August 2012 Update - Local Lodging Expenses and Social Security Statements

New Tax Rule for Local Lodging Expenses

The IRS recently issued long-awaited regulations that permit certain not-away-from-home lodging expenses to be deducted by workers if they are not reimbursed by their employer. Alternatively, if paid for by the employer, the expense can be treated as a tax-free working condition fringe benefit (WCFB) or tax-free accountable-plan reimbursement.

Thanks to prior IRS guidance, the value of an employer-provided WCFB is excluded from the recipient employee's gross income for federal income and employment tax purposes. A WCFB is defined as any property or service provided to an employee to the extent that, if the employee paid for the property or service, it would be deductible by the employee as an unreimbursed employee business expense. Employer-paid lodging for an employee who is out of town on the employer's business counts as a tax-free WCFB.

Prior regulations provide that the cost of an individual's lodging that is not incurred while traveling away from home on business is generally a personal expense and is therefore generally not deductible by the individual. An individual is not considered away from home unless he or she is away from home overnight, or at least long enough to require rest or sleep.

The new regulations stipulate that an individual's local lodging expenses can be deducted by the individual as business expenses if the applicable facts and circumstances dictate that such treatment is appropriate. In turn, expenses that would qualify for deductions if paid for by an employee will qualify as a tax-free WCFB if paid by the employer, or if advanced or reimbursed by the employer under an accountable plan. However, local lodging expenses will not qualify for the aforementioned tax-favored treatment if the lodging is lavish or extravagant, or if it is primarily to provide the individual with a social or personal benefit.

Safe Harbor Rule. Under the new regulations, local lodging expenses are automatically treated as ordinary and necessary business expenses if all of the following conditions are met: (1) the lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function; (2) the lodging is for a period that does not exceed five calendar days and does not occur more frequently than once per calendar quarter; (3) in the case of an employee, the employer requires the employee to remain at the activity or function overnight; and (4) the lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

Example: Tax-favored treatment allowed for employees.

Distant Corporation puts on periodic employee training sessions at a hotel near its main office. Distant requires all attending employees, including employees from the local area, to remain at the hotel overnight for the bona fide business purpose of maximizing the effectiveness of the training sessions.

If Distant directly pays the lodging costs for attending employees, the costs qualify as tax-free WCFBs for the attending employees, including those who live in the local area, and Distant can deduct the costs as business expenses. If Distant reimburses attending employees for the lodging costs under an accountable plan, the reimbursements are tax-free to the employees, including those who live in the local area, and Distant can deduct the reimbursements as business expenses.

Please contact us if you have questions concerning business travel expenses or any other tax compliance or planning issue.

Social Security Statements

The Social Security Administration (SSA) recently announced that Social Security statements may now be viewed online atwww.ssa.gov/mystatement. The statements provide workers with an estimate of benefits under current law and an earnings record with Social Security and Medicare for taxes paid over their working career. A printable version of the Social Security statement is available. To get an online statement, a person must be 18 or older and able to provide information that matches their SSA file. After verification, an account is created with a unique user name and password to access the online statement.

Boomer Alert: Approximately 3 million baby boomers are turning 65 each year. According to the Social Security Administration, social security was the major source of income for most beneficiaries.

