FoxNews reports:

Reggie Bush Could be Running From IRS on Gifts Allegedly Received at USC
By Deidre Behar
Published June 21, 2010

Good thing Reggie Bush is a fast runner, because the IRS might be chasing him for back taxes, pe

IRS Pursues Reggie Bush

nalties and interest on the estimated $300,000 worth of luxury gifts he allegedly received while playing football at the University of Southern California. And if they catch him, Bush could end up writing the government agency a check on the high side of $150,000.

“If the entire $300,000 is determined to be taxable,” Los Angeles-based CPA Mark Greenberg said, “about 50 percent of that would go to the IRS and Franchise Tax Board. And with penalties and interest, it could go up to 60 percent since it’s going back a few years.”

Greenberg estimates that Bush, now the star running back for the New Orleans Saints, “ultimately will wind up paying about $150,000,” but “it could be up to $200,000” if his financial team can’t get the penalties and interest waived.

Bush and USC have been in hot water since June 10, when the NCAA sanctioned the school with four years of probation and a two-year ban on postseason bowl games. The Trojan football team was also forced to forfeit all its victories during the three seasons Bush played, and it was stripped of 30 football scholarships intended for new players over the next three years.

The penalties imposed upon the coveted USC football program and former student-athlete Bush are the result of an extensive investigation that discovered the Heisman trophy winner received more than $300,000 in illegal benefits from marketing agents during the years he played college football.

Bush proclaimed his innocence in a public statement, saying, “I very much regret the turn that this matter has taken, not only for USC, but for the fans and players. I am disappointed by {the} decision and disagree with the NCAA’s findings. If the University decides to appeal, I will continue to cooperate with the NCAA and USC, as I did during the investigation.”

Bush’s camp declined to comment as to whether he has been contacted by any government agencies regarding unreported or underreported income. The IRS is legally unable to comment about any specific taxpayer.

How will all the drama surrounding Bush affect the lucrative endorsement deals he has inked since becoming one of the most prestigious players in the NFL? So far, not a lot.

“Reggie Bush has been an outstanding role model and a great partner of ours since he began his professional career. We’ve had a great relationship with him and look forward to continuing that in the future,” an Adidas rep told FOX411.com. Energy drink Red Bull said it “will continue to support Reggie Bush.” And the Milk Mustache campaign said it has no plans to change its relationship with the star player, calling itself “proud to work with Reggie Bush whose professional accomplishments, dedication to youth and community service sets a fine example for the young people of America.”

It remains to be determined whether Bush will keep the Heisman trophy he earned as a superstar running-back in 2005. But some sports media experts think Bush should be prepared to hand it over.

“I don’t think there should be any question. Bush should be stripped of the Heisman. I expect that to happen now that the NCAA has made its findings public,” said Eric Crawford, senior sports columnist at The Louisville Courier-Journal.

John McGrath, a sportswriter at The Seattle News Tribune, echoed Crawford’s sentiments, saying “as for Bush and the Heisman, the trophy ought to be revoked.”

But some say Bush deserves to keep the award, regardless of any controversy.

Reggie Bush's Heisman Trophy

“He should keep the Heisman Trophy because no one would argue he is not an outstanding athlete with great ability who’s achieved what he’s achieved by being a great football player,” said Jason W. Maloni, senior vice president of Levick Strategic Communications, a marketing firm. “Bush already has a Super Bowl victory to his name and has certainly proven he can compete in the NFL.”

Follow up: USA Today, July 20: USC is sending back Reggie Bush’s Heisman Trophy

Whether you are a pro football player or pro football fan, experts from Los Angeles accountants Richards, Greenberg & Co., LLP can help.

Give them a call at (818) 788-2651.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked no more than 40 hours for anyone during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks.

Related Items:

• HIRE Act: Questions and Answers for Employers
• Flyer

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Worried about pitching documents that they may need at some point, many people decorate a spare bedroom with boxes or large file cabinets stuffed with old bank statements, tax returns and pay stubs.  (Okay, if the stash isn’t in a spare bedroom, perhaps it resides in the attic, basement or garage.) As you finish up your tax return this year, take the opportunity to clean house. With a few key exceptions — mainly tax-related documents — you don’t need to keep all those papers. And if you’re willing to use online banking and create a digital archive of crucial records, you may even be able to go paper-free.  Before you dig into those piles of records and statements, invest in a shredder to guard against identity theft. And don’t skimp on the shredder, or you’ll defeat the purpose of having one. Ribbon-cut models produce bands that can be taped back together. So shell out the money for a cross-cut or confetti model.

