Kathleen M Zaffore PC

Certified Public Accountants

January 2008 – LONG LONG LETTER - unabridged

Bah, humbug. Tax season is upon us again. And, in case you haven’t heard, here is the latest. Congress DID act and the President DID sign a bill just before Christmas to temporarily fix the alternative minimum tax crisis (for one year) and along with that legislation, a few other items of interest:

For taxpayer in duress over mortgage (after Jan 1 2007 and before Jan 1 2010), taxpayer may generally exclude from income up to $2M of mortgage debt forgiveness on PRINCIPAL RESIDENCE. Lots of rules and qualifications, of course. Does NOT include second homes, time shares, rental properties, investment properties. If this effects you and you are NOT in actual bankruptcy – CALL US ASAP. Under old (and current) tax law, bankruptcy and insolvency protect many stressed mortgagees “selling short.”

Qualifying mortgage insurance premiums deductible as qualified residence interest for 3 more years

Members of qualified volunteer emergency response organizations get a reduction or rebate of property tax

Surviving spouse may qualify for the $500K home sale exclusion within two years of spouse’s death

BAD NEWS: failure to file partnership return will result in $85 penalty per month per member/partner. This is an increase from $50 per month per partner/member.

REALLY BAD NEWS: the same $85 penalty NOW APPLIES TO S CORPORATIONS for the first time!!! (had to get the revenue someplace for the tax reducers—remember that revenue neutral thing?)

Non-profit organizations: there is a brand new Form 990 this year for organizations with over $25K receipts; and the IRS is working away at finalizing the new “post card” filing for organizations with under $25K receipts. Stay tuned.

“Make Up Your Mind Already” Department—During December, Congress Overcomes IRS (a little)

New rules AGAIN on who may qualify as your dependent – looser than before [if you have anyone in your household who is not a relative and also is NOT REQUIRED to fle a tax return, let us know—that person may now be a tax deductible dependent]

New rules AGAIN on deductibility of health insurance for S corporation shareholders and LLC members – liberalized AND retroactive (good news—you may qualify retroactively for a deduction on your 2006 return; bad news—you will have to file an amended return to take the deduction – we will talk to you if this applies to/benefits you)

AMT can still kick in at $66K income for married filing jointly; $44,350 for singles (we were spared even lower income levels by the temporary fix)

SO…Here We Go Again. Fellow taxpayers…on your mark, get set….

Place the enclosed plastic envelope wherever you process your mail (near a shredder, for example).

As tax info arrives, put documents right into the envelope. Immediately!

Review the checklist on our web site as a reminder of items we need to do your return. Place additional documents in the envelope (ie HUD settlement sheets for refinances and new home purchase, car registration for deductible owner tax, BASIS ON STOCK YOU HAVE SOLD—or good clues so we can find that info like purchase date and number of shares purchased etc.).

If we normally send you a printed personalized, detailed tax organizer, you will find it in this package. If you haven’t received an organizer and want one, call the office or drop us an e-mail. Remember – use the organizer as a guide. It is not necessary to fill it out in detail. Unless you want to. We love it when you do, but…we still need your original documents—not that we don’t trust you or anything…J (photocopies are ok—and faxes and pdfs.).

If we normally send you an interactive organizer via e-mail, we will do that as soon as our software is installed and working properly – may be mid-February this year with Congress’s delay. If you would like to try out the e-organizer, let us know. Those of you who have tried E-Organizer in the past, love it – so any new takers this year?. One caveat: if your tax return is very complex, E-Organizer is NOT the best method.

To get your documents to us (choose one or more):

Mail us the envelope filled with the info you’ve gathered

Make an appointment and bring in your documents

Drop off at the office or in our brown client mailbox at the top of the stone steps

Fax

Scan and e-mail .pdf files

Remember: sooner is better.

