G. R. Reid

Accounting & Tax News

2012-02-28T01:17:00.000-08:00

G.R. Reid Associates, LLP

Certified Public Accountants
631.425.1800 www.GRReid.com

President's FY 2013 budget proposals carry numerous tax changes

On February 13, the President released his federal budget proposals for fiscal year 2013, and, on the same day, the Treasury released its “General Explanations of the Administration's Fiscal Year 2013 Revenue Proposals” (the so-called “Green Book”). The revenue proposals include over 130 large and small proposed tax changes for businesses and individuals, including new incentives to “insource” jobs, higher taxes for upper-income taxpayers, and the extension of key tax breaks.

Business Tax Proposals
The budget's proposals for business include the following:

The payroll tax cut currently in place for January and February of this year would be extended for the rest of 2012.
Qualified employers would be provided a tax credit for increases in wage expense, whether driven by new hires, increased wages, or both. The credit would be equal to 10% of the increase in the employer's 2012 eligible wages (OASDI wages) over the prior year (2011). The maximum amount of the increase in eligible wages would be $5 million per employer, for a maximum credit of $500,000, to focus the benefit on small businesses. For employers with no OASDI wages in 2011, eligible wages for 2011 would be 80% of their OASDI wage base for 2012. The credit would generally be considered a general business credit. A similar credit would be provided for qualified tax-exempt employers. The credit would be effective for wages paid during the one-year period beginning on Jan. 1, 2012.
Employers currently pay FUTA tax at a rate of 6.0% (beginning July 1, 2011) on the first $7,000 of covered wages paid annually to each employee. The rate for the first half of 2011 was 6.2%, including the 6% permanent tax rate and the 0.2% temporary surtax that expired on June 30, 2011. The net federal unemployment insurance tax on employers would permanently revert to 6.2%, effective for wages paid with respect to employment on or after Jan. 1, 2013. Also, under current law, employers in States that meet certain Federal requirements are allowed a credit against FUTA taxes of up to 5.4%, making the minimum net Federal rate 0.6%. States that become non-compliant are subject to a reduction in FUTA credit, causing employers to face a higher Federal UI tax. Effective on the enactment date, short-term relief would be provided, for example, the FUTA credit reduction for employers in borrowing States would be suspended in 2012 and 2013. Other changes would be made. For example, the FUTA wage base would be raised in 2015 to $15,000 per worker.
The 100% bonus first-year depreciation deduction that generally applies only for assets placed in service before 2012, would be extended through 2012.
Use of the last-in, first-out (LIFO) accounting method would be repealed, for tax years beginning after Dec. 31, 2013. Taxpayers required to change from the LIFO method also would be required to report their beginning-of-year inventory at its first-in, first-out (FIFO) value in the year of change, causing a one-time increase in taxable income that would be recognized ratably over 10 years.
For tax years beginning after Dec. 31, 2013, bar the use of the lower-of-cost-or market and subnormal goods methods of inventory accounting, which currently allow certain taxpayers to take cost-of-goods-sold deductions on certain merchandise before the merchandise is sold. Any resulting income inclusion would be recognized over a four-year period beginning with the change year.
An additional $5 billion of credits for investments in eligible property used in a qualifying advanced energy manufacturing project. Taxpayers would be able to apply for a credit with respect to part or all of their qualified investment. Applications for the additional credits would be made during the two-year period beginning on the date on which the additional authorization is enacted.
Replace the existing deduction for energy efficient commercial building property with a tax credit equal to the cost of property that is certified as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting, heating, cooling, ventilation, and hot water systems of the building by 20% or more in comparison to a reference building which meets certain minimum requirements. The tax credit would be available for property placed in service during calendar year 2013.
Effective for bonds issued after the enactment date, make the Build America Bonds program permanent at a Federal subsidy level equal to 30% through 2013 and 28% of the coupon interest on the bonds thereafter. The 28% Federal subsidy level would be intended to be approximately revenue neutral relative to the estimated future Federal tax expenditure for tax-exempt bonds. The eligible uses for Build America Bonds also would be expanded.
Effective after 2013, require employers in business for at least two years that have more than ten employees to offer an automatic IRA option to employees, under which regular contributions would be made to an IRA on a payroll-deduction basis. If the employer sponsored a qualified retirement plan, SEP, or SIMPLE for its employees, it would not be required to provide an automatic IRA option for its employees. Additionally, the non-refundable “start-up costs” tax credit for a small employer that adopts a new qualified retirement, SEP, or SIMPLE would be doubled from the current maximum of $500 per year for three years to a maximum of $1,000 per year for three years and extended to four years (rather than three) for any employer that adopts a new qualified retirement plan, SEP, or SIMPLE during the three years beginning when it first offers (or first is required to offer) an automatic IRA arrangement. This expanded “start-up costs” credit for small employers, like the current “start-up costs” credit, would not apply to automatic or other payroll deduction IRAs.
For qualified small business stock (QSBS) acquired after Dec. 31, 2011, make the 100% exclusion for qualified small business stock permanent. The AMT preference item for gain excluded under Code Sec. 1202 would be repealed for all excluded small business stock gain. Also, the time for a taxpayer to reinvest the proceeds of sales of small business stock under Code Sec. 1045 would be increased to 6 months for qualified small business stock the taxpayer has held longer than three years.
For tax years ending on or after the date of enactment, the maximum amount of start-up expenditures that a taxpayer may deduct (in addition to amortized amounts) in the tax year in which a trade or business begins, would be permanently doubled from $5,000 to $10,000. This maximum amount of expensed start-up expenditures would be reduced (but not below zero) by the amount by which start-up expenditures with respect to the active trade or business exceed $60,000.
For tax years beginning after Dec. 31, 2011, liberalize the tax credit available to small employers providing health insurance to employees. For example, the group of employers who are eligible for the credit would be expanded to include employers with up to 50 full-time equivalent employees and the phase-out would begin at 20 full-time equivalent employees.
Require corporate business jets that carry passengers to be depreciated over seven years instead of five, effective for property placed in service after Dec. 31, 2012.
Eliminate these tax preferences for oil and gas companies, generally effective after Dec. 31, 2012: investment tax credit for enhanced oil recovery projects, production credit for oil and gas from marginal wells, intangible drilling cost deduction, the deduction for tertiary injectants used as part of a tertiary recovery method, the exception to passive loss limits for working interests in oil and natural gas properties, percentage depletion, and two-year amortization of independent producers' geological and geophysical expenditures (amortization period would be increased to seven years).
Eliminate tax preferences for coal activities beginning in 2013 (expensing of exploration and development costs, percentage depletion for hard mineral fossil fuels, capital gains treatment for royalties, and the Code Sec. 199 deduction).
Tax certain “carried interest” as ordinary income, instead of at the 15% capital gains rate.
Permit IRS to issue generally applicable guidance about the proper classification of workers and to require prospective reclassification of workers who are currently misclassified and whose reclassification is prohibited under section 530 of the '78 Revenue Act. Penalties would be waived for service recipients with only a small number of workers, if they had consistently filed all required information returns reporting all payments to all misclassified workers and agreed to prospective reclassification of misclassified workers. This proposal would apply on enactment, but the prospective reclassification for those covered currently by section 530 of the '78 Revenue Act would not be effective for at least one year after the enactment date.