What to Keep

The most important documents to hang on to are your annual tax returns. You should keep the actual returns forever, but you can get rid of the supporting documents after four years. That’s how long the California Franchise Tax Board has to initiate an audit (The IRS has three years).  Once the time elapses, toss the records — and shred any that reveal your Social Security number or other personal information.  Other papers to save for at least four years include thank-you letters from charities and year-end investment statements. You don’t need to save your monthly mutual fund reports forever. But before you toss them, wait for the year-end statements and make sure they match up. Also be sure to keep records that show the initial purchase price for stocks and mutual funds so you can calculate your basis when you sell them. After that, you can shred the documents once the four- or eight-year Franchise Tax Board window draws to a close.  You also need to save records pertaining to your house as long as you live in it. Records showing your purchase price, and what you spent on improvements, may come in handy when you’re trying to prove the value of your home to potential buyers. Another reason to keep these papers: If you sell your house at a hefty profit (more than $500,000 for couples filing a joint return or $250,000 for single filers), certain expenses can be used to lower your tax bill. After you sell the house, keep the documents for four years. Finally, hold on to records showing how much money went into and came out of IRAs and 401(k)s — especially if you’ve made any nondeductible contributions — so you don’t overpay taxes when you withdraw the money. Keep any 8606 forms on which you reported nondeductible contributions to traditional IRAs.

What to Toss

So what can you unload? ATM receipts, bank withdrawal and deposit slips, and credit-card receipts can go through the shredder after you’ve checked them against your monthly statements. Rebecca Eddy, founder of Eddy & Schein In-Home Administrators for Seniors, says one client kept every single pay stub she had ever received. That’s overkill. Just keep them until you get your Form W-2. You can also get rid of paper copies of most monthly bills — for credit cards, utilities and cable TV — unless you need them for tax purposes.  If you need help sorting through the clutter, consider hiring a daily money manager. Daily money managers tend to have a background in accounting, finance or law, and they make house calls.

Laura Cohn, Associate Editor, Yahoo Finance

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The new health care reform law is chock-full of new taxes and tax increases that will affect many individuals and businesses, but it will be years before most of these hikes take a bite out of your — or your company’s — wallet. The law also has tax breaks to help both individuals and small businesses pay for insurance.

Figuring out exactly what the new law’s impact will be on your finances will be tricky, not only because many of the effective dates are delayed, but also because the law signed by President Obama will most likely change very soon: After passing the Senate bill on March 21, the House also approved a package of modifications that the Senate plans to pass before the end of the month.

Take a look at what’s coming down the road, starting with provisions that take effect first:

•A new 10% excise tax on indoor tanning services that takes effect for services provided after June 30, 2010.

•Giving small firms tax credits as incentives to provide coverage, starting this year. Employers with 10 or fewer workers and average annual wages of less than $25,000 can receive a credit of up to 35% of their health premium costs each year through 2013. The credit is phased out for firms larger than that and disappears completely if a company has more than 25 employees or average annual wages of $50,000 or more. Beginning in 2014, small firms that sign up with one of the health exchanges to be created can receive a credit of up to 50% of their costs.

•A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011.

•Elimination, after this year, of a deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage. This will not take effect until 2013.

•Doubling the penalty for nonqualified distributions from health savings accounts, to 20%, beginning in 2011.

•A limit on the amount that employees can contribute to health care flexible spending accounts to $2,500 a year. Under the House package of changes, the cap won’t take effect until 2013.

•A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.

•Imposing a 0.9% Medicare surtax on wages of single taxpayers earning more than $200,000 a year and couples earning over $250,000, starting in 2013. In addition, the House’s package of modifications would levy a special 3.8% Medicare tax on the unearned income of those taxpayers. The House defines unearned income as interest, dividends, capital gains, annuities, royalties and rents. Tax-exempt interest would not be included, nor would income from retirement accounts.

•A hike in the 7.5% floor on itemized deductions for medical expenses to 10%, beginning in 2013. But taxpayers age 65 and over are exempt from the cutback through 2016.

•A new 40% excise tax, beginning in 2013, on high-cost health plans, defined as those providing coverage in excess of $8,500 for individuals and $23,000 for families. The House’s package of modifications includes higher threshold amounts and an initial effective date of 2018.

