to sell, but who also realize that having 98 percent of one’s net worth in a single asset does not always make good investment sense, as retirement is on the short-term horizon. A recap allows the owner to continue to run his or her business, receive a salary and benefits, and capture the additional equity growth the company can obtain. Outside investors bring a depth of experience and work with the owner to better position the company for its eventual sale sometime in the future. If you are interested in discussing whether a recapitalization might be the right opportunity for you, please contact either Tom Kintis (tkintis@cgkib.com) or Tony Alongi (aalongi@cgkib.com) at 262-522-8220. Tue, 08 Apr 2008 09:12:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11879&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11879&mname=Article With the tightening credit market and downturn in many industries, more businesses need a financial budget to serve as a map, a tool to gauge the financial performance of their companies year to year, month to month, and day to day. C&G can help you build a useful financial budget by working with your team to identify the building blocks and drivers of your budget, create appropriate variations of your budget based on assumptions, and design appropriate budget versus actual reports for measurement. Our software team can implement budget automation software to streamline the input and creation of your budget with automatic email notifications, approvals and more. Call us today to arrive at your destination faster. Thu, 03 Apr 2008 13:39:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11878&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11878&mname=Article According to the Association of Certified Fraud Examiners, the most common explanation for criminal activity, in general, and internal fraud, in particular, is the accused's attempt to achieve equity. Studies have shown that counter-productive employee behavior, like stealing, is motivated primarily by job dissatisfaction. Employees feel that "striking back" is important to their self-esteem. ("I deserve more!") When managers are faced with disgruntled employees, they can modify these emotional circumstances, not just with "image" work, but with adequate compensation and by recognizing workers' accomplishments. Incentives programs and task-related bonuses follow this principle, assuming that employees who feel challenged and rewarded by their jobs will produce more work at a higher quality and are less likely to violate the law. Many companies have learned that it is best to spell out specific unacceptable conduct. If the type of conduct that is considered unacceptable is not accurately detailed, there might be legal problems in discharging a dishonest employee. Check with your counsel regarding any legal considerations with respect to a fraud policy. One of the most important legal considerations is to ensure everyone and every allegation is handled in a uniform manner. Please feel free to contact us regarding these important issues. Wed, 02 Apr 2008 12:58:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11877&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11877&mname=Article Chortek & Gottschalk LLP has over 20 years of experience in performing employee benefit plan audits. Demonstrating our commitment to the highest quality audits, C&G recently joined the AICPA Employee Benefit Plan Audit Quality Center, a national community of CPA firms that promotes employee benefit plan audit quality and is designed to raise awareness of the importance of ERISA audits. Membership in the Center requires that we design and maintain our quality control systems to meet the Center’s standards. Our team of employee benefit plan auditors stays current in the highly technical practice area by attending continuing education classes specifically for employee benefit plans. Tue, 01 Apr 2008 12:53:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11876&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11876&mname=Article Microsoft's latest desktop operating system, Windows Vista, has been among the slowest to be adopted by business users. Many IT experts (including C&G Consulting) and businesses have been waiting for the release of "Service Pack 1" before considering business use of the software. As with all technology investments, the decision to implement or not to implement Vista should be made for business reasons. CNET reports that US Businesses are beginning to warm to Vista, with nearly half of IT managers reporting that they're using or evaluating Windows Vista: http://www.news.com/Poll-Businesses-in-U.S.