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        IRS Warns of Scams Connected

Dear Clients and Friends,

     Just when we thought we were ready for another tax season, Congress passed yet another tax law, “The Tax Relief and Health Care Act of 2006” (See page 3 for the highlights).  This becomes the third new tax act in 2006 alone.

     We discussed the highlights of “The Pension Protection Act of 2006” and “The Tax Increase Prevention and Reconciliation Act of 2005” in our previous newsletter.  If you have misplaced it or would like another copy, please let us know.  Also be aware that our newsletter is also available on our website.

     Also affecting 2006 are “The Energy and Transportation Acts of 2005.”  This legislation provides tax credits for energy efficient improvements to principal residences including qualifying windows, doors, certain fans, water heaters, heat pumps, and air conditioners.  There is a lifetime total credit equal to $500.  In addition, other energy credits include solar and fuel cell technology, as well as, various credits for vehicles including hybrids, lean burn technology and alternative fuel vehicles.  These other credits vary and are based on specific specifications.  We can help you determine the type and amount of energy credit you may qualify for.  Most of these credits are in effect for 2006 and 2007.

     I encourage you again to visit our webpage and check out the tax tips and calculators, which include the tax tip of the week, the business tip of the month, and various financial calculators.  Also, don’t miss the recently added ‘Taxes Quick Guide”.  This section provides a wealth of tax information as well as records retention guidelines.

As we head into another “busy” season, we look forward to working with all of you and to your continued success in 2007.

Sincerely,

     Though safeguards have been put in place to protect taxpayers, the IRS is warning taxpayers to be alert to possible scams as con artists may try to use this new program to extract money from unsuspecting taxpayers. Be suspicious of letters, telephone calls, and e-mails that pretend to be official IRS collection efforts.

     Here’s what the IRS says you need to know about the program.

     All taxpayers whose cases will be turned over to a private debt collection agency will know they are in the program before they are contacted by a private collector.

     The IRS will notify taxpayers by letter that they are in the program. The letter will contain the name of the collection agency given their account.

     Taxpayers will receive a second letter, this one from the collection agency, informing them that they will be contacted soon regarding back taxes.

     When paying a collection agency the taxes owed, taxpayers should make checks out to the U.S. Treasury, not to the collection agency or to any individual. The agency is to provide the appropriate IRS coupon and mailing address for the payment.

     Warning signs of a scam include threats to place liens or seize taxpayer property. The private collection agencies are authorized only to discuss payment schedules and to collect the debt.

     The taxpayer information the private agency will have is very limited. If an agency asks for personal or banking information, consider that a warning sign of a scam. The IRS never asks for taxpayer information such as PINs or account passwords, and they already have your social security number.

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Professional Accounting Expertise

Make Your Business Meetings Worth The Time

     Are your organizational meetings dull, uninspiring, and inefficient? Do they drain morale, waste time, and focus on the past? Would you like them to be vibrant, engaging, productive, and future-focused? If so, here are some suggestions to supercharge your business meetings.

Assess your current situation. Be honest. Determine what is and isn’t working and commit to improvement.

Raise your expectations. Demand more from your sessions. Agendas should be circulated in advance. Attendees should be on time, prepared, and ready to actively participate.

Set ground rules. No Web surfing or crossword puzzles. Keep your sessions disciplined and business-like. But don’t forget the benefits of humor to lighten things up and reduce stress.

Have an agenda, but be prepared to leave it. If a stimulating and productive discussion develops, exploit it. Harvest those creative ideas. You can always revisit less important matters.

Challenge your meeting time and formats. If your meetings get in a rut, try something different. Don’t underestimate the power of mixing things up.

Know when to quit. If you hit a big breakthrough, consider stopping. End on a high note.

Avoid the trivial. Handle routine updates via memos or e-mail.

Stretch and challenge the team. Your meetings are valuable personal and organizational development opportunities. Treat them that way.

Recognize excellence. Praise and reward performance.

Focus on the positives and keep future-focused. Maintain a positive tone. Discuss your yesterdays only to improve your tomorrows.

Recap and take action. Resolve issues, determine a course of action, and assign action steps. It’s important to make recognizable progress.

End on a unifying note. Reinforce the common bond and move forward together.

       In the final hours of its 2006 session, Congress passed legislation that extends several popular tax breaks for individuals and businesses. The Tax Relief and Health Care Act of 2006 was signed into law by President Bush on December 20, 2006. The late passage of these tax changes will cause a short delay in IRS processing of 2006 returns, since the Service must update its computers for the provisions in the new law.