•A new tax on individuals who don’t obtain adequate health coverage by 2014. The tax is be phased in over three years, starting at the greater of $95, or 0.5% of income, in 2014, and rising to the greater of $750, or 2% of income, in 2016. The House passed companion measure would modify this provision so that a person without coverage in 2014 would pay the greater of $95, or 1% of income, and in 2016 would pay the greater of $695, or 2.5% of income.

•Providing a refundable tax credit, once the individual mandate takes effect in 2014, to help low-income folks purchase coverage. To be eligible, a person’s household income must be between 100% and 400% of the federal poverty level, generally around $11,000 to $44,000 for singles and $22,000 to $88,000 for families.

•A nondeductible fee charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $750 times the number of workers in the firm, and is slated to go into effect in 2014. The House’s package of modifications would increase that fee to $2,000 times the number of employees, though it would not count the first 30 workers in that calculation.

By Joan Pryde, Senior Tax Editor, the Kiplinger letters

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You have your no. 2 pencil, a calculator and this year’s W-2. Now what?

That’s the thought that crosses many self-preparers’ minds as they get ready to tackle their taxes. Veteran CPA Steve Duben says it’s a tale as old as time. “The truth of the matter is that the law is complex and not easy to understand,” Duben said. “The IRS claims that the average tax return self-prepared will take an individual 21 ½ hours to complete. This includes information gathering and understanding and preparing the return.”

If you’re willing and able to put in the time and effort to prep your own taxes this year, Duben gave MainStreet a list of the most common tax mistakes he’s encountered and how to avoid them.

Forgetting to Report All Income

Did you do some freelance work while you were looking for the dream job you finally landed in September? You still need to report that income in your 2009 return.

“Some taxpayers feel that if they did not get a 1099 form then they do not have to report income received,” Duben said. “The IRS has a long arm and seems to know what was and was not reported. To avoid this take your time and review all sources of income.”

What’s the penalty if you don’t report all income? Duben says “The cost, besides the tax will be interest at 6% per year and penalties of up to 20%.”

Accounting for Business Expenses

Did you buy a deluxe espresso machine and want to call it a “business expense” on your taxes since you run a business from home? Think twice.

“Business expenses need to be ordinary and necessary for the business. Taxpayers should also be able to substantiate the expenses and their business purpose if asked by the IRS or other taxing agency. If the expenses cannot be substantiated then they will be disallowed upon audit and … the cost will include the tax, interest and possible penalties,” Duben says.

Sorry, that americano probably isn’t “necessary for the business.”

It Has to be From 2009

Want to deduct moving expenses from when you switched jobs and moved to New York? Great, but didn’t that happen right before New Year’s Eve in 2008? Sorry, that’s not deductible.

Duben says “Any deduction to be deducted on an individual’s tax return needs to be paid (or charged on a credit card) during the tax year.”

Next time, wait until Jan. 1 to book that flight.

Paying for Other People’s Expenses

Even if you’re a nice person, the IRS doesn’t really care.

“Some taxpayers consider payments of expenses for another as their expense. The law only allows one to deduct his/her expense,” Duben says.

Nice guys really do finish last.

Report Medical Expenses Net of Reimbursement

Health care expenses are a little too complex for us, so let’s leave it to the experts.

In IRS Publication 502, it states “You cannot include medical expenses that were paid by insurance companies or other sources. This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services.”

Deducting Interest on Million-Dollar Mortgages

Some self-preparers might get excited to hear you can deduct the interest on your home loan. But, wait a minute, there’s a catch.

Duben explains, “Interest on one’s home is limited to loans of $1.1 million – any interest on a loan over this amount is not deductible.”

Well, at least Uncle Sam is looking out for the little guy. Owning a home is tough nowadays.

Forgetting to Keep Track of Charitable Giving

Receipts, receipts, receipts. We can’t say it enough here at MainStreet. When it comes to tax time, good record-keepers will win.

As Duben explains, “Contributions over $200 require a letter from the charity to substantiate the deduction. Contributions in which something is received such as a dinner or merchandise can only be deducted to the extent the contribution exceeds the fair market value of goods or services received.”

So, if you won a pair of tickets to the Super Bowl at a blind auction for charity, but only paid $20 for them, you’re out of luck (and a deduction). Then again, you do have Super Bowl tickets.

Trying to Deduct Your “Time Donation”

Doing PR for a charity if your a PR professional is a really good deed, but it’s still not tax deductible.

