Wednesday, December 30, 2009

The Best New Year's Resolutions Ever

It is time to make the obligatory New Year’s resolutions. The old, worn-out routine is out. No lose weight, stop smoking, drinking, ad nauseam. This year I have a better list; one I have a chance at keeping. Are you ready? Here we go.

• Smile more.
• Greet everyone with gratitude and a heart of service.
• Listen first, talk second.
• Try to understand from their point of view.
• Work hard when in the office so I can spend more quality time with family when at home.
• Stop and smell the roses, watch the birds, enjoy a green field of grass.
• Hope.
• Hug my kids more than ever.
• Hug my wife as much as ever.
• Tell my parents, “I love you” and “Thank you.”
• Spend quiet time each day.
• Appreciate what I have.
• Look for opportunities to serve.

Pretty good list, isn’t it? Now it is your turn. Tell me what you resolve to do this New Year.

Saturday, December 26, 2009

Each Gives Which Each Has

Before the final brick was laid on the Berlin Wall, the East Germans loaded a dump truck with garbage and other refuse and hauled it onto the West German side and dumped it. The West Germans were wild over this and rallied to load three or more trucks with garbage and take it to the East German side. Fortunately, cooler heads prevailed. Instead, they loaded a truck with blankets, medicine, and food. They attached a note: EACH GIVES WHICH EACH HAS.

The lesson requires review by all of us. When someone does us wrong, we want to retaliate. However, revenge is a caustic emotion and destroys the vessel that holds it. Sending love, kindness, and patience, even if undeserved, will benefit you more than anyone else. The message you send to yourself is that you have plenty of love and kindness to spread around.

Recently, a family member directed significant hate toward my immediate family. Sue and I discussed what we should do. We toyed with sending a return letter with an underlying jab. You see, we fell we are right in our position. Even if we are in the right, does it justify such a response? Eventually Sue and I decided no response was the best approach. I didn’t want to sink to that level or get into a pissing contest.

For Christmas, this family member sent my daughters a Christmas card, excluding Sue and me. Several jabs were taken in the letter to place blame and garner sympathy. Rather than fire back a blistering letter, Sue and I sat down thought it through. I remembered the Berlin Wall story from Zig Ziglar. We realized that if we send anger, hate, revenge, or any other negative emotion we would be condoning the activity and telling our own minds that this is all we have to give. Instead, we sent a beautiful basket of flowers with a note attached that in part read: OUR LOVE FOR YOU IS UNCONDITIONAL. WE LOVE YOU AND ALWAYS WILL. WE WISH YOU PEACE OF MIND, HAPPINESS, AND HEALTH.

I enjoyed the warmest Christmas I’ve had in years. I never knew how powerful the positive emotions can be. Sure, I expected they would be uplifting, but not like this. The message was more powerful to us than to them. Still, I pray they feel every ounce of love we sent. Maybe I am crazy, but I feel if life is worth living, it is worth living well. And living a good life doesn’t come from out there, but from in here.

Merry Christmas everyone. May you all be filled with peace of mind, happiness, love, and contentment.

Wednesday, December 23, 2009

Everything I Need to Know I learned From My Cat

Cats have the life. They sleep when they want, eat when they want, play when they want, and enjoy a sunny day as much as a rainy one.

Humans are the only mammal that sleep eight hours and then pound out an uninterrupted sixteen hour day. Cats sleep in several spurts with a few naps on the long side each day. An early evening nap leads to a short burst of horse-play, followed by a prowl around the house. Mid-morning is a good nap time for my cats. However, they get up early and get their exercise in. My goal is to take a power nap, or at least, a gentle, refreshing nap, once during the day. Hope the boss isn’t watching. If the cats are a guide, I’ll spend less time overall sleeping and have more productive time each day. Infants do it; old people do it; and cats do it. So I am going to do it. Does this mean I’m getting old?