Proposals to Boost U.S. Manufacturing and Insourcing of Jobs
To encourage businesses to locate jobs and business activity in the U.S., the President's budget proposes to make these changes, among others:

Effective for expenses paid or incurred after the date of enactment, create a new general business credit against income tax equal to 20% of the eligible expenses paid or incurred in connection with insourcing a U.S. trade or business. Insourcing a U.S. trade or business would mean reducing or eliminating a trade or business (or line of business) currently conducted outside the U.S. and starting up, expanding, or otherwise moving the same trade or business within the U.S., to the extent that this action results in an increase in U.S. jobs.
Effective for expenses paid or incurred after the date of enactment, deductions for expenses paid or incurred in connection with outsourcing a U.S. trade or business would be disallowed. Outsourcing a U.S. trade or business would mean reducing or eliminating a trade or business or line of business currently conducted inside the U.S. and starting up, expanding, or otherwise moving the same trade or business outside the U.S., to the extent that this action results in a loss of U.S. jobs.
Creation of a new allocated tax credit to support investments in communities that have suffered a major job loss event (i.e., when a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in a long-term mass layoff). About $2 billion in credits would be provided for qualified investments approved in each of the three years, 2012 through 2014.
For tax years beginning after Dec. 31, 2012, limit the extent to which the Code Sec. 199 domestic production deduction is allowed with respect to nonmanufacturing activities by excluding from the definition of domestic production gross receipts (DPGR) any gross receipts derived from sources such as the production of oil and gas, the production of coal and other hard mineral fossil fuels, and certain other nonmanufacturing activities. Additional revenue obtained from this retargeting would be used to increase the general deduction percentage and to fund an increase of the deduction rate for activities involving the manufacture of certain advanced technology property to approximately 18%.
Retroactively effective after Dec. 31, 2011, make the research credit permanent and increase the rate of the alternative simplified research credit from 14% to 17%.