Raiche July 2012 Update - 2013 HSA Limitations & Kiddie Tax Update

2013 HSA Limitations Health savings accounts (HSAs) were created as a tax-favored framework to provide health care benefits mainly for small business owners, the self-employed, and employees of small- to medium-sized companies who do not have access to health insurance. The tax benefits of HSAs are quite favorable and substantial. Eligible individuals can make tax-deductible (as an adjustment to AGI) contributions into HSA accounts. The funds in the account may be invested (somewhat like an IRA), so there is an opportunity for growth. The earnings inside the HSA are free from federal income tax, and funds withdrawn to pay eligible health care costs are tax free. The recently released 2013 inflation-adjusted deduction for individual self-only coverage under a high-deductible plan is $3,250, while the comparable amount for family coverage is $6,450. This is an increase of 4.8% and 3.2%, respectively, from 2012. For 2013, a high-deductible health plan is defined as a health plan with an annual deductible that is not less than $1,250 for self-only coverage and $2,500 for family coverage, and the annual out-of-pocket expenses (including deductibles and copayments, but not premiums) must not exceed $6,250 for self-only coverage or $12,500 for family coverage. Kiddie Tax Update In the good old days, highly taxed parents could shelter some of their investment income by attributing it to their lower taxed older children. No more. The kiddie tax captures that income at the parent's rate. Parents may not realize there are tax rules that could affect their child's investment income. Here's how it works. A child is subject to the kiddie tax if: He or she has not attained age 18 as of the close of the tax year; or has earned income that does not exceed half of his or her support and is either age 18 or a full-time student age 19-23; Either parent of the child is alive at the end of the tax year; and The child does not file a joint return for the tax year. Note: The kiddie tax applies to children under age 18 regardless of their earned income level. A child subject to the kiddie tax pays tax at his or her parents' highest marginal rate on the child's unearned income over $1,900 (for 2012) if that tax is higher than the tax the child would otherwise pay on it. The parents can instead elect to include on their own return the child's gross income in excess of $1,900 (for 2012). An individual eligible to be claimed as a dependent on another taxpayer's return may not claim a personal exemption. Thus, a child cannot claim a personal exemption ($3,800 in 2012) if his or her parents can claim an exemption for him or her; whether they actually claim the exemption is irrelevant. The 2012 standard deduction for a child claimed (or eligible to be claimed) as a dependent on another return is the greater of $950 or the sum of $300 plus earned income, but not to exceed the $5,950 (for 2012) standard deduction that would otherwise be allowable. For 2012, a child with no earned income (e.g., wages) may use a standard deduction to avoid tax on the first $950 of unearned income (e.g., dividends); the next $950 is taxed at the child's tax rate. Therefore, in 2012, the kiddie tax provision does not affect the child until unearned income exceeds $1,900 (or greater if the child itemizes deductions and deductible expenses directly connected to the unearned income exceed $950). Example: Child with earned income. Johnny, age 17, earns $2,000 delivering newspapers. He also had $1,300 of dividend income, for a total of $3,300. The earned income from the paper route ($2,000) is fully sheltered from tax by Johnny's standard deduction of $2,300 ($2,000 earned income plus $300; limited to $5,950 in 2012). So, the $1,000 excess ($3,300 - $2,300) will be taxed at a normal 10% tax rate. The kiddie tax does not apply because unearned income is less than $1,900.

2012-06 Newsletter - "Dirty Dozen" & Reverse Mortgage As Cash Resource

Check out June 2012 news, updates and tips courtesy Raiche & Company CPAs

Raiche & Company CPAs, P.A. Newsletter

If you have a child who works, consider encouraging the child to use some of the earnings for Roth IRA contributions. All that is required to make a Roth IRA contribution is having some earned income for the year. Age is irrelevant. Specifically, for 2012 your child can contribute the lesser of: (1) earned income or (2) $5,000.

By making Roth IRA contributions for just a few years now, your child can potentially accumulate quite a bit of money by retirement age. Realistically, however, most kids will not be willing to contribute the $5,000 annual maximum even when they have enough earnings to do so. Be satisfied if you can convince your child to contribute at least a meaningful amount each year. Remember, if you are so inclined, you can make the Roth IRA contribution for your child.

Here's what can happen. If your 15-year-old contributes $1,000 to a Roth IRA each year for four years starting now, in 45 years when your child is 60 years old, the Roth IRA would be worth about $33,000 if it earns a 5% annual return or $114,000 if it earns an 8% return. If your child contributes $1,500 for each of the four years, after 45 years the Roth IRA would be worth about $50,000 if it earns 5% or about $171,000 if it earns 8%. If the child contributes $2,500 for each of the four years, after 45 years the Roth IRA would be worth about $84,000 if it earns 5% or a whopping $285,000 if it earns 8%. You get the idea. With relatively modest annual contributions for just a few years, Roth IRAs can be worth eye-popping amounts by the time your child approaches retirement age.

For a child, contributing to a Roth IRA is usually a much better idea than contributing to a traditional IRA for several reasons. The child can withdraw all or part of the annual Roth contributions-without any federal income tax or penalty-to pay for college or for any other reason. (However, Roth earnings generally cannot be withdrawn tax-free before age 59 1/2.) In contrast, if your child makes deductible contributions to a traditional IRA, any subsequent withdrawals must be reported as income on his or her tax returns.

Even though a child can withdraw Roth IRA contributions without any adverse federal income tax consequences, the best strategy is to leave as much of the account balance as possible untouched until retirement age in order to accumulate a larger federal-income-tax-free sum.