Cats eat when they are hungry and not massive hunks of food either, unless it is a special treat and there is competition. Usually cats eat small amounts at various times of the day. Outdoor cats eat a mouse or a bird when the urge strikes and house cats chomp kitty food when they feel like a snack. The point is they eat pretty much the same thing daily. To follow the cat’s lesson, I’ll eat less more often and focus more on fresh fruits and vegetables. It is healthier and better on the stomach.

Cats jump and play when the urge strikes. They jump and run at the drop of a hat when they are in the mood. They chew human legs and arms when they get spicy. The cat lesson for humans is: Sing when the urge strikes; laugh, smile, jump, hop, or even take a little jog. So what if others think I’m nuts? My wife has known I’m nuts for over two decades, so the secret is out.

So many people whine about the weather. It is either too hot or too cold, windy or calm, wet or dry, humid or not. I’ve noticed cats watch a gentle rain, raging thunderstorm, snow, and sleet with the same calm pleasure. Their blood pressure must be purrrfect as they take whatever weather comes their way and enjoy it all. If a cat can paw at a snowflake, why should I complain about shoveling the snowflake later? The cat doesn’t care about ice, flood, or shoveling. They take it all in and then settle in for a long nap. Just because I have to shovel later doesn’t mean I can’t enjoy this moment first. And I will. If it is good enough for the cat, it is good enough for me.

We can all learn from our mammal friends. They take one day at a time, live life for the moment. That is my goal: to enjoy the moment, live the now. The past is already gone, tomorrow not yet here. All I have is now, this moment, to enjoy and savor. I think I’m going to hop, skip, and sing, followed by a light snack and a nap. Ahhhh! That is too much of a plan. I’ll just sing a silly song and dance around the house until… the wife and kids get home. Then I’ll act civilized. I will. Honest.

Friday, December 18, 2009


Over the holidays we send an organizer to all our clients with last year’s data in the margin to facilitate information gathering for this year. We also include a three page questionnaire.

Before we even sit down with the client we require the questionnaire be filled out. Without a few simple questions answered, we can’t do our job; and if we can’t do our job, we may as well go home.

About 80% of the people come in without the questionnaire filled out. Some grumble when asked to fill it out in the waiting area. I am amazed by this response. Our job is to help you pay the least amount of taxes allowed by law and you don’t want to answer a few questions? My doctor has me fill out a form listing my medical concerns/issues every time I visit. To this day I have never heard someone in the doctor’s office complain about filling out the form. In medicine, they call it: prescription before diagnosis is malpractice. The same applies to accounting/bookkeeping/payroll/tax preparation. If you prepare your own return online, the computer asks so many questions, many people start pulling out their hair. But the computer needs to know how to prepare the return. Live, flesh and blood, tax preparers can focus on your personal tax situation better than a computer, but we still need questions answered. By answering some questions in advance, we can jump to the appropriate action and save you money.

If your tax preparer doesn’t require you to answer some questions, you need a new tax preparer. It is the tax preparer’s job to serve you for the fee you pay them. Without information service is impossible.

When you see your friendly tax pro this year, be prepared to answer questions. Don’t act disgusted. We are doing our job. Don’t tempt us to take a short cut.

Thursday, December 17, 2009


The IRS, in a private ruling, stated scrip rebates donated to charity are deductible.

Charities purchase scrip from retailers (or a clearinghouse) at a discount and sell to members and/or the public at face value. Example: A local church purchases a $100 Wal-mart scrip in the form of a gift card for $98 and resells it for full price, $100, to a parishioner. The church retains the $2.

The private ruling says the IRS will consider the $2 a deductible charitable contribution. The situation addressed in the private ruling involved a charity that gave buyers of scrip the option of receiving a cash discount or letting the charity keep it. Many charities don’t give the option of taking a cash discount and I read the private ruling to mean the deduction is only allowed when the option to take the discount is present.