International Tax System
Following are highlights of the President's proposals for reforming the U.S. international tax system:

Defer the deduction of interest expense properly allocated and apportioned to a taxpayer's foreign-source income that is not currently subject to U.S. tax until such income is subject to U.S. tax.
Require a taxpayer to determine foreign tax credits from the receipt of a dividend from a foreign subsidiary on a consolidated basis for all its foreign subsidiaries. Foreign tax credits from the receipt of a dividend from a foreign subsidiary would be based on the consolidated earnings and profits and foreign taxes of all the taxpayer's foreign subsidiaries.
Provide that if a U.S parent transfers an intangible to a controlled foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the U.S., then an amount equal to the excessive return would be treated as subpart F income.
Clarify the definition of intangible property for purposes of the special rules relating to transfers of intangibles by a U.S. person to a foreign corporation (Code Sec. 367(d)) and the allocation of income and deductions among taxpayers (Code Sec. 482) to prevent inappropriate shifting of income outside the U.S.
Amend the rules that limit the deductibility of interest paid to related persons subject to low or no U.S. tax on that interest to prevent inverted companies from using foreign-related party and certain guaranteed debt to inappropriately reduce the U.S. tax on income earned from their U.S. operations.
Disallow the deduction for non-taxed reinsurance premiums paid to affiliates.
Modify tax rules for dual capacity taxpayers.
Tax gain from the sale of a partnership interest on look-through basis.
Prevent use of leveraged distributions from related foreign corporations to avoid dividend treatment.
Extend Code Sec. 338(h)(16), which provides that (subject to certain exceptions) the deemed asset sale resulting from a section 338 election is not treated as occurring for purposes of determining the source or character of any item for purpose of applying the foreign tax credit rules to the seller, to certain asset acquisitions.
Remove foreign taxes from a Code Sec. 902 corporation's foreign tax pool when earnings are eliminated.

Tax Changes for Individuals
The President's plan calls for numerous changes to be made for individuals, including the following:

For tax years beginning after Dec. 31, 2012, reinstatement of upper-income taxpayers' reduction of itemized deductions and phaseout of personal exemptions.
The expiration of the 2001 and 2003 (EGTRRA and JGTRRA) tax cuts for those with household income over $250,000 a year for joint filers ($200,000 for single taxpayers), effective after 2012.
For dividends received after Dec. 31, 2012, the current reduced tax rates on qualified dividends would expire for income that would be taxable in the 36% or 39.6% brackets. In other words, qualified dividends for upper income taxpayers would be taxed as ordinary income.
For long-term capital gains realized after Dec. 31, 2012, the current reduced tax rates on long-term capital gains would expire for capital gain income that, in the absence of any preferential treatment of long-term capital gains, would be taxable in the 36% or 39.6% brackets. Thus, the maximum long-term capital gains tax rate for upper-income taxpayers would be 20%.
For tax years beginning after Dec. 31, 2012, the tax value of specified deductions or exclusions from AGI and all itemized deductions would be limited to 28% of the specified exclusions and deductions that would otherwise reduce taxable income in the 36% or 39.6% tax brackets. A similar limit also would apply under the alternative minimum tax. The limit would apply to tax-exempt state and local bond interest, employer-sponsored health insurance paid for by employers or with before-tax employee dollars, health insurance costs of self-employed individuals, employee contributions to defined contribution retirement plans and individual retirement arrangements, the deduction for income attributable to domestic production activities, certain trade and business deductions of employees, moving expenses, contributions to health savings accounts and Archer MSAs, interest on education loans, and certain higher education expenses. The change would apply to itemized deductions after they have been reduced by the proposed statutory limit on certain itemized deductions for higher income taxpayers.
The budget proposal would make permanent the American Opportunity Tax Credit (AOTC), a partially refundable tax credit worth up to $10,000 per student over four years of college.
For tax years beginning after Dec. 31, 2012, the expansion of the EITC for workers with three or more qualifying children would be made permanent. Specifically, the phase-in rate of the EITC for workers with three or more qualifying children would be maintained at 45%, resulting in a higher maximum credit amount and a longer phase-out range.
For tax years beginning after Dec. 31, 2012, the AGI level at which the child and dependent care credit begins to phase down would permanently increase from $15,000 to $75,000. The percentage of expenses for which a credit may be taken would decrease at a rate of 1 percentage point for every $2,000 (or part thereof) of AGI over $75,000 until the percentage reached 20% (at incomes above $103,000).
The exclusion for income from the discharge of qualified principal residence indebtedness (QRPI) would be extended to amounts that are discharged before Jan. 1, 2015, and to amounts that are discharged pursuant to an agreement entered before that date.