What about tax deductions for traditional IRA contributions? Isn't that an advantage compared to Roth IRAs? Good questions. There are no write-offs for Roth IRA contributions, but your child probably will not get any meaningful write-offs from contributing to a traditional IRA either. That is because an unmarried dependent child's standard deduction will automatically shelter up to $5,950 of earned income (for 2012) from federal income tax. Any additional income will probably be taxed at very low rates. Unless your child has enough taxable income to owe a significant amount of tax (not very likely), the advantage of being able to deduct traditional IRA contributions is mostly or entirely worthless. Since that is the only advantage a traditional IRA has over a Roth IRA, the Roth option almost always comes out on top for kids.

By encouraging kids with earned income to make Roth IRA contributions, you're introducing the ideas of saving money and investing for the future. Plus, there are tax advantages. It's never too soon for children to learn about taxes and how to legally minimize or avoid them. Finally, if you can hire your child as an employee of your business, some additional tax advantages may be available.

IRS Announces Major Expansion of "Fresh Start" Initiative

IRS Commissioner Doug Shulman announced a major expansion of the "Fresh Start" initiative in a press release dated March 7th, 2012. The Fresh Start initiative, first introduced in 2008 as a part of a larger program to help taxpayers address their tax liabilities, assists qualified taxpayers in three major areas: penalty relief, installment agreements, and offers in compromise.

Penalty Relief

Late-payment penalties (0.5% per month of the unpaid tax amount up to a maximum of 25%) are abated until October 15, 2012 as long as the tax, interest and any other penalties are paid by that date. Certain wage earners and self-employed individuals are given a six-month grace period for failure-to-pay penalties. The penalty relief will be available to wage earners who were unemployed for at least 30 consecutive days during 2011 or in 2012 (up to the April 15, 2012) and self-employed individuals who experienced a 25% or greater reduction in 2011 business income (compared to 2010) due to the economic downturn.

A qualifying taxpayer filing as single or head of household may not have Adjusted Gross Income (AGI) greater than $100,000. Married taxpayers who file jointly do not qualify if their AGI is more than $200,000. This penalty relief is restricted to taxpayers whose calendar year 2011 balance due (taxes owed less payments and withholding) does not exceed $50,000.

Tax returns must be filed timely. This means taxpayer(s) must file their returns by April 17, 2012 or file for an extension to October 15, 2012. Failure-to-file penalties will not be waived. New form 1127-A must be filed to qualify for relief.

Installment Agreements

The Fresh Start provisions also allow more taxpayers to qualify for installment agreements to pay taxes owed. Effective immediately, taxpayers owing taxes of $50,000 (double the previous threshold of $25,000) or less can begin an installment agreement without supplying the IRS with a financial statement. Qualified taxpayers who cannot pay the entire amounts owed by the due date may enter into a payment plan extending payments up to a maximum term of seventy-two months. Although penalties are reduced, interest continues to accrue on the outstanding balance. In addition, taxpayers must agree to monthly direct debit payments. Taxpayers can set up an agreement online at www.irs.gov by going to the online payment agreement (OPA) page and following the instructions.

Offers in Compromise

Liberalized rules for offers in compromise (agreements between taxpayers and the IRS to settle a taxpayer?s liability for less than the full amount owed) as set forth in the earlier Fresh Start remain in effect. Those changes allow more taxpayers to qualify and allow for some changes to the program to more closely reflect real-world situations.

According to Mr. Shulman, the changes to the Fresh Start initiative reflect the IRS? obligation to assist taxpayers struggling to pay their bills. "Our goal is to help people meet their obligations at get back on their feet financially," Shulman said. If you have questions about the Fresh Start Initiative and how it may apply to your financial situation, please give us a call

IRS Cracks Down on Identity Theft Nationwide

In a press release from January 31, 2012, IRS commissioner Doug Shulman announced the results of a nationwide effort to cut down on identity theft and refund fraud. The IRS worked in conjunction with the Justice Department's Tax Division and local U.S. Attorneys' offices to target more than one hundred people across twenty-three states. The sweep resulted in 939 criminal charges against would-be tax frauds.

In addition to the sweep, IRS auditors and investigators visited approximately 150 money-service businesses to conduct extensive compliance visits and insure these businesses aren't engaged in practices which may facilitate refund fraud and identity theft.