Duben says that donating your own time doesn’t create a deduction for the value of the time donated. So, if you normally charge $60 an hour for your PR services and worked for 15 hours for the charity, sorry, but you can’t take $900 off of your taxable income.

Not Taking a Reimbursement, Then Wanting to Deduct It

Say your employer offers to reimburse you for the conference you attended in the spring of 2009, but you turn it down because you’d rather have the deduction. Oops, not a good move.

“Employee-related expenses can be deducted if they are related to employment, required by the employer and not reimbursed or reimbursable. Not claiming a reimbursement from the employer if it is available does not create a tax deductable expense,” Duben said.

Deducting Mileage Without Records

If you use your vehicle for business, you can deduct your mileage on your tax return, but make sure you’ve kept adequate records. If your log isn’t exact, the IRS is not going to be happy.

Duben says it very simply: “Auto mileage needs to have a log to substantiate the amount claimed.”

Claiming a “Dependent”

With so many “boomerang” kids coming home to live with mom and dad, it’s no surprise that the definition of a “dependent” is very important this year.

If you want to claim a dependent on your taxes this year, but you aren’t sure if the person fits the definition, make sure you visit the IRS Web site or ask a professional tax preparer. The IRS site has a really good tutorial on the ins and outs of who counts as a dependent.

Using the Wrong Social Security Number

When you file, don’t forget to double-check the form before you submit it by mail or online. If you’ve accidentally switched two digits in your Social Security number, you could be facing trouble down the road.

Even the IRS says this is one of the most common errors they encounter. Just make sure you read over your forms before you file, and you should be all set.

Claiming New-Home Credits Too Early

If you want to make sure you get credit for that new home you just purchased, you better have closed escrow before Jan. 1, 2010. If you didn’t, you’re out of luck and you’ll have to wait until next year to get the credit.

The IRS has a great little packet of tax information specific to homeowners of all types, whether this is the first time you’ve bought a home or you own a house for each season.

Using the Wrong Filing Status

Did you forget you were married? That’s going to mess up your tax return.

This mistake is in line with using the wrong Social Security number. Just remember to look over your forms before you send them in.

Not Turning in Your W-2

This is a definite “d’oh” moment. Although the most obvious of all of the mistakes we’ve listed, this error could be costly.

Duben says this simple error could waste a lot of time. “Any of the above mistakes will cost additional taxes plus interest and possibly penalties. If a taxpayer is waiting for a refund the above errors can delay the refund for as long as it takes to correct the error. I have seen cases where it takes over a year to get things corrected.”

Your W-2 is so incredibly important. Don’t spend the time and effort to do your taxes only to find that you forgot to send in the paperwork.

by Kali Geldis
Monday, February 1, 2010

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A tax pro answers questions she hears most often and quashes some myths.

During tax season I’m in contact with 10 to 20 clients a day, six days a week. The same questions have been coming up for years. To save you and your tax preparer some time and maybe quash a few misconceptions, here are answers to four of the questions I hear most often.

1. Isn’t a bigger refund better?

The simple answer is “no.” The important line on your tax return is the “Tax Liability” line, not the “Refund or Balance Due” line. A smaller tax liability is always better. Taxpayers should plan to minimize their tax, not maximize their refund.

Example: Jonathan and James each have federal tax calculated to be $12,000 on their tax returns. Jonathan receives a $500 refund and James receives a $2,000 refund. Who made out better? Jonathan, with his $500 refund. They both paid the same in federal taxes, but Jonathan had $12,500 withheld and James had $14,000 taken out of his pay. Jonathan had use of his money throughout the year, and did not provide the government with an interest-free loan. James gave the government an interest-free loan of his money, while he paid for a motorcycle repair on his credit card at 17% interest.

True, many people use their tax refund as a form of forced savings. But in this day of direct deposit, it is quite easy to set aside that extra $25 a week (or whatever your refund cushion is divided by pay periods) and have it available for that motorcycle repair, vacation or other needs. Why let the government have free use of it? Another concern might be your state’s financial condition. In 2009 and again this year some states are delaying processing refunds due to their own fiscal problems.

2. Why am I paying tax on Social Security? Isn’t this my own money, taxed twice?

It’s not all your own money. It’s true that you paid income tax on the portion of your salary taken for Social Security. But your employer matched what you paid into Social Security, and you didn’t pay taxes on the employer’s share. In addition, current retirees are getting a real return on the money they paid in–a return they’ve never been taxed on. (Given the budget deficit, what future retirees will get is another issue I’ll leave to the policy wonks.) So although you understandably don’t like the fact that up to 85% of your Social Security benefits can be taxed, maybe you can feel a little better knowing that you are not paying taxes on all of it twice.

