(775) 786-6141
The IRS has just announced plans that the 2013 tax season will begin on January 30, 2013 (a Wednesday if you’re wondering). 
This misses the previously set date of January 22, 2013, but given that Congress passed the American Taxpayer Relief Act (ATRA) in 2013 when it should have passed it in 2012, a late start of only eight days is impressive. If we could just get Congress to get things done so quickly.
Starting on January 30, the IRS says more than 120 million households should be able to begin filing returns. Those households include people who are “affected by the late Alternative Minimum Tax (AMT) patch as well as the three major ‘extender’ provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.” For the rest of tax filers unable to file starting January 30, look to late February or into March to be able to submit a return. This group of tax filers includes people who claim the residential energy credits (Form 5695), depreciation and amortization (Form 4562), or general business credits (Form 3800). 
The IRS has posted a list of the forms that won’t be accepted until a later date at IRS.gov. It often happens that those in this tax filing group don’t file until later in the season anyway or they just go ahead and file an extension, so the delay in being able to file may not cause much of a delay at all.
The IRS does remind all of us that it will not process paper returns before the January 30th opening date, so there’s no rush to get that return finished and in the mail in the next couple of weeks. Also, paper filing is not the most efficient way to file. If you want your tax refund sooner you should e-file with the direct deposit option checked.
If you have any questions, please feel free to contact us here at Barnard Vogler & Co.
When I advised my clients to complete their transactions in 2012, it was apparent that the effects of the actions our elected officials were going to take to avoid the “fiscal cliff” could only have a negative effect on taxes. 
At the twelfth hour, Mitch McConnell, Republican Senate Minority Leader bypassed Nevada’s own Harry Reid and reached out to Vice President Joe Biden with whom he had worked with when Biden was in the Senate. They worked out a compromise that was passed in the Senate and the House on January 1.
How does this affect you?
The tax rate for taxpayers with income over $450,000 married and $400,000 single increased from 35% to 39.6%. The tax rate on capital gains and dividends increase from 15% to 20% also applies to this threshold. When combined with the 3.8% healthcare tax, that tax rate on capital gains and dividends becomes 23.8%.
Some of you may be breathing a sigh of relief that the tax rate increase will apply only to those taxpayers. However, the 3.8% healthcare tax on investment income will hit those of you with taxable over $250,000 married and $200,000 single (see my blog in November 2012 regarding the healthcare tax of 3.8%). Also, itemized deductions are phased out at $300,000 for joint filers and $250,000 for singles, effectively raising their taxes.
Interestingly, the bill does not say whether the $400K/$450,000 threshold refers to adjusted gross income (AGI) or taxable income. AGI doesn’t include subtractions for itemized deductions, while taxable income does. With so many phase-outs of itemized deductions for taxpayers in the higher brackets, this may not be of much consequence to most of these affected taxpayers.
The payroll tax holiday reducing payroll taxes and self-employment taxes by 2% is over. 
The tax rate increases from 4.2% to 6.2%. That means for an individual earning the maximum 2013 cap of $113,700 or more, the increase would be $2,274, or nearly $200 per month.
The alternative minimum tax (AMT) still effectively eliminates many tax breaks for the higher income tax brackets. AMT was created in 1969 to ensure that wealthy taxpayers pay at least some minimum amount of federal income tax, regardless of deductions, credits or exemptions. In essence, it is a flat tax with two brackets, 26 percent and 28 percent. Under the new deal, Congress has finally created a permanent inflation “patch” that would allow millions to escape AMT. Without the patch, the AMT would have hit 31 million taxpayers this year, reaching deeply into the middle class.
What the bill did not include:
The bill only addressed the revenue side of the budget question and deferred action on the spending side for two months. Additionally, the agreement does not address any increase in the nation’s debt ceiling.
A strong economy depends upon predictable behavior and decision-making by the government. The competitive environment is unpredictable enough without our government making it more unpredictable. This has been lost on our elected officials much to the consternation of almost everyone: businessmen, employees, bankers, homeowners, and investors. Get ready for the budget and spending standoff two months from now.