Taxpayer identity theft normally occurs when a thief uses a legitimate taxpayer's identity to falsely file a tax return and claim a refund. A victim of identity theft is rarely aware their identity has been stolen until he or she attempts to file a legitimate return later in the tax season and discovers that another return has already been filed using their Social Security Number.

If you receive an IRS notification for any of the following reasons, you should take immediate action:

• More than one return was filed for you in a single tax year
• You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or
• IRS records indicate you received wages from an employer unknown to you.

Immediately respond to the name and number printed on the letter if you receive such notification.

The IRS advises you to minimize your risk of identity theft by:

• Rarely carrying your Social Security card or documents with your SSN on them.
• Disclosing your SSN only when required. Many businesses may ask for your SSN but do not actually need it. Do not give out your SSN unless absolutely necessary.
• Protecting your financial information, both online and in print.
• Checking your credit report periodically. You may check your credit without charge once a year at www.equifax.com, www.experian.com, or www.transunion.com . By using each of these services only once each year, you can actually check your credit report every four months.
• Protecting your personal computers using firewalls, anti-spam and anti-virus software. Keep your software current via frequent updates. Use secure passwords and change them often.

By taking action against tax fraud criminals, Commissioner Shulman sends a clear message to anyone considering participation in a tax fraud scheme. He said "We are aggressively pursuing cases across the nation with the Justice Department, and people will be going to jail". The IRS is taking additional steps to prevent identity theft and detect fraud by using new identity-theft screening filters and placing identity-theft indicators on taxpayer accounts to track and manage incidents of identity theft. Despite these advances, you should always be vigilant in protecting your Social Security number and financial information.

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Highlights of 2012 Tax Code Changes

Happy New Year! Tax returns for 2011 are barely begun but it is not too early to start thinking about tax planning strategies for 2012. This is by no means an all-encompassing list, so be sure to discuss your specific situation with your tax professional. Some important tax code changes for 2012 are:

Individuals

• Each personal and dependent exemption is $3,800 - an increase of $100 over 2011.
• The 2012 standard itemized deduction rose slightly. A taxpayer filing as single (or married filing separately), saw a $150 increase to the basic deduction as it rose to $5,950. Married couples filing a joint return gained a $300 deduction to $11,900. Those filing as Head of Household have an additional $200 deduction as the amount increased to $8,700.
• The maximum earned income tax credit for low and moderate income workers rose to $5,891 for 2012, a $140 increase from 2011.
• Standard mileage rates regarding medical miles driven remained unchanged at 14 cents per mile. The deduction for charitable mileage increased by 4 cents, however, as it rose to 23 cents per mile. Business miles driven increased to 55.5 cents per mile for most vehicles earlier in 2011 and that amount remains unchanged going into 2012.
• Though the credit amounts don't change for 2012, the modified adjusted gross income threshold at which the lifetime learning education credit begins to phase out is $104,000 for joint filers and $52,000 for single filers. This is up from $102,000 and $51,000, respectively.
• Perhaps the item with the potential for greatest impact is the decreased Alternative Minimum Tax (AMT) exemption from $74,500 to $45,000 for a married couple. Single taxpayers and those filing Head of Household experience an exemption decrease from $48,450 to $33,750. Be sure to discuss this change with your tax professional - the potential impact could be significant.
• Lastly, the FICA ceiling rose to $110,100 from $106,800. The good news is that the employee rate remains at 4.2% at least through February 29, 2012. Currently, that rate is slated to increase to the historic rate of 6.2% after that date, but many believe the lower rate will be extended for the entire year. Touch base with your CPA in mid-February to see what happens.
  

Businesses

• Depreciation is often a significant deduction for businesses. Unfortunately, two significant depreciation deductions decreased for 2012. The Code Section 179 deduction for equipment purchases is $139,000 of the first $560,000 of business property placed in service during 2012. This is down from $500,000 of the first $2,000,000 in 2011. First-year bonus depreciation also decreased to 50% of qualified property (down from 100%).
• Many other very specific changes occurred regarding certain employee fringe benefits, estimated tax payments and qualified retirement plans - to mention just a few.

Please keep in mind this is not a complete list of changes for tax year 2012 - and there likely will be further changes as the year progresses. Due to current economic conditions - and the fact that this is an election year - it is more important than ever to keep in contact with your CPA. Income tax planning is only one of the many ways to increase your wealth potential!