3. Should I pay off my mortgage, when it means losing my mortgage deduction?

There is little wisdom in having a mortgage solely for the purpose of a tax write off. For every dollar of interest you pay, you get back 25 cents (more or less depending upon your tax bracket) in a refund. You lost 75 cents. And that’s assuming you itemize. If you have a small mortgage, you may do as well or almost as well claiming the standard deduction, and thus get little or no benefit form your mortgage break.

But there are other considerations when deciding on whether to maintain a mortgage or to make extra principal payments to pay it off early. Will you be “cash poor” by making extra payments, and not have funds available for other needs and emergencies? Will your employment situation be changing in some way which will make obtaining credit more difficult in the future? If so, it might be beneficial to keep the mortgage or obtain an equity line of credit now (while avoiding the temptation to tap that line without forethought.) If you must have a loan, home mortgages generally are the lowest cost option because of lower interest rates and tax deductibility.

Moreover, even if you have plenty of emergency funds and job security, you must consider the interest rate on your mortgage. If it’s very low, you may be able to do better (on an after-tax basis) by investing the money you’d otherwise use for early repayment of principal.

4. Should I tap my retirement account to pay off my credit cards?

Many people became very nervous during the recent market crash, and some emptied their retirement accounts, using the cash to pay off debts. They were scared of stocks and scared of debt, too. Even if you decide you need a more conservative asset allocation (with more bonds or cash equivalents and fewer stocks), you can do it within your individual retirement account or 401(k), without incurring the tax on retirement account withdrawals, plus a possible 10% early withdrawal penalty.

Plus, you must consider more than the tax on the withdrawal itself. The income you recognize when you withdraw cash from a traditional pre-tax retirement account can push you into a higher tax bracket, forcing more of your Social Security to be taxed or causing you to lose various tax benefits because of “phase out” rules. (Many deductions and credits are only allowed within strict income limits.)

Paying high interest rates on your credit card debt while getting a low rate of return on your 401(k) investments seems counterintuitive, but by withdrawing money prematurely from your retirement account, you lose the chance to let your investments recover and end up having a big chunk of what you take out go to Uncle Sam. So before you decide to cash out a retirement account, ask your tax pro to calculate how much you’ll owe. Plus, investigate other alternatives, including a loan from your 401(k) and withdrawals of your original contribution to a Roth IRA.

I am not a financial planner and don’t pretend to be one. But the annual tax return ritual is a good time to look at your tax situation and consider how it fits into your total financial picture — and how financial moves you make could affect your tax bill next year.

Cheryl A. Morse has been an enrolled agent specializing in individual and small-business taxes for more than 25 years and is a tax manager with Emerging Business Partners in eastern Massachusetts. She is a national instructor for the National Association of Tax Professionals, an instructor for the University of Massachusetts Tax School and area chair of the IRS Taxpayer Advocacy Panel

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By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

Employers are taking matters into their own hands as they get ready for the 2011 benefit plan year. There’s a growing recognition that the health care bill passed by Congress on March 21 won’t help lower costs in the short term, forcing firms to act on their own if they want to survive. In fact, many employers believe the pending health bill will only add to their problems. “Health reform will result in not only increased costs for employers, but less generous benefits for employees,” says Helen Darling, president of the National Business Group on Health.

Most companies will make workers pay a bigger share by raising premiums, deductibles and copayments. These increases will affect both the medical and pharmacy plans. Surcharges for providing health care coverage to working spouses will also increase, to encourage those spouses to use their own employer’s health plan.

But the real emphasis will be on behavior, with businesses using more sticks and fewer carrots to pressure employees to adopt healthier lifestyles and participate in programs to manage their chronic illnesses. In a recent survey by Hewitt Associates, nearly half of employers say they plan to use financial penalties for workers who don’t participate in certain health improvement programs. “Employers have come to realize that they have to manage their risks, not just costs,” says Rick McGill of Hewitt, a benefits consulting firm.

Big bucks are at stake. About 70% of health care costs are driven by behaviors. The difference in cost between a diabetic who manages his or her disease compared with one who doesn’t can be 10 times higher, says McGill.