Donors need acknowledgement from the charity prior to filing if claiming a deduction. Rebates kept by the purchaser are not taxed, as the IRS considers this a tax free price reduction.

Wednesday, December 16, 2009

Tax Update on Home-buyers Credit

The IRS has not updated Form 5405 to carry back the tax credit on a home purchased after November 6th. The rules for the third incarnation of the credit are different than the previous credits and required a complete reworking of Form 5405.

There is now a new $6,500 credit for those that owned a home five of the last eight years. Also, homes purchased after November 6th must not exceed $800,000; there was no ceiling prior to this. A signed closing statement must accompany Form 5405.

Tuesday, December 15, 2009

Golf Cart Tax Credit

This should make golfers smile. Street-legal electric golf carts qualify for a federal income tax credit. The credit has a base rate of $2,500. This is an actual cash reduction in your federal income tax, rather than a deduction. Depending on the battery capacity, the credit can be larger, in some cases, as much as half the cost of the vehicle.

The golf cart manufacturers understand the tax credit and are building golf carts that meet the tax standard. The golf cart can still be used on a golf course, but qualifies for the credit because they are manufactured for highway use primarily.

Friday, December 11, 2009

Stupid Laws

All work and no play is unhealthy. Therefore, today I am going to have some fun with stupid laws around the world. The laws listed below come from Facts of Life, a mailer from Bouwer Printing.
  • Men in strapless gowns can be fined in Florida,
  • Running out of gas on Germany's Autobahn is illegal.
  • It is illegal to carry a violin down the street in a paper bag in Salt Lake City, UT.
  • The penalty for jumping off a building in New York is death.
  • It is illegal to sell dolls without a human face in France. Sorry Elmo.
  • It is illegal to ride an ugly horse in Wilbur, Washington.
  • Butter substitutes can not be sold in Wisconsin state prisons.
  • It is illegal to set a mousetrap in California without a hunting licence.
  • It is illegal to go to bed in Massachusetts without first taking a bath.
  • Coasting downhill in neutral is illegal in Rhode Island.
  • Sleeping while you drive is illegal in Tennessee.
  • You are not allowed to dye ducks blue and then sell them in Kentucky.

Smile big and have a good weekend.

Thursday, December 10, 2009

S-Corp Dividend Rules

One of the nicest things S-corporations offers is tax-free dividends. Unlike, partnerships, regular corporations, and sole proprietorships, distribution/dividends paid out of profits above wages are not subject to self-employment or FICA taxes.

Example: XYZ is an S-corporation with two shareholders/owners and five additional employees. XYZ has $150,000 in profit before shareholders/owners are paid. Each shareholder/owner is paid a $50,000 wage, plus a $25,000 distribution/dividend. The wage is handled like any other employee wage. The dividend is only subject to ordinary tax, no FICA or self-employment tax; about a 15% savings, or $7,500 per owner.

When I tax plan with S-corp clients I sometimes have a hard time convincing them to pay a dividend rather than all wages. The IRS says S-corps must pay a reasonable wage before dividends are paid. Reasonable is a wide road and requires careful consideration. Once your S-corp pays you a reasonable wage, it is time for dividend distributions of additional funds. The savings can be significant.

Don’t overpay your taxes because you don’t understand the value of the S-corp. Invest time with your friendly accountant and build a plan for the greatest tax savings. The rules are many when it comes to S-corps and the opportunities are equally great. You don’t need to understand basis, debt basis, flow-through income, etc. to take advantage of the benefits. You need a good accountant that lays out what is available to you and how to accomplish the goal.

I encourage you to take this post to your accountant if you have an S-corp. Allow him/her to explain what I outlined above as it relates to you.

Tuesday, December 8, 2009

Harvesting Losses

The last corn fields around my house were harvested this past week. All the hard work and risk (think weather, corn prices) the farmers took has paid off.

When things go wrong (drought, flood, wind) and the crop is poor, the farmer still harvests what he can. Now that the year in closing, it is time for taxpayers to harvest losses as well.