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Tax Benefits for Education

To assist taxpayers with the ever-increasing costs of higher education, there are a variety of tax advantages available. For the 2011 tax year, there are two tax credits (reduce the amount of tax owed) available, the American Opportunity Credit, and the Lifetime Learning Credit. In addition, some taxpayers may be able to deduct tuition and fees (to reduce the amount of taxable income). Lastly, both parents and student should consider whether opening tax-advantaged savings accounts to help pay for education may yield some benefit. Additional education-related benefits exist (interest deductions for student loans and work-related education expenses) - be certain to address any questions you have with your tax professional soon so you can take the necessary actions before December 31, 2011.

The American Opportunity Credit

The American Opportunity Credit is available as a result of the American Recovery and Reinvestment Act. The American Opportunity Credit was originally set to expire in 2010 but was extended with a few small changes. In 2011 and 2012, the American Opportunity Credit applies to a broader range of taxpayers, the credit can be applied towards four years of post-secondary education instead of two years, and adds required reading materials to the list of qualified expenses.

The maximum annual credit allowed is $2,500 per student. The full credit is available to taxpayers whose modified adjusted gross income is $80,000 or less for individuals and $160,000 or less for married couples filing jointly. Expenses such as tuition, course materials, and supplies necessary for enrollment or attendance are considered qualified expenses. A computer may qualify as a qualified expense if it is needed as a condition of enrollment or attendance at the educational institution. If you have questions about what does or does not qualify, be sure to contact your tax advisor for guidance.

Lifetime Learning Credit

The Lifetime Learning Credit could reduce taxes up to $2,000 per year for qualified educational expenses. It is most useful for graduate students, part time students, and those who are not pursuing a degree because there is no limit on the number of years the lifetime learning credit can be claimed for each student. A taxpayer may not take both the American Opportunity Credit and the Lifetime Learning credit for the same student in the same year. But, if you pay for qualified educational expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. The American Opportunity Credit may be available for one student and the Lifetime Learning Credit for another.

Tuition and Fees Deduction

If your income is too high to claim the American Opportunity Credit, you may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. The tuition and fees deductions can reduce the amount of income subject to tax by up to $4,000. The tuition and fees deduction is not allowed if any of the below conditions are true:

• Your filing status is married filing separately,
• Another person can claim an exemption for you as a dependent on his or her tax return,
• Your modified adjusted gross income is more than $80,000 (single) or $160,000 (married/joint), you were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes or
• You or anyone else claims an education credit for expenses of the student for whom the qualified education expenses were paid.

Savings Plans

Section 529 of the IRS Code allows taxpayers to prepay or contribute to certain specified savings accounts to pay for a student's qualified higher education expenses. Distributions from 529 plans are tax-free if they are used to pay for qualified higher education expenses including tuition, required fees, books and supplies. If the designated student attends school at least half-time, room and board expenses also qualify. These plans offer significant flexibility if a student's education plans change - be sure to discuss these options with your tax professional.

Coverdell Education Savings Accounts were also created to incentivize both parents and students to pay for both primary and secondary education. Total contributions for the beneficiary of a Coverdell Education Savings Account cannot be more than $2,000 in any year, no matter how many accounts have been established so it is important that all contributors to these accounts for a child communicate with one another. Contributions to a Coverdell Education Savings Account are not deductible. However, the principal grows tax-free until distributed. When distributed, the beneficiary is not required to pay tax on these funds provided the amount distributed is less than the qualified education expenses incurred in the year distribution occurs.

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Raiche & Company CPAs, P.A. Newsletter

2011-11 Newsletter - In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

Our office would like to make you aware that, for tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation. Please read further to see which inflationary measures may affect your return next year:

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.

• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs

• For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
  
  
• The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.

• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

• For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below:

Medical Savings Accounts (MSAs)	Self-only coverage	Family coverage
Minimum annual deductible	$2,100	$4,200
Maximum annual deductible	$3,150	$6,300
Maximum annual out-of-pocket expenses	$4,200	$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

• The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
  
  
• Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

Please feel free to reach out to our firm via phone or email anytime to talk about your personal tax situation. We are always here for you!

Website: www.raichecpa.com

The Importance of Good Recordkeeping

Benjamin Franklin once said: "An ounce of prevention is worth a pound of cure." When it comes to record keeping, the 18th century inventor could not have been more correct. In the event that a natural disaster strikes your home or office, being well organized and redundant in your record keeping can save you or your loved ones considerable time and effort getting life back to normal when the dust settles. Here are a few useful tips any taxpayer can use to help minimize potential damage:

Utilize Electronic Recordkeeping

Talk to your bank about paperless bank statements so that you will always have access to them. Instead of receiving them in the mail, they can be sent to your email or you can access your account online with a username and password.