Workers who don’t play ball will pay more. Employers are realizing that penalties work better than rewards and are planning to ramp them up. To avoid running afoul of federal antidiscrimination laws, businesses can’t base penalties or rewards on results, but they can discount rates for participation. For example, employers will impose higher premiums for smokers who refuse to participate in a smoking cessation class, or will relegate wage earners who refuse to participate in wellness activities to a health plan with leaner benefits.

More firms are also using their own clinics to cut costs, on-site if the company is big or nearby when smaller businesses work together. Clinics offer low prices, convenience and noteworthy success rates.

Also growing: Consumer directed health plans (CDHPs) combining high deductible plans with a tax advantaged savings account. About 60% of companies will make them an option in 2011, up from 54% this year, and 12% will make them the only option, up from 8% in 2010, according to a recent employer survey by Towers Watson and the National Business Group on Health. “Employers offer substantially reduced premiums of between 30% and 50% to encourage employees to choose the CDHP option,” says Ted Nussbaum of Towers Watson.

Having more-educated health consumers is a key goal, with insurers helping firms provide information to employees on cost-effective treatments and comparative pricing. Employers will also provide incentives such as lower copays or no deductibles to encourage workers to use the top performers. There’s ample evidence that higher quality providers have lower costs and employees get back to work quicker, says Nussbaum.

Several big firms are sharing success stories, making it more likely that others will follow suit. For example:

•At PepsiCo., smokers who won’t join programs pay $600 more a year, a policy that has hiked participation 10-fold and boosted smoking cessation rates 14%.
•Boeing targeted employees with complex medical problems for a program in which specialized teams of nurses and doctors monitor care. Average absence rates fell from 7.8 days per six months to 3.4 days. The first two years of the program resulted in a savings of 20%.
•Perdue Farms has 18 on-site clinics and credits them with helping keep worker diabetes control rates at 68%, double the national average.

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By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

March 23, 2010

The health care bill is more than two thousand pages long — with hundreds more to come from regulators filling in the details. It will literally take years before all the details are set and everyone can see how the plan will affect their particular situation. But here are 10 commonly asked questions that can be answered now:

• I own a business with 35 employees. I don’t provide health care insurance, but I’m hoping to soon. How will this bill affect me? Because you have more than 25 workers, you won’t get the employer tax credits that start right away. Instead, you’ll have to wait until 2014, which is when states start operating the Small Business Health Options Program, or SHOP Exchanges, where small businesses will be able to pool together to buy insurance. The Congressional Budget Office forecasts that the exchanges would bring premiums down as much as 4% while still adding more people to the rolls of insured.

• What if my business grows to more than 50 workers? Starting in 2014, firms with 50 or more workers will be required to offer either health care insurance or pay a fee of up to $2,000 per full-time employee if any of their workers gets government subsidized insurance coverage in the exchanges. The first 30 workers would be excluded from the assessment.

• I’m self-employed and buy insurance on my own. Last year, it went up $200 a month, and I’m worried it will go up more in the future because of this bill. Will it? That is hard to predict. The legislation does immediately create a process for reviewing increases in health plan premiums and requires plans to justify any increases. And once the state-based American Health Benefit Exchanges are up and running in 2014, you will be able to shop for health insurance among competing carriers.

• My employer has a good health plan. Will I have to pay more? Not as a result of the legislation. Your costs may go up in the next few years, but rising medical costs are mostly to blame for what’s driving up premiums now. The health reform law does contain cost control provisions, but they won’t have much of an effect on medical costs for at least five years.

• I’m a Medicare beneficiary. Should I expect to pay more? That’s certainly possible later on, but in the short term, you’ll pay less for preventive services and for prescription drugs. Starting in 2011, those in Medicare will receive free preventive care services, such as screenings for colon, prostate and breast cancer. Plus the threshold for income related Medicare Part B premiums for 2011 through 2019 will be frozen.

At the same time, those beneficiaries who have high drug costs and fall into the “doughnut hole” coverage gap will get a $250 rebate this year. In 2011, beneficiaries in the gap will be able to get a 50% discount on brand-name drugs. By 2020, the gap would be eliminated. That means that seniors, who now pay 100% of their drug costs once they’re in the doughnut hole, will pay 25%.

But, Medicare Part D premium costs would be higher for high-income beneficiaries — individuals with incomes above $85,000 and couples with more than $170,000.

• My Medicare is supplemented by my former employer. Is that in danger? If your former employer offers prescription drug coverage to Medicare eligible retirees, that benefit may be in danger. Starting in 2013, the tax break employers get for providing that benefit to retirees will be eliminated, increasing the likelihood that employers will drop it.