Estate and Gift Tax Proposals
Restoration of transfer tax to 2009 levels. The estate, generation-skipping transfer (GST), and gift tax parameters as they applied during 2009 would be made permanent. The top tax rate would be 45% and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes. These changes would apply for estates of decedents dying, and for transfers made, after Dec. 31, 2012.
Portable estate tax exclusion made permanent. The provision allowing a surviving spouse to use the deceased spouse's unused estate tax exclusion, which expires for decedents dying after Dec. 31, 2012, would be made permanent.
Basis consistency and reporting requirement for donated and inherited property. The basis of property in the hands of the recipient could be no greater than the value of that property as determined for estate or gift tax purposes (subject to subsequent adjustments). A reporting requirement would be imposed on executors and donors to provide the necessary valuation and basis information to both the recipient and IRS. These rules would apply for transfers on or after the enactment date.
Toughened rules for valuation discounts. Certain additional restrictions (“disregarded restrictions”) would be ignored under Code Sec. 2704 in valuing an interest in a family-controlled entity transferred to a member of the family if, after the transfer, the restriction will lapse or may be removed by the transferor and/or the transferor's family. The transferred interest would be valued by substituting for the disregarded restrictions certain assumptions to be specified in regs. These rules would apply to transfers after the enactment date of property subject to restrictions created after Oct. 8, 1990 (the effective date of Code Sec. 2704)
Minimum and maximum term for grantor retained annuity trusts (GRATs). A GRAT would be required to have a minimum term of ten years and a maximum term of the life expectancy of the annuitant plus ten years. Also, the remainder interest would have to have a value greater than zero at the time the interest is created and any decrease in the annuity during the GRAT term would be prohibited. These rules would apply to trusts created after the enactment date.
Duration of GST tax exemption limited. On the 90th anniversary of the creation of a trust, the GST exclusion allocated to the trust would terminate. This rule would apply to trusts created after the enactment date, and to the portion of a preexisting trust attributable to additions to such a trust made after that date.
Coordination of income and transfer tax rules applicable to grantor trusts. The current lack of coordination between the income and transfer tax rules applicable to a grantor trust creates opportunities to structure transactions between the deemed owner and the trust that can result in the transfer of significant wealth by the deemed owner without transfer tax consequences. New rules for grantor trusts would prevent this by: (1) including the assets of the trust in the grantors' gross estate of that grantor for estate tax purposes, (2) subjecting to gift tax any distribution from the trust to one or more beneficiaries during the grantor's life, and (3) subjecting to gift tax the remaining trust assets at any time during the grantor's life if the grantor ceases to be treated as an owner of the trust for income tax purposes. These rules would apply for trusts created on or after the enactment date and with regard to any portion of a pre-enactment trust attributable to a contribution made on or after the enactment date.
Extension of estate tax lien on Code Sec. 6166 deferrals. The estate tax lien under Code Sec. 6324(a)(1) would be extended to apply throughout the Code Sec. 6166 deferral period, effective for estates of decedents dying on or after the effective date and for estates of decedents dying before the enactment date as to which the current law Code Sec. 6324(a)(1) lien period had not expired on the effective date.