       Here’s an overview of the extended tax breaks.

·    The optional itemized deduction for state and local sales taxes was reinstated for 2006 and 2007. The deduction can be taken in lieu of deducting state and local income taxes, a break for taxpayers who live in states without income tax or for those who pay more in state and local sales taxes than income taxes. Taxpayers can keep receipts or use IRS tables for the sales tax deduction.

·    The deduction for higher education tuition and fees had expired at the end of 2005, but is extended by the law for 2006 and 2007. This deduction can be taken both by those who itemize and those who don’t; it’s known as an “above-the-line” deduction. There are income limits that apply.

·    Teachers who buy classroom supplies with their own money can take a deduction of up to $250 for 2006 and 2007.

·    The research business tax credit is reinstated for 2006 and 2007. The work opportunity and welfare-to-work tax credits are extended for 2006; in 2007 they will be combined into one credit. The 15-year recovery period for certain leasehold and restaurant improvements is extended through 2007.

·    The law also extends certain tax breaks for energy conservation through 2008 and makes several changes to the rules for health savings accounts.

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Accounting Profession Launches “Feed The Pig” Campaign

      The American Institute of Certified Public Accountants (AICPA) and state CPA societies have launched an aggressive national public service campaign to advance financial literacy and to improve the savings habits of young adults. The name of the AICPA initiative is “feed the pig” and draws from the “piggy bank” image of youth. The “feed the pig” campaign has a stylish and financially savvy fictional icon named Benjamin Bankes who informs and urges a return to childhood savings patterns.

·    The Situation: According to the campaign information, financial literacy in the United States is in crisis. Americans spend 20% more than they earn, do not adequately save for retirement, exhibit poor financial habits, and have high levels of credit card debt. This is not a healthy condition for a country competing in a global economy.

·    Target Population: The “feed the pig” campaign is focused on young adults between the ages of 25-34, who have yet to develop ingrained life-long financial behavior patterns. The objective is to increase financial awareness, foster healthy economic habits and emphasize how small improvements in savings can have a dramatic impact over the course of a lifetime. The implied message is that if you adequately “feed the pig” now, it will return the favor in the future.

·    Campaign Tools: A devoted Web site, www.FeedthePig.org, is loaded with information and resources to advance personal finance. Site visitors can subscribe to free financial tips, explore a wealth of articles, tools, and suggestions to enhance financial resources and improve financial IQ. The campaign also features TV, radio, print and digital media along with billboards and bus kiosks to attract and motivate young adults.

     So, watch for the prosperous and wise Benjamin Bankes as he delivers his important “feed the pig” message from the CPA profession. 

Gifts:  Who Pays Tax and When?

     Receiving a gift is not a taxable event to the one who receives the gift. If the gift is large enough, it could result in gift tax being due by the donor.

     In any case, you are not to report any gifts you receive on your income tax return. This is true whether the gift is in cash or a gift of property.

     When you sell property you received as a gift, you have a whole new story. Your basis (cost) in the property is the same as it was in the hands of the donor. You are considered to have owned the property for as long as the donor owned it, and you also take the donor’s cost. This is true for gifts made while the donor is alive. Property received from an estate is treated differently.

     So how does this work on your tax return? Let’s assume that you received a piece of real estate from your mother three months ago, and the real estate has a current value of $100,000. We will further assume that your mother owned the property for twenty years and had paid $30,000 for it.

     If you sell the property this year for $100,000, you will have a long-term capital gain of $70,000 ($100,000 minus your mother’s cost of $30,000). You get the favorable long-term capital gain treatment because you are deemed to have owned the property for twenty years.

     A final note about gifts: They are not taxable to the person receiving the gift, but they are also not deductible by the person giving the gift. Only gifts to charities and other organizations approved by the IRS provide a tax deduction for the giver.

     If you have questions about gifts and the tax consequences of giving or receiving them, contact our office. We will be happy to assist you. 

     Nolan, Giere & Company is pleased to welcome Lee Ann Hiatt and Elizabeth “Beth” Frye to our team.  They are joining our staff as seasonal individual tax preparers.

     Lee Ann has 23 years of tax experience.  She resides in Huber Heights with her family and loves to spend time at Marblehead on Lake Erie.

     Beth received her BS in Accounting from the University of Central Florida.  She is currently a graduate student at Wright State University.  She resides in Huber Heights with her family and is a huge NASCAR fan.

This newsletter provides general tax, financial, and business information for our clients.  The information should not be acted upon without further details and/or professional assistance.