You may have to pay more if your supplemental coverage is through Medicare Advantage, since government payments to those plans will be decreased over the next three years, to bring payments on a par with traditional Medicare. You could lose extra benefits such as free eyeglasses and hearing aids.

• I make $300,000 a year and have a very generous employer paid health plan. How much more will I have to pay? You do face higher taxes. Starting in 2013, individuals will pay a higher Medicare payroll tax of 2.35% on earnings of more than $200,000 a year and couples earning more than $250,000, up from the current 1.45%. You’ll also face an additional 3.8% tax on unearned income such as dividends and interest over the threshold. Furthermore, starting in 2018, the law also will impose a 40% excise tax on the portion of most employer sponsored health coverage that exceeds $10,200 a year for individuals and $27,500 for families.

• I just graduated from college. I don’t have a job and can’t afford insurance. Will I be affected? You will be eligible for coverage under your parents’ health care plan as long as you are single, under age 26 and are not eligible for other employer provided health coverage. This will be available for plan years beginning six months from now or later.

• My family has income of about $60,000, but we haven’t been able to afford health insurance. Can we get it now? You might be eligible for government subsidies to help you pay for private insurance that will be sold in the new health exchanges that will begin operation in 2014. Premium subsidies will be available for families with incomes from $29,327 to $88,000. But there’s no help until then.

• My insurance coverage was canceled last year when I exceeded the lifetime cap. Can I get back on it now? You probably would qualify for the new high-risk pools, which will be effective within 90 days of the bill’s enactment. A participant will pay the full cost, but the premiums will be set as if the person does not have a preexisting condition.

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Answers are often difficult to come by when the crisis affects you or your business. But rest assured there are answers to every crisis.

You may not visualize the solution, you may not want to hear it, or you may believe that nothing will help. But there is a way to deal with all problems.

I’ve been providing solutions to my clients for over 30 years. During that time I’ve untangled thousands of unique problems. Every one of them is unique, just like your present situation.

The basic principals I employ are based on best practices, proven methods, careful analysis of the facts, and the ability to ‘think outside the box’.

If you would like to discuss your situation, call me at 818-788-2651 and say you are calling about Financial Bailout Solutions. There is no charge for our conversation. If you would like to tap into my experience to help your situation, we can arrange a personal interview and meeting at my office in Encino.

Lawrence L. Richards, C.P.A.
October 2008

There are some common situations that you encounter in QuickBooks that may improperly alter the account balances in prior years’ accounts if you don’t handle them properly. We are describing these problems and their solutions now so that you can avoid additional accounting fees to correct these errors at the end of your year. The following three problems are most notable:

1. Check written in prior years that needs to be voided in the current year
   Quickbooks allows you to void a check by selecting the check to void and then selecting Edit, Void Check. The effect of this method is to change the amount of the selected check to zero and adjust the checking account balance from the date of the voided check to the present.PROBLEM
   What most bookkeepers do is to go back to the prior year date of the check that you discovered in the current year that you now want to void. This is an incorrect method and creates the following problems:

   a. The bank reconciliations that have been prepared for the month of the voided check and all subsequent months are now incorrect.
   b. Previously printed financial statements are different than the financial statements that can be currently printed.
   c. If the voided check is dated in a year for which income tax returns have already been prepared, then the QuickBooks financial statements will not agree to the financial statements used in the preparation of the income tax returns.
   d. If the voided check is a payroll check from a prior quarter, then the QuickBooks payroll information will not agree to the previously prepared payroll tax returns.
   e. Prior bank reconciliations that are saved as PDF files do not get adjusted, so they still show the check as outstanding.

   SOLUTION
   We don’t want you to use the prior year date of the check you want to void. The better procedure is to make the correction using today’s date. This concept is to make all prior period corrections in the current year. The proper way of voiding a prior period check is:

   a. Using today’s date, create a deposit for the amount of the check that should be voided. Choose the same category(ies) and amounts as the original check. Reference the original check number and original check date in the memo field. Save the transaction.
   b. During the preparation of the next bank reconciliation, select both the original check and the newly created deposit for clearing. The net result of this selection is zero, but note that the amounts of cleared deposits and checks shown on the bottom left of the bank reconciliation screen will each be increased by the amount of the original check.