HIGH NEED TO KNOW

CPAs are basically nosey. We want to know a lot about you – as we probe around, we might discover important ways to save you money or your bacon. So…something else “new” in your tax package – a questionnaire. Please take 10-15 minutes to go through it and then stick it in your plastic envelope. Your answers will:

a. help you remember things you wanted to ask/tell us

b. remind you of documents we will need to prepare your return

c. help us NOT to overlook income and deduction items critical to your return

d. uncover possible strategies to reduce your taxes now and in the future!

e. all of the above and more. Really.

If you misplace the questionnaire we have mailed to you, LOOK ON THE HOME PAGE DIRECTORY – click on Questionnaire. Print it and get it to us with your tax information.

[…AND WHAT DO WE DO WITH ALL THAT INFORMATION?

Shhhhhhh. Your information is our secret. Everything we know about you stays in our office. That is a high value for us. We do not outsource any of our work to other accountants, bookkeepers or tax preparation services—all practices that are becoming more common these days in an effort to cut costs (but not prices!). Your work is done in our office by one or more of us and we treat every tax return as if it is ours. That is part of why we are pokey, but we really do want you to have the best result possible.

We also DO NOT RELEASE INFORMATION about you to anyone (ie mortgage brokers, attorneys, bankers, collection agencies, financial advisors, ex-spouses, your parents/children/in-laws etc etc) without your WRITTEN authorization. Please help us by e-mailing, faxing, or mailing to us an express authorization to release to a particular agency or person. We cannot accept a “blanket” authorization “kept on file.” Without the prior written approval, your loan or court hearing or meeting with your future in-laws may be delayed. Please know that we do this to protect you and your sensitive information. No authorization=our lips are sealed…]

FULLY ENGAGED

Another “first” – you will find your engagement letter(s) in your tax package this year (for your personal returns and IF APPLICABLE, for your corporations, LLCs, partnerships, trusts, gift and other returns). Under current regulations, we cannot even start your tax return until we have a signed engagement letter. So, please sign and return THE COPY (plain paper) of the engagement letter in your plastic envelope. YOU KEEP the original letter on letterhead for your files. In our constant quest to save forests and quell global warming, next year, we would like to send most of our engagement letters by e-mail. There is a question about that on the questionnaire.

 

IMPORTANT TIDBITS FOR THE OLD AND NEW YEARS

STANDARD MILEAGE RATES

Beginning January 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

50.5 cents per mile for business miles driven; (48.5 cents in 2007)

19 cents per mile driven for medical or moving purposes (20 cents in 2007); and

14 cents per mile driven in service of charitable organizations (14 cents in 2007)

 

TRADITIONAL AND ROTH IRA CONTRIBUTION LIMITS—FUND BY APRIL 15!!

Tax year

Under age 50

Age 50 or older

2006-2007

$4,000

$5,000

2008

$5,000

$6,000

2009-2010

$5,000 indexed

$5,000 indexed plus $1,000

THERE ARE SOME IMPORTANT RESTRICTIONS – GIVE US A CALL BEFORE FUNDING

FROM SOCIAL SECURITY ADMINISTRATION:

Retirement Earnings Test Exempt Amounts:

2007

2008

Under full retirement age
NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit.

$12,960/yr.
($1,080/mo.)

$13,560
($1,130/mo.)

Year individual reaches full retirement age
NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit.

$34,440/yr.
($2,870/mo.)

$36,120/yr.
($3,010/mo.)

There is no limit on earnings beginning the month an individual attains full retirement age. See http://www.socialsecurity.gov/retire2/agereduction.htm

Remember – it is NOT 65 for everyone!!

 

 

Maximum Earnings Taxable:

2007

2008

Social Security (OASDI only)

$97,500

$102,000

 

 

NEWS ON THE ESTATE FRONT:

Estate Planning

2007

2008

Estate Tax Exclusion

$2 million

$2 million

Gift Tax Exclusion

$1 million

$1 million

Annual Gifting – to anyone

$12,000

$12,000

 

Next year, 2009, exclusion is slated to increase to $3.5 million. But watch for changes as we approach 2010—the year that the estate tax is supposedly REPEALED

(fat chance)

 

IRS Notices (or e-file rejections) —Top 8 Reasons For Receiving One

(and nobody really likes hearing from the IRS, including us)

Wife’s name does not match SS number – she never officially changed it with Social Security Administration – go to www.ssa.gov.