Many large companies are determining how they will handle the changes coming in January 2014 with the Affordable Care Act. For a company who employs 50 or more full-time employees that is already offering health care benefits, one option that I am reading about over and over is:
Employers would terminate their current health insurance plan; pay the penalty for each employee, (approx $2,000); and force employees to shop in the state and federal exchanges. While this may seem cheaper, companies need to consider that they will lose their tax deduction for providing health insurance benefits not to mention the consequences on employee morale and recruiting efforts.
Another option that has emerged is to continue to offer health insurance but through a Corporate Exchange instead. According to the Wall Street Journal, both Sears Roebuck and Darden Restaurants (which operates Olive Garden, Red Lobster and other dining establishments) announced in October they had signed on to Aon Hewitt’s Corporate Exchange. Sears has approximately 90,000 employees while Darden has about 45,000 that will be participating in the exchange. Through the Corporate Exchange, not only can an employee pick different insurance coverage, but they can pick different insurance providers. These options are similar to the ones that will be available under the public exchanges, but large companies with more than 100 employees are not eligible to participate in the public exchanges at least until 2017.
Under this option, there is no penalty as the group health plan is still fully compliant with the Affordable Care Act. The employer then decides how much of a subsidy to provide employees to purchase coverage. Ideally, this subsidy provided to employees would be evaluated annually to keep up with the potential increase in cost of coverage. The employee then takes their subsidy and can evaluate various provider options and levels within the exchange and pick the best plan for them. The more exchange participants, the greater the economies of scale. 
This type of exchange will supposedly keep costs for the employers lower because insurers are forced to compete with one another to attract members in the exchange to their plan. Besides the potential cost savings for the employer, employees are happier under exchanges because they can pick the type and level of insurance that they want. A single person in their 20’s can choose a relatively less expensive plan while someone in their 50’s can opt for more coverage.
This is a novel concept that if it works as Aon plans, will sure to be replicated and remain a viable option for employers.
It has been known for quite some time that women make up most of the purchasing decision power in households but their increasing presence in the workforce is becoming nearly as significant. 
According to a recent post by XYZ University, these are a few of their interesting statistics:
Even from only 10 years ago, these are huge changes and these trends do not show any indication of reversing. This impacts today’s businesses in two major areas: employees and customers.
Having more female employees brings new skills as well as challenges to the table. Many studies have shown that women tend to have a management style that is more consensual and inclusive which can be an advantage with today’s increasing social and crowd sourcing business methods. Also with more women working, maternity leave and child care, for example, will become bigger issues that companies must face and deal with. Further with more women in leadership roles, more men will take on more responsibilities at home leaving them less willing to sacrifice family for work.
As more women take on leadership roles and more men take on larger family roles, the change in these gender roles may change who has been the dominant purchasing power of households. Additionally, the upwardly mobile urban single woman may become a significant customer in areas of serious investments such as homes and travel.
A few weeks ago, I, along with the rest of the world, heard that Hostess and their unions could not come to a new personnel agreement and would be going bankrupt. The television news stations all started blasting their sensational headline that Twinkies were going the way of the McDonald’s Arch Deluxe, Crystal Pepsi, and the Delorean and would no longer be made. The news showed clips of people in grocery stores with their carts full of all sorts of Hostess products for fear that they would never be able to enjoy them again. 
The next morning I went to my local convenience store to get a paper and the Hostess stand was empty. They were sold out of Twinkies, Ding Dongs, Wonder Bread, Donettes and Sno Balls!
It makes for a great headline that an iconic product like Twinkies will soon be defunct, but this distorts what will happen after bankruptcy liquidation. As evidenced by the quick sellouts of Twinkies, this is still a product that is very much valued and in demand. I am not aware of all of Hostess’ internal financial struggles, but I’m sure Twinkies can be profitable and that there’s at least a few other companies in the world who believe the same as I do and have the financial clout to do so. During bankruptcy liquidation, the trustee will try to sell all the brands and facilities to get the most value to pay Hostess’ creditors. 
Some person or group will buy the Twinkies brand and recipe and I’m sure they will start producing and selling millions of Twinkies across the United States. The shoppers who filled their carts will have alleviated their short term cravings, but for the rest of us, rest assured. Twinkies will be populating the grocery shelves again in no time!