   The previously prepared bank reconciliations, financial statements and tax returns will not be changed if the above method is utilized. Problems are avoided by the Solution of voiding the prior year check in the current year.

   (Please call us if you are voiding a payroll check in the current year for which the payroll tax returns have already been submitted.)

2. Sales invoice prepared in a prior period that is to be changed in the current year
   QuickBooks permits previously prepared sales invoices to be reopened and changes made. These changes may be removing a line item, changing the quantity or price of a line item, issuing a discount, adding a new line item, and deleting an invoice.PROBLEM
   What most bookkeepers do is to go back to the prior year date of the invoice that you discover in the current year that you want to revise. This is an incorrect method and creates the following problems:

   a. Previously printed financial statements are different than the financial statements that can be currently printed.
   b. If the changed sales invoice is dated in a year for which income tax returns have already been prepared, then the QuickBooks financial statements will not agree to the financial statements used in the preparation of the income tax returns.
   c. If the changed sales invoice contains sales tax and was issued in a prior quarter, then the QuickBooks information will not agree to the previously prepared sales tax return.
   d. Accounts receivable aging reports will not be accurate.

   SOLUTION
   We don’t want you to use the prior year date of the sales invoice that you want to change. The correct procedure is to make the correction using today’s date. This concept is to make all prior period corrections in the current year. The proper method of changing a prior period sales invoice is:

   a. If reducing the invoice total or deleting the invoice, select Customers, Create Credit Memos/Refunds. The credit memo should use today’s date. Make the appropriate changes to record the items to change or remove. If you are deleting the invoice, record a credit invoice that shows each line exactly as it was on the original invoice. Do not change the original invoice. Reference the original invoice number and date in the memo field in the credit memo.
   b. If you are increasing the invoice amount, and select Customers, Create Invoices. Prepare an additional invoice using today’s date to record the amount of the increase. Do not change the original invoice. Reference the original invoice number and date in the memo field of the additional invoice.

   These methods should also be utilized to reverse an invoice in the event that a customer is unable to pay.

   (Please call us if you file sales tax returns and are changing invoices in the current year in a quarter for which a sales tax return has already been submitted.)

3. Closing the prior years’ books and record (general ledger) to prevent changes to the account balances
   Deleting or changing prior years’ transactions causes the account balances in QuickBooks to be different than amounts used in the preparation of the income tax returns and other reports.PROBLEM
   Many bookkeepers make assorted corrections to prior year transactions by using the prior year date intentionally or by mistake. Using a prior year date while working in the current year is incorrect and creates the following problems:

   a. The bank reconciliations that have been previously prepared will be different if the deleted or changed transaction is a cash transaction.
   b. Previously printed financial statements are different than the financial statements that can be currently printed.
   c. If the income tax returns have already been prepared, then the QuickBooks financial statements will not agree to the financial statements used in the preparation of the income tax returns.
   d. If the transaction is a payroll check from a prior quarter, then the QuickBooks payroll information will not agree to the previously prepared payroll tax returns.
   e. If the transaction contains sales tax and was issued in a prior quarter, then the QuickBooks information will not agree to the previously prepared sales tax return.

   SOLUTION
   When you are working in the current year you must never use a prior year date. In order to prevent this from happening, use the Period Close feature in QuickBooks, as follows:

   a. Select Edit, Preferences, Accounting, Company Preferences, Set Date/Password to access this feature. Enter the closing date (the end of the prior year). A password is optional but recommended. Be sure to write the password in a safe place as there is no way of recovering the password. Our clients send us the password as a backup. Then click on OK twice.

   Once Period has been Closed, if a transaction dated on or before the closing date is changed, a window will pop up informing you that the change will affect prior periods. What you must do is to close the pop up window and correct the transaction date to a current year date.

   (Please call us should you encounter a situation where you believe a prior period change is necessary.)

   If your books and records for the prior fiscal year are officially closed, the Period Close feature described above should be done.

WHEN YOU FOLLOW THE ABOVE SOLUTIONS TO THESE COMMON PROBLEMS YOU WILL ELIMINATE INCORRECT CHANGES FROM OCCURRING IN YOUR QUICKBOOKS DATA FILE. THIS REDUCES THE LIKELIHOOD OF ADDITIONAL ACCOUNTING FEES TO IDENTIFY AND FIX YOUR QUICKBOOKS.

As always, I am available to discuss any of these matters with you.

Your resource for all of your tax, financial, and business planning matters,

Lawrence L. Richards, C.P.A.