Other Proposals
Many expiring provisions would be extended. The Administration proposes to extend a number of provisions that have expired or are scheduled to expire on or before Dec. 31, 2012. For example, the optional deduction for State and local general sales taxes, the deduction for qualified out-of-pocket classroom expenses, the deduction for qualified tuition and related expenses, the Subpart F “active financing” and “look-through” exceptions, and the modified recovery period for qualified leasehold, restaurant, and retail improvements, would be extended through Dec. 31, 2013.
Reducing the tax gap. The President's budget calls for increases in IRS's tax enforcement and compliance budget to enable IRS to more effectively crack down on “tax cheats and delinquents,” and thereby bring in more revenue, and implement many recent tax law changes. The plan also includes a host of measures to expand information reporting, improve compliance by businesses (e.g., require more forms to be filed electronically), and specific changes to step up collection of taxes.

The following web links can go to the White House or Treasury websites to access the official release material:

White House FY2013 budget webpage can be viewed at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf .
Treasury press release can be viewed at http://www.treasury.gov/press-center/press-releases/Pages/tg1414.aspx.
Full text of the FY2013 Green Book can be viewed at http://www.treasury.gov/resource-center/tax-policy/Documents/General-Explanations-FY2013.pdf.

Source: Federal Tax Updates on Checkpoint News tab 2/14/2012
Source: WG&L Accounting & Compliance Alert on Checkpoint 2/14/2012
© 2012 by Thomson Reuters/RIA. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of Thomson Reuters/RIA.

Healthcare and Benefit Services

2012-02-28T00:41:00.000-08:00

: : Julie Seiden, Managing Director,
Health Benefits Services |

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC

Behavior-Based Design Promotes Healthy Lifestyle Changes

According to the Centers for Medicaid Services, at $8,086 per person annually, the United States spends more per capita on health care than any other country in the world. However, at least half of the country's population has one or more chronic diseases, 33% are diabetic or pre-diabetic and 66% are overweight or obese. These statistics came from the U.S. Centers for Disease Control and Prevention. However, Americans inflict these statistics upon themselves. Lack of exercise, poor nutrition and smoking are three leading contributors to such a high percentage of unhealthy people.

Promoting A Healthy Lifestyle
People are naturally wired to keep doing what they're already doing. If there is no incentive to change, even if it's beneficial, they won't. This also applies to offering passive open enrollment. Employees are more likely to keep their current coverage. VBID is a new insurance design based on value. It also encourages wellness proponents. The main idea is to match patients' out-of-pocket expenses with heath service values. Different levels of value are recognized in this approach. By making high-value treatments more available and discouraging low-value treatments, this approach works to yield improved health outcomes on all health care expenditure levels. Research shows that barrier reductions improve patient compliance for recommended treatments.

In addition to increasing compliance for treatments, this approach has also been shown to increase compliance in patients who need regular medication. A study performed by the Center for Health Value Innovation and the University of Michigan Center for Value-Based Insurance Design showed that patients with chronic illnesses who required medication were more willing to take it. Their cooperation for preventative services was also better. However, there is still one troubling issue, which is people who have the opportunity and encouragement to comply but don't. This has left researchers wondering what is missing from the VBID approach that is necessary to make such people more compliant. The solution is to implement the use of loss aversion and productive tension to raise individual involvement for improving healthy behavior.

Raising The Productive Tension Level
The main idea of productive tension is to create a program that gives enough initiative to provide patients with a positive reason to change. In order to be optimal, productive tension needs to have four different components:

Information - Although it increases knowledge, it doesn't always encourage action. If it did, the country's population would be rich, fit and happy. After purchasing $46 billion on diet and self-help books in 2010, Americans still need help.
Infrastructure - This includes having the right tools, technology and resources to help people. Keep in mind that infrastructure alone doesn't necessarily initiate action.
Incentives - Nothing works better for motivation than a reward. Financial rewards are especially enticing. These still may not initiate action in all people. In a Global Survey of Health Promotion and Workplace Wellness Strategies, only 48% of employers stated that their incentive programs were minimally effective.
Imperatives - These are important for accountability and understanding. People need to know what they must accomplish, why they need to do so and what happens if they fail.

Applying The Behavioral Design
One illustrative example of applying the behavior-based design is depicted by Safeway. The supermarket chain's CEO, Steven Burd, said that 70% of his employees' health care costs were because of their own behavior. In addition to this, 74% of those cases included four major chronic health conditions. The conditions were cancer, diabetes, cardiovascular disease and obesity. During the following five years, the supermarket chain redesigned its health care infrastructure. Their new focus, after launching the Healthy Measures Initiative, is consumer-based strategies. As a result of the positive changes, Safeway has seen a great increase in voluntary participation among their workers for controlling and preventing these conditions.