Child’s name does not match SS number – please check numbers of all new arrivals to a household (ie step children, new births, adoptions) – go to www.ssa.gov.

Child was “taken” on another return – if you alternate years with a former spouse, please let us know if this is the year you are allowed the deduction for a child who is “shared” for tax purposes. Also – make sure your college student understands that he/she is probably STILL your dependent! [We can sometimes work magic with college students, but … it is harder if they have already done their tax returns incorrectly.]

Failure to report all income from Forms 1099 – that includes interest income, retirement distributions, dividends, rents, royalties, and miscellaneous nonemployee compensation (ie contract work). [Watch out for extreme trading on E-Bay etc. The income is taxable, but if you are doing a lot of trading, you may be eligible to claim it as a business…with business deductions – very good!! Talk to us!]

Failure to report all income from W-2s – don’t forget even those tiny little part time jobs. All income is taxable. Sigh.

Incorrect estimated tax payments – please let us know the exact amounts you paid for your quarterlies (if you do quarterlies) and the date you made the payments.

Penalties and interest statementsif you do not pay your taxes by April 15 (even if your return is extended), the IRS will charge you penalties and interest on outstanding tax balance when you do file. That is why we work so hard to get you an estimate of taxes due before April 15 if you are going to extend.

Failure to report sale of stock option related stock sales even if your company includes your stock option related stock sale on your W-2, you must report the transaction on Schedule D. It is usually a wash with very little taxable impact, but if you don’t report it on Schedule D, the IRS assumes that the whole stock sale is taxable….yikes.

Help us minimize contact with the IRS by providing complete information and then checking your return before filing. We really hate to admit it…but we do make mistakes once in awhile…drat!

 

FOR THE 2008 SEASON

Web Site. We are updating our web site for 2008: www.zaffore.com. Please take a minute to check it out (after mid-January). Good stuff: annotated links to a variety of sites including the IRS, Social Security Administration, the Secretary of State, and a host of business and personal finance sites; articles for small businesses, investments, personal finance. We will be adding new content throughout 2008.

TA DAH! NEW WEB SITE. In addition to www.zaffore.com, we will launch a new web site by summer called: www.boomerwealth.net. It is for all of us boomers AND the people we love. Boomers have always been the “juggle generation” balancing jobs/careers/businesses with family and community involvement. Now we are juggling finances and time (and time IS money) to help our kids, undergird our parents, and find the “extra” we need to sustain and improve our own lives and purposes. WWW.boomerwealth.net will cover issues of personal wealth – acquiring it, maintaining it, growing it, protecting it, using it, and gifting it – to your heirs and to your causes. This will be a subscription site, but good news! Our clients will be able to surf it for free—even if you are not a boomer. Part of the subscription is a weekly note from us, giving you a brief (and hopefully entertaining) update on your financial health. And because we know that boomers are not the only ones who need to pay a tad more attention to finances, the note will go out to all of our clients who have email addresses. Be sure to update us on your address! Here are a few topics we will examine:

Can you buy real estate with your IRA? Including your own house??

If the bank asked for your net worth statement for a loan, could you produce it?

What triggers AMT?

Is there a reason NOT to fill out a FAFSA?

Is a reverse mortgage a good idea for your parents? Or you?

Can you legally deduct expenses on your vacation house?

What does it cost to buy into a continuous care residence for assisted living and beyond (and why)?

Can you use a trust to protect your personal assets from creditors?

Does it make sense to create a dream business to carry you through retirement?

Can a micro business tap into mega deductions?

Can you create a legacy and a business for your children all in the same entity?

Good stuff! We are looking forward to launch and hope that you will enjoy it and be empowered. If you have questions you would like answered or topics covered, let us know.