-warm-to-Vista/2100-1016_3-6226572.html?tag=topicIndex Since Windows Vista is a desktop operating system, the chief questions to be answered from a business perspective before deciding to implement it at your business are: Does Windows Vista run all of my business software? Is there a return on investment for upgrading existing computers to Windows Vista, or should only newly purchased PCs be ordered with Windows Vista? What should the training budget be to make sure users are comfortable performing their work using Vista? Will your organization benefit from upgrading Microsoft Office to the 2007 version at the same time? The answers to these questions are unique to your business. Several technical factors outside your business must also be considered. Microsoft is readying a new version of Windows called "Windows 7". It is currently on schedule for release in 2009. Rather than facing the same upgrade questions for the desktop operating system within 18 months, some organizations are planning on skipping the Windows Vista platform to implement Windows 7. Their logic is that business software compatibility for Vista will likely mature by the release date of Windows 7, and since Windows 7 is an evolution of Vista, business software compatibility will be less of an issue at that time. Microsoft is actually enabling businesses to choose to skip Vista by continuing to sell Windows XP Professional, and has extended the deadline for its discontinuance several times in response to pressure from business customers. All these variables make the Vista upgrade decision highly subjective to your business. Attend our webinar on Wednesday March 12th (email to register) to see Windows Vista for yourself or contact Michael Senkbeil (msenkbeil@c-gconsulting.com) at 262-522-8248 if you would like to discuss what Vista strategy your business should take. Thu, 28 Feb 2008 09:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11872&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11872&mname=Article The Economic Stimulus Act of 2008 package was signed into law on February 13, 2008. The Act provides benefits for individual taxpayers through rebate checks and significant incentives for businesses to invest in industrial and business equipment purchases. The following is a summary of the Stimulus Act's tax provisions. Boosted Sec. 179 expensing. For tax years beginning in 2008, the Stimulus Act will increase the $128,000 expensing limit to $250,000 and boosts the overall investment limit from $510,000 to $800,000. Under current law, taxpayers can expense up to $128,000 for 2008 (as indexed for inflation). This annual expensing limit is reduced (but not below zero) by the amount by which the cost of qualifying property placed in service during 2008 exceeds $510,000 (as indexed for inflation). The expensing rules are eased for qualifying empowerment zone property, renewal property, and GO Zone property. The amount of the expensing deduction is limited to the amount of taxable income from any of the taxpayer's active trades or businesses. Bonus first-year depreciation. Bonus first year depreciation was first allowed following the terrorist attacks of 2001 but under current law generally isn't available for property acquired after 2004 (there are some exceptions, such as for qualified GO Zone property generally placed in service before 2008). The Stimulus Act generally permits a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property acquired and placed in service after Dec. 31, 2007, and before Jan. 1, 2009. 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mso-pattern: auto } .xl329473 { PADDING-RIGHT: 1px; PADDING-LEFT: 1px; FONT-WEIGHT: 400; FONT-SIZE: 10pt; VERTICAL-ALIGN: bottom; COLOR: windowtext; PADDING-TOP: 1px; FONT-STYLE: normal; FONT-FAMILY: Arial; WHITE-SPACE: nowrap; TEXT-DECORATION: none; mso-ignore: padding; mso-generic-font-family: auto; mso-font-charset: 0; mso-number-format: "_("$"* #,##0_);_("$"* (#,##0);_("$"* "-"??_);_(@_)"; mso-background-source: auto; mso-pattern: auto } Fixed Asset Cost Type of Depreciation Depreciation Machine #1 $ 250,000 Section 179 Maximum 250,000 Machine #2 $ 250,000 Bonus Depreciation 125,000 Normal 1st year on balance * 17,863 Total Depreciation in 2008 392,863 Percent expensed in 2008 79% * 250,000 - 125,000 (Bonus) = 125,000 x 14.29% (7-year asset) The otherwise applicable “luxury auto” cap on first year depreciation will be increased by $8,000 to $11,060 for vehicles that qualify. The types of property eligible for bonus depreciation will be the same as those eligible under earlier bonus depreciation packages: (1) tangible property with a recovery period not exceeding 20 years; (2) purchased computer software; (3) water utility property; and (4) qualified leasehold improvement property. Bonus depreciation will be allowed for alternative minimum tax (AMT) as well as for regular tax purposes. Please note that only new property will qualify – used property will not qualify. Taxpayer Rebate. An eligible individual will receive a basic credit equal to the greater of: (1) his/her net income tax liability up to a maximum of $600 ($1,200 for a joint return); or (2) $300 ($600 for a joint return) if either (a) the taxpayer's qualifying income is at least $3,000; or (b) his/her net income tax liability is at least $1 and gross income is greater than the sum of the applicable basic standard deduction amount and one personal exemption (two personal exemptions for a joint return). Qualifying income is earned income, veterans' disability payments (including payments to survivors of disabled veterans), and Social Security benefits. There will be an additional $300 per dependent child under the age of 17. The amount of the rebate (both the basic and the child's amount) phases out at a rate of 5% of adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). Contact Scott Henkel ( shenkel@c-gcpa.com ) for more details. Mon, 25 Feb 2008 09:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11870&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11870&mname=Article FOR IMMEDIATE RELEASE! CPA and Business