Important documents you receive regarding finances and taxes, such as W-2s and tax returns, can be scanned to your computer and stored on an external hard drive or CD for safekeeping. You should keep these external storage devices in secure locations with important documents like your medical directives and powers of attorney, wills and trusts, birth and marriage certificates.

You also might consider using an online service to back up your computer's hard drive. These services will store all of the information on your computer on their servers. That way, all of your files are backed up and can be easily recovered if your computer is lost or damaged.

Whether or not you choose to utilize paperless recordkeeping, you should keep physical copies of documents which are difficult to replace in at least one secure location. Secure locations include household safes, fireproof boxes, or safe deposit boxes. You should also consider storing a second set of those documents in a secure location as well.

Keep Evidence of Valuable Belongings

In order to ensure that you can claim your valuable lost property if it is lost or damaged, you should make lists of the objects in each room of your house and be sure to note their value. You should also take digital photos or videos of the belongings in your home. Just be sure to store copies of those files in a secure place. Business owners should create lists to record your possessions by category, such as office furniture and fixtures, information systems, motor vehicles, equipment, etc. Again, be sure to store the pictures, videos, or lists you make in a secure location so that they cannot be stolen or damaged by water and/or fire.

Have a Plan

It is important to have a way to receive information about extreme weather conditions before and after they occur. NOAA Weather Radios send out warnings and post-messages in the event of earthquakes, avalanches, oil spills, floods, and more. Be sure to keep working batteries in yours at all times. Also, be ready to take action if a disaster were to hit; have an emergency plan that you go over annually. Communicate this to your family, employees, or customers, and practice it if necessary.

Raiche & Company CPAs, P.A.

One New Hampshire Drive

Suite 125, Pease Tradeport

Portsmouth, NH 03801

(603) 742-8894

Raiche & Company CPAs, P.A. - Newsletter

011-08 Newsletter - Summary Of Debt Ceiling Increase

Congress approved a bill on August 2 increasing the debt ceiling by $2.1 trillion, averting default and limiting the downgrade of the federal government's AAA bond rating.

The legislative package not only raised the debt limit enough to keep the government operational through 2012, it also established an ambitious and complicated deficit reduction plan that includes spending cuts, a special "super committee" that will recommend further cuts in spending, enforcement triggers, and a vote on a balanced budget amendment to the U.S. Constitution.

Below is a summary of most of the agreement's major components (as of August 4, 2011):

Debt Ceiling Increase

The current $14.3 trillion ceiling on federal borrowing would be increased by an amount between $2.1 trillion and $2.4 trillion - a sum presumed sufficient to allow the Treasury Department to operate beyond the 2012 election and into 2013.

The increase would come in two steps. The debt limit would be increased by $900 billion immediately. Of that first $900 billion, $500 billion would be subject to a congressional resolution of disapproval. To block the increase, such a resolution would presumably have to be enacted over the president's veto, a step that requires two-thirds majority votes in both chambers.

A second increase of $1.2 trillion to $1.5 trillion would be available later. The size of the second increase would be determined by actions Congress takes to curtail growth in the debt.

If by early 2012 a joint congressional committee created by the legislation has recommended, and Congress has enacted, $1.5 trillion in additional savings for fiscal 2012-2021, the second increase in the debt limit would be $1.5 trillion. Alternatively, the debt limit would be increased by $1.5 trillion if a constitutional amendment requiring a balanced budget is sent to the states for ratification.

If the joint committee recommends, and Congress enacts, savings of less than $1.5 trillion, or if no additional savings are enacted, the second debt limit increase would be $1.2 trillion. The second debt limit increase would also be subject to a congressional resolution of disapproval, which could be vetoed.

Spending Cuts - First Round

An immediate reduction in the deficit would be achieved by placing statutory caps on discretionary appropriations for fiscal years 2012 through 2021. The savings would amount to $935 billion over 10 years, according to the Congressional Budget Office, when compared with spending levels estimated in January, or $756 billion when compared with CBO's March estimate that took into account savings enacted as part of fiscal 2011 appropriations (PL 112-10).