E-Mail. We check our e-mail often during tax season, so feel free to communicate with us that way (sometimes easier than calling). Our staff e-mail addresses: (the old one on AOL works, too)

Kathy Zaffore, CPA kathyz@zaffore.com

Kim Ruane, CPA kimr@zaffore.com

Kathleen Bell, CPA kathleenb@zaffore.com

Vicki Stevens, Computer Wizard vickis@zaffore.com

Lorie DeBerard, Paraprofessional/Admin lorie@zaffore.com

Shannon Fontana, Office Manager/Admin shannon@zaffore.com

PDF FILES. Your copy of your federal and state tax returns will be returned to you on a CD in a pdf format, just like always. We will include instructions to open the file on your PC—it is easy—just double click on the pdf icon—that is all you have to do. To our knowledge, the pdf will still not open on a Mac computer, but we can e-mail you the file, with your permission, and you can open that file. If you don’t have a computer, let us know. We will run a paper copy for you. If you don’t have Adobe reader software on your computer, let us know and we can help you get it installed. It is free. CDs save trees. That is important.

Payments. When we call to let you know that your tax returns are ready, you can either pick them up or we can mail them to you. Your invoice is included in the package. Prompt payment is appreciated!! We accept cash, checks, credit cards, and compliments (along with payment). We do not accept livestock but might consider jewelry. If your account is more than 30 days overdue, we will rebill you with a finance charge of 1.5% per month and a rebilling fee of $5 per month. Sorry L . Do communicate with us if you are having difficulty paying the bill…we will set up a payment plan for you.

The Official Client Mail Box. It is a real mailbox, painted brown, complete with a red flag. It is located at the top of the stone stairs coming down to the office. Feel free to use the client mailbox to drop off and pick up documents. Please do not leave stuff in the real mailbox on the street – the post lady gets, well, postal.

Directions. Remember -- Pinery Parkway is a circle drive, making a complete loop from Parker Road at south and north ends of The Pinery. Call for a map. Tax season is bad enough. Don’t wander in the dark and the cold. AND PLEASE WATCH FOR DEER ON THE ROAD – WE ARE TALKING *HERDS OF DEER* And I have seen elk over in Pradera, just southwest of the Pinery…yikes.

Shred-O-Rama. For inactive clients (ie those we have not heard from or talked to for AT LEAST 3 YEARS): WE SHRED YOUR DOCUMENTS AFTER 4 YEARS. WE DO NOT CONTACT YOU AHEAD OF TIME. IF YOU ARE NOT RETURNING TO OUR FIRM AND WOULD LIKE TO HAVE YOUR FILES, CALL OR EMAIL IMMEDIATELY. WE CANNOT KEEP FILES INDEFINITELY – THERE ARE JUST NO STORAGE UNITS BIG ENOUGH FOR THAT ;). THANKS FOR YOUR COOPERATION.

Team Gossip:

Kathy Zaffore, CPA, principal, escaped to Kauai, Hawaii in May, with a jaunt to Oahu. Big adventure: snorkeling in the open ocean off Nihau—I would have been gasping at the intense beauty of the coral reef twenty feet below me if I hadn’t had a snorkel connecting me to my element…air. Other adventure: if you are game, ask me about the “clothing optional” beach and the poodle (hint: I opted for clothing and the poodle was, well, au naturel). John and I celebrated our 30th anniversary in September with a long, luxurious journey to Italy – a few days revisiting Rome, a cooking week in Tuscany (better than a spa vacation!!), and a museum-packed week in Florence (John is a saint) [thank you everyone for your patience this fall—I am still not caught up]. Trains = adventure in italia for car-centric Americans. Overall, we had a blast! We are planning a reunion trip in 2009 with our cooking classmates (see www.tuscanwomencook.com for details – if you love to cook, you need to go!)(and talk about a dream business in retirement….wow!)

Kim Ruane, CPA, practice manager, has turned into a scrapbooking tornado, scooping up odds and ends of family photos and memorabilia and whipping them into fun-filled treasures (where do we sign up for her to go through our messy boxes of memories?). Who knew she had such a creative streak? Kim, almost an empty nester (two still in college here in Colorado and one on his own in Chicago – a biochemical researcher – wow!), keeps up with her busy extended family (all over the country) while doing volunteer work at her church, being the life of the party at Bunko, participating in a Bible study group – so, how on earth does she have time to scrapbook??? I think she should become an Organization Coach. As such, I continue to be her toughest “client.” She tries to manage me--a real chore, but she is pretty good at it (read that, even I obey her….a lot of the time).