With so much of your retirement funds invested in the market these days, the thought of retirement is a risky proposition. I personally don’t have plans to retire anytime soon; however, listening to Bill Hampel, an economist for the Credit Union National Association,
speak at the AICPA National Conference on Credit Unions, one take away for me was “how much shock are you willing to take to your portfolio?”. This is something you need to determine up front before you retire. Based on historical data, this can be as much as a 50% hit.
So as you work with your financial planner to determine that timeline when you can retire, keep in mind that the market is volatile. Why do you think that so many people have continually delayed their retirement date? I find it interesting that when you ask someone that is heading towards a “normal” retirement age when they plan to retire, the answer is typically five years.
What is so magical about this FIVE year number? Is it a safe number? Does it appear to keep you vested in the company and not perceived as a short timer? Is it real? Or will it keep getting deferred?
The winners in this downturn of the economy have been the ones that have had the ability to defer their retirement. Not so lucky have been the ones that retired and then saw their nest egg and home values plummet. Until we see a resurgence of the economy we will probably continue to see the retirement age generation pushing out that date FIVE more years.
Many times we have been contacted by clients and potential clients inquiring about our firm performing an audit for them, and more importantly, what will it cost? 
Some of the first questions we ask are “who is asking for it” and “do you think you really need an audit”?
The answer depends on who will be using the financial statements and the needs of the creditors, investors or agencies. The major difference in the three types of financial statements is the assurance level. In all three levels, the reporting entity is primarily responsible for the financial statements.
The most basic level of service with respect to financial statements is the compiled financial statements. The CPA makes certain that the data received from the client are in the correct format and free of clerical errors. A report on the compiled financial statements is issued that states no assurance is expressed as to whether changes are necessary to be in conformity with generally accepted accounting principles.
The next level is the reviewed financial statements. 
In addition to evaluation of the format presentation of the data, the CPA is required to make inquiries of management, apply analytical procedures and obtain representations from management. The additional requirements allow the CPA to express limited assurance that he is not aware of any material modifications that should be made to the financial statements to be in conformity with generally accepted accounting principles.
The highest level of assurance is expressed on audited financial statements. Procedures in an audit include confirmation with outside parties, observation of inventories, and testing of selected transactions by examining supporting documents. Even though an audit is the CPA’s highest level of assurance that financial statements are free from material errors and fraud, it does not provide a guarantee of absolute assurance.
The costs involved for preparation of financial statement increases as the expression of assurance level on them increases. Governmental agencies may require from a small entity, say under $100,000 net worth, reviewed financial statements to apply for certain licenses. 
The cost for such a financial statement seems disproportionate as to the value of the entity. Make sure you know which one of the financial statements you really need because the cost difference can be astounding.
Referencing a recent article in Bloomberg.com, President Barack Obama and House Speaker John Boehner have a big job ahead of them in the coming weeks. 
They hope to come together in act of solidarity to work out an agreement to avert the so-called fiscal cliff which happens at the end of this year if no deal is struck.
Obama, claiming a mandate from voters after his Nov. 6 re- election, has called for an immediate tax-cut extension for people earning less than $250,000 and insisted that top earners pay more. Boehner has cited public support for the re- elected House Republican majority and said tax rates must not go up. While both said they were willing to compromise and act quickly, Obama and Boehner have offered no public concessions. Their differences may take weeks to reconcile.
Obama and Boehner will meet at the White House in the next few days, along with House Democratic Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell.
If Congress does not act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January. They stem from previous decisions by Congress, including from the deal last year to raise the federal debt ceiling and the 2010 extension of tax cuts.
In recent remarks, Obama and Boehner have left open the possibility of agreement on preserving current tax rates while limiting tax breaks for top earners to raise revenue. Such an approach, should it come to fruition, would let Obama claim the higher tax payments he seeks from the wealthy and allow Boehner to avoid the higher rates he calls unacceptable.
Since his re-election, Obama has repeated the outline he laid out during his re- election campaign for a “balanced” approach to cutting the deficit that would include higher taxes on the wealthiest and some spending cuts. 
Boehner has also outlined the Republican approach to the fiscal cliff: avoid tax rate increases and spending cuts while beginning a process to overhaul entitlement spending and the tax code.