The discretionary spending cap for fiscal 2012 would be $1.043 trillion, which is about $24 billion more than the amount set by the House-adopted budget resolution (H Con Res 34). The cap for fiscal 2013 would be $1.047 trillion. For both years, a "firewall" would be erected between security (national defense, homeland security, and related activities) and non-security accounts - meaning domestic programs could not be targeted to provide more security spending.

The caps for fiscal 2014 through fiscal 2021 would not segregate security and non-security spending.

Enforcement Mechanism for Spending Caps

If lawmakers did not adhere to the discretionary appropriations caps, a process for imposing across-the-board, automatic spending cuts from discretionary accounts would take effect after Congress adjourns for the year.

The automatic mechanism would be similar to the system of spending "sequesters" enacted as part of the 1985 Gramm-Rudman anti-deficit law (PL 99-177). Some spending, including military pay, would be exempt from the automatic cuts.

Spending Cuts - Second Round

The new joint committee could recommend specific ways to reduce the deficit by an additional $1.5 trillion by 2021. The panel would be required to consider recommendations from regular legislative committees, and to report its recommendations to both chambers, subject to up-or-down votes without amendment.

The committee would be required to report by Nov. 23, and the House and Senate would be required to act by Dec. 23.

All of the federal budget would presumably be on the table, including entitlement cuts and revenue increases.

Enforcement Triggers for Panel Recommendations

Should the enacted recommendations from the joint committee not produce at least $1.2 trillion in savings, a process for automatic spending cuts would be triggered to achieve the desired savings and spread spending cuts equally across nine fiscal years.

Any sequester would be equal to the portion of the $1.2 trillion savings target that was not achieved. The first automatic cuts would take effect Jan. 2, 2013, and would fall equally on defense and non-defense accounts, including both discretionary spending and some entitlement spending.

Programs targeting low-income individuals and families would largely be exempt from the sequester, as they were under Gramm-Rudman. Medicare cuts would be restricted to no more than 2 percent of the program's outlays, and would only affect payments to providers, not beneficiaries.

Entitlement Cuts

The special joint committee would be likely to look closely at entitlement spending to achieve its deficit reduction goals. The spending cuts would be subject to tough negotiations over the next four or five months.

If a sequester was triggered, some restricted automatic cuts in Medicare spending might occur. It is unclear what other entitlement spending might be subject to a sequester.

Taxes

The proposal does not include immediate increases in revenue, although the joint deficit-reduction committee might consider revenue increases.

Earlier in the negotiations, Boehner proposed an increase of $800 billion in revenue. Such an increase might come either from elimination of tax breaks for individuals or corporations, or a comprehensive overhaul of the tax code might be structured to yield a net revenue increase.

Balanced-Budget Amendment

The plan requires both the House and the Senate to vote on a proposed balanced-budget amendment to the Constitution by the end of the year. If two-thirds of both chambers voted to adopt this amendment - and send it to the states for ratification - the second debt limit increase would be $1.5 trillion.

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Raiche & Company CPAs, P.A.

One New Hampshire Drive

Suite 125, Pease Tradeport

Portsmouth, NH 03801

6037428894

2011-07 Newsletter - IRS Raises Standard Mileage Rates

On June 23rd, the IRS announced that it will raise the optional standard mileage rates for the final six months of 2011. From July 1, 2011 to December 31, 2011, taxpayers can deduct 55.5 cents per mile for business miles, and 23.5 cents per mile for medical and moving expenses. These rates are up from fifty-one cents and nineteen cents respectively, while the per-mile deduction for charitable expenses remains fixed at fourteen cents.

If you use your vehicle for business-related purposes, and you do not want to keep track of every vehicle-related expense, like your gas, oil, and tires, you can use an IRS shortcut and deduct a standard amount per mile. Most taxpayers qualify for the standard mileage rate, but there are some exceptions. Also, you should keep in mind that the standard mileage rate does not excuse you from keeping detailed records. Should you decide to use the standard deduction, although you do not need to keep records of your expenses, you do need to record the date, destination, names and relationships of business parties, and mileage driven for each business trip.

It is not typical for the IRS to change the per-mile deductions in the middle of the year. Normally the IRS sets the standard deductible rate for the year, and it is not adjusted. "This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

Raiche & Company CPAs, P.A.

One New Hampshire Drive

Suite 125, Pease Tradeport

Portsmouth, NH 03801

6037428894