The stock market has left many people in the hole. The rally that started in March has made some of us feel a little better, but anxious we are overdue for a correction. Locking in losses now for tax purposes can make sense and put you in a position to benefit if the market continues to rally.

If you have mutual funds or ETFs, it is easy to harvest losses with little risk. By selling a growth stock mutual fund and purchasing a different growth fund in the same fund family, you have harvested the first mutual funds loss and the new fund keeps you in the market if things keep going up without additional sales charges.

You can deduct $3,000 of capital loses on your federal tax return every year above and beyond other capital gains; Wisconsin only allows a $500 per year deduction. It still makes sense to harvest loses. If you realize a $20,000 loss from the first mutual fund, you can use that loss to reduce other capital gains now and in future years, plus the additional $3,000 until the loss is used up.

Careful planning can cut your tax burden in this tax increasing environment. Don’t waste the opportunity.

Monday, December 7, 2009

Use Drugs and Drive

I watch little television and when I do it is usually football, the history or learning channels. When I watch football I mute the sound and read, peaking above the pages to see how things are going every so often. As I write this, the Giants are edging the Cowboys and the sound is off.

Outside football season I watch even less TV. In August of this year I watched zero television. None. Not even a second. Not even with the sound off. Normally I enjoy a good science or history program several times a week and will indulge with a movie once or twice a month. Not this August. And it wasn’t intentional. I just noticed in September I hadn’t watched TV in over a month.

Now that the holidays are here I sometimes watch the game with the sound on. If I don’t fall into a pleasant slumber, I quickly bore from all the commercials. Then I start flicking between games as commercials come on. Before long a commercial storm blankets all the games on at the same time. I counter by checking the science and history channels. Then, as it always happens, every channel spends an eon spewing “important messages.”

Last night and part of this afternoon I watched and listened to the game, flicked between games when necessary, and diverted to the science and history channels as desperation set in. I noticed something disturbing about the advertisements: most were selling drugs or gas-guzzling vehicles. Let’s explore the message.

What advertisers want us to do is ask our doctor about everything, as if we are so stupid and need a pill for everything, even things we didn’t know was wrong. If I listened to these ads I would be erect 39 hours a day, would need to see my doctor because after four hours I may have a serious problem, and I should piss better, faster, more often, less often, and probably shake off the last drop with the wrong hand.

I did learn a few things from these ads. First, if a drug is advertised, don’t use it. My reasoning: If a medication really does the job your doctor will prescribe it for you if it is necessary. If the drug requires advertising to push the product, I have serious doubts about the medication. My guess is that it is very expensive and other cheaper medications may perform as well or better. I think they count on you being stupid and sending the bill to your insurance company, but when your employer’s insurance premiums go up, there is less money available to give you a raise or even pay you at all. So, is it that important to piss well with a hard-on?

Next, we tackle the vehicle ads. It seems that the only vehicles offered on TV are big, gas-guzzling trucks and SUVs. Detroit still hasn’t learned their lesson. Eventually, the government will turn us into a third- world nation bailing out idiot corporations. Letting them fail now is easier than bailing them out and watching them fail later anyway.

Once you add all the commercials together you get one simple message: Get a ton of over-priced drugs from your doctor and drive the biggest vehicle you can finance. Folks, if you want quality of life, use as few medications as possible, drive a reasonable vehicle that doesn’t destroy the environment and you financially at the same time.

Am I the only one that feels this way? I encourage you to follow my example and turn off the idiot box before it causes you permanent damage. You know, there are really good books and magazines available for entertainment. I also bet the kids would love extra time with mom and dad. And as long as we are talking mom and dad, when is the last time you had a heart-to-heart talk with yours. What about your siblings, friends, and neighbors? They are good people to know, too.

And remember: Don’t drink and drive.