The president wants to let George W. Bush-era tax cuts lapse on income of individuals above $200,000 and of married couples above $250,000. That would push the top tax rate to 39.6 percent from 35 percent. Boehner has emphasized opposition to higher tax rates, rather than talking about higher taxes or higher revenue. He has endorsed the idea of increasing government revenue through an overhaul of the tax code without saying explicitly whether he would support a tax increase or the elimination of tax breaks without a corresponding rate cut.
Obama’s plan to cap tax breaks, which has gotten no traction in Congress, would raise about $584 billion over a decade, compared with the more than $900 billion that would be generated from higher rates on income, capital gains, dividends and estates.
Some Democrats may however insist on higher tax rates. Representative Sander Levin, the top Democrat on the House Ways and Means Committee, has said talk of limits on tax breaks was little more than “glittering generalities” that doesn’t reflect that the biggest breaks, including the mortgage interest deduction, are tax policies and not loopholes. Republicans have said that any additional tax revenue should come through a restructured tax code and from so-called dynamic scoring that relies on revenue from macroeconomic changes generated by the tax overhaul itself.
When pressed by reporters recently, Boehner reiterated his previous statements and said he wanted to preserve flexibility for negotiations with Obama on a deal to avert the fiscal cliff and reduce the federal budget deficit.
The blueprint for a deal to avoid a fiscal nightmare early next year may be found in the failed debt negotiations between Obama and Boehner in mid-2011. The contours of that plan included revenue increases, spending cuts and changes to lower the long-term costs of entitlement programs. Before the talks collapsed, Boehner was willing to accept $800 billion in revenue increases and Obama was ready to settle for $1.2 trillion.
Part of their negotiations on a $4 trillion deficit-cutting plan included a gradual increase in the Medicare eligibility age to 67 and an alternative yardstick for calculating inflation that would reduce annual Social Security cost-of-living adjustments and raise taxes by slowing the annual adjustments in tax bracket thresholds.
Regardless of where the negotiations begin and end, the citizens of this great country need to stand up and have their voices heard. We cannot rely on the leaders of each party to interpret the results of the recent election to benefit their position.
I encourage each of us to take the time to contact our respective Senators Harry Reid and Dean Heller and Representatives Shelley Berkley, Mark Amodei and Joe Heck to let them know the importance of resolving this crisis. I know they appreciate hearing from their constituents and letters, phone calls and e-mails (the preferred method I believe) are the best way to let them know that we care and want some action.
A recent Harvard Business Review article, What You Can Learn From Family Business, compared the performance of similar sized family businesses to traditional public companies with some interesting results.
Their conclusion: family businesses focus on resilience more than performance. 
Forgoing excess returns in the good times to ensure survival in the down times.
Seven key difference were identified:
We’ve all seen that many of the businesses that have survived this recession have done so because they have strong balance sheets. Strong in that they are holding significant amounts of cash and little debt. 
Family run businesses seek to be self-sufficient and not beholden to lenders. They take the long view of protecting family wealth. So, they may not be the innovative risk takers and therefore miss some opportunities; however, they are the backbone of business that provides stability in this ever volatile world.
Businesses constantly need to purchase equipment for their business to expand or replace aging equipment. Usually, they want to write the expense off as quickly as possible for their taxes to see immediate tax savings. With the initial tax cuts in 2003 and the extensions and additional cuts made throughout the past four years to combat the recession, there have been two options for many taxpayers to completely write off their equipment purchases immediately.
Section 179 depreciation, which allows a taxpayer to expense new and used equipment purchases in the year of acquisition, has been around since 2003. It has allowed immediate expensing of a minimum of $100,000 since 2003 and up to a maximum of $500,000 with the 2012 amount being $139,000.
In addition, there has been bonus depreciation since 2008, which has allowed the taxpayer to write off 50% in 2008 and 2009 or 100% in 2011 and 2012 of new long-production capital purchases. With these rules being around for so long, there has been no sense of urgency to purchase new equipment.
However, this honeymoon is about to end. Beginning in 2013, barring some radical unanticipated agreement in Congress, bonus depreciation ends and Section 179 depreciation decreases to only $25,000. This will make the write off period for the capital asset purchases anywhere from 3 to 39 years. So go shopping, stimulate the economy and purchase equipment for your business before December 31st! This will not only help the economy, but also your cash position as you will see immediate benefits on your 2012 taxes!