Kathleen Bell, CPA , accountant extraordinaire, continues to be everyone’s favorite accountant – she faithfully nurtures her happy group of clients. We continue to squeak a few more hours out of Kathleen – good for all of us (except maybe Kathleen…). She is the mom of a high schooler and middle schooler—time does fly by. I mentioned this last year and it remains true: she does not look one day older than when we started working together 15 years ago…maybe there is truth to that rumor about “hard work and clean living.” And maybe it is the stash of M&Ms we know she lives on. She continues to dazzle her family (and lucky us, occasionally) with culinary delights – so creative and fun! But with all she bakes and whips up, how does she stay so slender??? Kathleen and gang stayed close to home this year with one jaunt up to Ouray to soak in the hot springs. To my knowledge, she has not tried to ski again, opting for cocoa by the fire ;).

Vicki Stevens, IT Specialist and Overall Computer Wizard and Bookkeeper and Software Designer and …, not only keeps our systems up and running, with great humor and fun (she has to have a sense of humor to deal with all of us non-techies), but can occasionally be talked into QuickBooks training.   She continues to sell her own software product, AllReports, a nifty add-on for doing state unemployment reports, W-2s and 1099s with QuickBooks and Peachtree (see www.granitesoftware.com for details).  Vicki hops around town with her high schooler’s special needs’ sports teams (this season-basketball), while also overseeing a freshman in college.  In her leisure, she continues to work on the refinishing project in her basement, with her brother’s expert help.  Her basement houses an amazing assortment of her daughters’ pets (the usual suspects -- cats, dogs, guinea pigs etc)  -- including (are you ready for this?) a friendly tarantula that has become a popular visitor to her high schooler’s classroom.   Now, here is the mystery:  Vicki is a neat freak.  She has my deepest admiration—an immaculate house AND a lot of critters.  Read that:  hair control! 

Lorie DeBerard, Paraprofessional and Admin, continues to greet all of our clients with enthusiasm and a real desire to help, but she has also stepped into a new and growing role in the office. With her solid and increasing bookkeeping skills, she works with an ever-expanding list of clients as a paraprofessional, a much needed addition to our range of services. If you need bookkeeping help, we may have a solution for you! You may recall last year that we told you that Lorie’s Navy reservist husband John was called into active duty and was on his way to Iraq. We were all overjoyed to have him return in September, safe and sound. Lorie shoveled a lot of snow out of her rural driveway last winter and truly kept the home fires burning. Both John and Lorie – we applaud you. In her everyday life, Lorie scoots all over Douglas and Elbert Counties, keeping up with the activities of two teenagers and one pre-teen.

Shannon Fontana, Office Manager/Admin, another remarkably well organized (and delightful) person, joined our team early in the summer. Shannon, a recent Southern California transplant, turned in her Los Angeles suburban life to become a rural Parkerite with horses and chickens and manure, oh my. She is a part time accounting student at Metro, a full time wife, mom of two high schoolers, and member of a rambunctious Italian family. She grew up within shouting distance of my neck of the woods in LA (South Bay/Palos Verdes), and graduated from Redondo Union HS. I know we have at least one client who is a Redondo Union HS graduate…I just can’t remember who. Shannon gardens in the summer, brings us eggs and zucchini, and is also somehow finding time to start a scrapbook habit…all time gained by not having to commute in LA traffic for 4 hours everyday! Welcome, Shannon.

 

 

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FOR BUSINESS CLIENTS:

Software Updates: We are currently using Peachtree Complete Accounting 2007 and QuickBooks Pro 2006 and Premier 2007. We have Peachtree Complete Accounting 2008 and will load it early in the year. We also have QuickBooks Premier 2008 and will load it by March. Vicki is recommending to us that we run 2006 and 2008, but not 2007…so that is what we will do. We are QuickBooks Pro Advisors so we do stay current. QuickBooks 2005 will “sunset” this year. If you are running 2005 and do payroll, you will need to update. If you do not run payroll, there is no need to update, but we will not be able to share data with you – you can give it to us, but we will not be able to return it to you electronically.