Advisory Firm Chortek & Gottschalk Announces New Principal Waukesha, WI (January 16, 2008) – Chortek & Gottschalk LLP (C&G), a certified public accounting and business advisory firm, announces that Paul A. Rodrigues has joined the firm as a Principal. Rodrigues, a licensed CPA with a Masters Degree in Taxation, brings his 20 years of experience in construction, real estate, litigation and forensic accounting to Chortek & Gottschalk. Additionally, he is working to acquire his certification as a Fraud Examiner. Prior to joining the firm, Rodrigues was the National Tax Director for Jefferson Wells International, where he established offices across the United States to service Fortune 1000 companies. His years of public accounting experience include tenure with several regional and specialty certified public accounting firms where he focused on the construction market. Rodrigues earned his undergraduate degree from UW-Madison and his Masters degree in tax from UW-Milwaukee. ABOUT CHORTEK & GOTTSCHALK LLP Headquartered in Waukesha, Chortek & Gottschalk LLP offers audit and accounting services complemented by tax compilation and planning, consulting, IT and merger and acquisition services. The firm is recognized for its emphasis on helping Southeast Wisconsin closely-held companies achieve financial success by focusing on all levels and types of profit enhancement, asset protection and business planning. For more information contact: Rick Sovitzky, Partner Chortek & Gottschalk, LLP (262) 522-8251 rsovitzky@c-gcpa.com www.c-gcpa.com Wed, 02 Jan 2008 09:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11812&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11812&mname=Article Noffke Tree Farms of Mequon, a firm client for many years, was the drop-off point for 10 area Christmas tree growers donating 200 Wisconsin-grown trees to the Trees for Troops program. A large FedEx truck piled high with it’s green aromatic load headed to its destination in Fort Knox, Kentucky, home of Army Recruiting Command. Kathy Gross, whose parents started Noffke Tree Farms in 1952, volunteered for the program through the Christmas Tree Growers Association. The program, which began in 2005 with 4300 trees delivered to military families estimate that 17,000 trees will be sent to service members and their families in the US and overseas this year. The trees last year came from more than 650 donors in 27 states with FedEx providing the shipping and logistics. Master Sgt. Pat LaLonde, of the Wisconsin National Guard 128th Air Refueling Wing, remembers how colorless the desert can be having served in Asia. “There’s no green over there, so having a fresh Christmas tree means everything. It’s like having a little piece of home,” LaLonde said. Leonard Noffke, who served in the Wisconsin National Guard in the 1950s, says, “It’s the least we can do. They do so much for us.” Noffke Tree Farms attached notes to each tree, “We hope that this tree brings the spirit of the holidays to you, wherever you are.” Sat, 15 Dec 2007 09:00:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11813&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11813&mname=Article The Federal Community Renewal Tax Relief Act was passed to encourage public-private collaboration to generate economic development in 40 distressed communities around the country. As a result of this Renewal Community designation, Milwaukee will receive regulatory relief and tax breaks to help local businesses provide more jobs and promote community revitalization. Certain Milwaukee business owners can take an annual tax credit of up to $1,500 for each employee who lives and works for the business in a Renewal Community (RC). Employers must verify their business location and employees address as being inside the RC. Chortek & Gottschalk, LLP can help with this verification process. The credit is available through December 31, 2009 and prior year amended returns can be filed to look back and claim this credit for any open years (generally 2004 – 2006). We recently assisted one of our business clients in claiming this tax credit and they were able to file Federal amended tax returns for 2004 – 2006 claiming almost $180,000 of tax credits. Another Federal tax credit that may be available to business owners is the Alternative Fuel Tax Credit. Congress recently enacted legislation providing for a 50 cent per gallon tax credit for companies using propane in forklifts. Although forklifts are normally exempt at the time of purchase from the Federal excise tax on propane, they are still eligible to claim the full 50 cent per gallon credit for business use. This credit could be of significant benefit to a warehouse or manufacturing operation using propane-powered forklifts. For example, a warehouse operating four forklifts running approximately five hours per day would consume approximately 2,000 gallons of propane annually. At a 50 cent per gallon tax credit, this would amount to a $1,000 credit for the taxpayer, which is claimed on the taxpayer’s income tax return for the year. This credit is available after October 1, 2006. Please contact Scott Henkel if you are interested in exploring the opportunity of claiming these tax credits for your business. Sat, 01 Dec 2007 09:15:00 CST http://www.c-gcpa.com/site/Viewer.aspx?iid=11814&mname=Article http://www.c-gcpa.com/site/Viewer.aspx?iid=11814&mname=Article