Thursday, December 3, 2009


Life is easier today with computers, microwave ovens, cell phones, cable TV, etc. Rarely do we think about life without our technological tools, even though many have been around for less than a generation.

If a storm knocks out the electricity we become acutely aware of technology, or lack thereof. Still, with the current out, our cells phones and laptops work until the battery runs down.

When technology is at its best, life is easier, more fulfilling, and pleasant; we can get more work done in less time; we can enjoy entertainment in ways unimagined only a few years ago.

But what happens when technology fails? This became painfully clear to me over the past week. I planned on upgrading QuickBooks in my office over Thanksgiving and the stress followed fast.

I figured by starting over the holiday, I could resolve issues before the next work week. What’s the worst that could happen? Well, let me show you how bad things can get.

First, I ordered QuickBooks Accountant 2010 online and downloaded the program onto each computer. Things went smooth. My office is on a server. It seems QuickBooks 2010 requires Microsoft Framework 3.5 and other update files. My server didn’t update to Framework 3.5. The C drive isn’t large enough for all the added files. My computer guy had to work half the night finding enough room to get the job done. Three days later, I finally got QuickBooks to work on the server.

Technology can save time, but it also can waste so much more time, and I’m not even talking about games and wasted time surfing the web. A tax office today cannot serve their clients without technology. I’m just scared. Soon, I’ll need to install the 2009 tax software. I hope is runs smooth.

Wish me luck.

Wednesday, December 2, 2009

Federal Disaster Area

The Sunday and Monday of Thanksgiving week I testified in Atlanta in a hearing for a client; Thanksgiving rounded out a large part of the remainder of the week; and Monday and Tuesday of this week I attended continuing education classes with most of my staff. Today I am struggling with computer updates stemming from QuickBooks issues. As a result, I am really far behind and my desk shows it.

President Obama has declared my desk a federal disaster area; low interest government loans are available to clear out the detritus.

The only way to attack such a pile-up is to have a game plan. I am big on goal setting and carry a Performance Planner with me wherever I go. I have set out a detailed plan to catch up. First, I have to get QuickBooks functional. That is the fly in the ointment. I don’t know how long it will take. Once QBs is working, I’ll work late and this weekend getting the paper moved.

Wish me well. When I get a serious, determined look to my eyes, look out. I am on a mission. As God is my witness, I will get all projects up to date and make additional progress on projects that need results.

And I smile while I work, too.

Tuesday, December 1, 2009

Getting Smart with Education Credits

The education credits have a new friend, the American Opportunity Credit. Let’s review the old and new education credits.

The Hope credit has been replaced by the American Opportunity credit, but is still available in the Midwest Disaster Area where the credit is double the regular credit. There are several notable differences between the Hope and American Opportunity credit: maximum credit, phase-out, eligibility, qualifying costs, and refundability. Review the list below:
  • Maximum credit: American Opportunity credit (AOC): $2,500 (100% of first $2,000 plus 25% of next $2,000)per student; Hope credit (Midwest Disaster Area only): $3,600 (100% of the first $2,400 plus 50% of the next $2,400) per student; Lifetime Learning Credit (LLC): $2,000 (20% up to $10,000) per return.
  • 2009 modified adjusted gross income phase out range: AOC: $80,000-$90,000 ($160,000-$180,000 MFJ); Hope and LLC: $50,000-$60,000 ($100,000-$120,000 MFJ)
  • Eligibility: AOC: enrolled at least half-time for first 4 years; Hope: Enrolled at least half-time for first 2 years; LLC: Enrolled in any qualifying course.
  • Refundable: AOC: 40%, max: $1,000; Hope and LLC: No.
  • Qualifying Costs: AOC: Tuition, required fees, and course materials; Hope: Tuition, required fees, books, supplies, equipment, plus room and board if at least half-time; LLC: Tuition and required fees only (Midwest Disaster Area includes more).

For most people, the phase out will determine which credit to apply. As always, check with your friendly accountant for your personal tax situation.