A brief word on annually paying Intuit or Sage for payroll functionality – we know it is expensive (around $200/year), but if you are running your own payroll (ie without our help or without a payroll administrator company like Paychex) it is worth every penny. Period.

Other payroll issues: the IRS is moving closer to requiring all employers to remit payroll taxes electronically. That means that sooner than later, you will not be able to take the blue and white Form 8109 coupon to the bank with your payroll deposit. Please give us a call if you need help getting set up to remit your taxes electronically. Your bank can help you, too. We will put a link on our web site to get you to the IRS’s electronic filing section, too. Check “links” on www.zaffore.com.

And if payroll is overwhelming you, give us a call. We will help you sort through your options, including the pros/cons of engaging a payroll adminstrator like Paychex or ADP, or a PEO like Administaff.

Year End Payroll Info: If we do your W-2s, we will electronically file all W-3 transmittals to Social Security on your behalf. Throughout 2008, we will also electronically file as many UITRs as we possibly can. The transmittals that come with your payroll packages will provide instructions, but you can always call us with your questions.

********IMPORTANT IMPORTANT IMPORTANT!!!********

Most corporations and partnerships will be filed electronically. PLEASE REMEMBER – there are stiff penalties for the first time this year for late filing S corporations AND penalties for late filing partnerships/LLCs have increased to $85 per partner/member per month. We will need 2007 S corp data in our offices by JUNE 15 to assure timely filing by September 15. We generally do not like to do the corporations separately from the individuals related to them because we can miss opportunities to reduce taxes. That means – if we are doing both your corporation and your individual returns, we need your individual data in the office by June 15 as well. Absolutely. Or you risk penalties if the deadline is missed

If you have a new corporation or LLC, we need to know NOW if you plan to have us do the accounting and tax work. Please send us information about it including tax identification number, names and addresses of shareholders/partners/members, date of incorporation/organization. If we don’t know about it, we cannot extend it. If we do not extend it, you will be penalized for late filing.

FOR EVERYONE:

We will file most 1040 individual tax returns (both state and federal) electronically this year in our continuing effort to save America’s forests.

EMAIL DISCLAIMER. To comply with some very difficult laws, we are forced to write a disclaimer at the end of every email that includes tax information. We apologize for the verbiage, but it is necessary.

Emergency Lists!! Please consider keeping an emergency workers’ list in plain sight. Put on that list:

Emergency phone numbers to reach not only you, but friends, neighbors, relatives.

Names of children and who should be contacted to care for them temporarily in case you are incapacitated (to avoid Social Services showing up)

Names of pets (and where to find them) and who should be contacted in case you are incapacitated (to avoid the Dog Catcher)

Don’t forget to tell your friends, neighbors, relatives that you have used their name as an emergency contact!! (this is pretty important)

Multi-Millionaires in the Making. Do you know your personal financial net worth? Do you want to? That could be the first step to building your wealth. Give us a call. We can help you figure it out, set up tools to track it, and think through how to improve it. And watch for www.boomerwealth.net.

 

We look forward to seeing everyone soon – the sooner the better. Our turn-around is measured in tortoise time by late March. REMEMBER PLEASE – the more complete your information when it arrives in our office, the faster we can get your returns back to you. Find the checklists on www.zaffore.com.

WE APPRECIATE YOU ALL

AND

WISH YOU THE VERY BEST OF EVERYTHING FOR 2008.

… as always, stay in touch with us during the year – as accountants, we are basically nosey and want to know what is going on in your lives—even if there is no tax impact…but there is almost always a tax impact…drat

 

PS – the winner of the Tax Tome Quiz is………

……the suspense is killing us…….

 

L WALKER OF PARKER COLORADO!!!!

Thank you all who participated…it is good to know how many of you

actually read what we send out ;)