Solutions For Creating Tension
There are several different ways to encourage participants to become healthier. The following are a few good examples of beneficial changes:

Health Requirements - Having employees pass an annual physical and health exam is a great idea for an incentive.
Company Gym - While providing an outside gym membership may be effective sometimes, having a gym or fitness center in the workplace is even more effective.
Company Contests - Hosting contests that all employees can participate in is beneficial. Weight loss or health competitions with cash prizes and contribution pools are extremely successful.

The bottom line is that increasing tension to promote a healthy lifestyle change is the best way to make it happen. People are much easier to convince when there are both incentives and rewards.

For more information on our services, visit the G.R. Reid Healthcare & Benefit Services website.

Accounting & Tax News

2012-02-21T16:06:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

www.GRReid.com

Congress Passes Payroll Tax Cut Extension

Last Friday, the House of Representatives and the Senate both passed a bill that will extend the reduced 4.2% Social Security tax rate through the end of the year (The Middle Class Tax Relief and Job Creation Act of 2012, H.R. 3630). The vote was 293–132 in the House and 60–36 in the Senate. The bill now goes to President Barack Obama, who is expected to sign it quickly.

The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to 4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. (The employer portion remained at 6.2%.) Under the Temporary Payroll Tax Cut Continuation Act of 2011, P.L. 112-78, enacted Dec. 23, 2011, the 4.2% rate was extended through Feb. 29, 2012. For 2012, that rate applies to the first $110,100 of wages. H.R. 3630 extends the 4.2% rate through the end of 2012. As a result, a recapture provision included in the temporary extension will not take effect. Under that rule, taxpayers with income from employment for January and February that exceeds $18,350 would have been required to recapture the excess benefit they receive. The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors. The extension of the payroll tax cut is estimated by the Joint Committee on Taxation staff to cost $93 billion in revenue over the next two years. The act raises revenue through an auction of the spectrum of public airwaves, currently reserved for television, to allow for more wireless Internet systems. The auctions are projected to raise $15 billion. The act also repeals earlier-enacted shifts in the timing of corporate estimated tax payments.

Content provided by the Journal of Accountancy http://www.journalofaccountancy.com/Web/20125176.htm

Financial & Wealth Services News

2012-02-21T08:02:00.000-08:00

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC

Save Now or Save Later?

Most people have good intentions about saving for retirement. But few know when they should start and how much they should save.

Sometimes it might seem that the expenses of today make it too difficult to start saving for tomorrow. It’s easy to think that you will begin to save for retirement when you reach a more comfortable income level, but the longer you put if off, the harder it will be to accumulate the amount you need.

The rewards of starting to save early for retirement far outweigh the cost of waiting. By contributing even small amounts each month, you may be able to amass a great deal over the long term. One helpful method is to allocate a specific dollar amount or percentage of your salary every month and to pay yourself as though saving for retirement were a required expense.

Here’s a hypothetical example of the cost of waiting. Two friends, Chris and Leslie, want to start saving for retirement. Chris starts saving $275 a month right away and continues to do so for 10 years, after which he stops but lets his funds continue to accumulate. Leslie waits 10 years before starting to save, then starts saving the same amount on a monthly basis. Both their accounts earn a consistent 8% rate of return. After 20 years, each would have contributed a total of $33,000 for retirement. However, Leslie, the procrastinator, would have accumulated a total of $50,646, less than half of what Chris, the early starter, would have accumulated ($112,415).*

This example makes a strong case for an early start so that you can take advantage of the power of compounding. Your contributions have the potential to earn interest, and so does your reinvested interest. This is a good example of letting your money work for you.

If you have trouble saving money on a regular basis, you might try savings strategies that take money directly from your paycheck on a pre-tax or after-tax basis, such as employer-sponsored retirement plans and other direct-payroll deductions.

Regardless of the method you choose, it’s extremely important to start saving now, rather than later. Even small amounts can help you greatly in the future. You could also try to increase your contribution level by 1% or more each year as your salary grows.

Distributions from tax-deferred retirement plans, such as 401(k) plans and traditional IRAs, are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if withdrawn prior to age 59½.

*This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return involve a higher degree of investment risk. Taxes, inflation, and fees were not considered. Actual results will vary.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.

This material was written and prepared by Emerald.

Accounting & Tax News

2012-02-21T06:20:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

Charitable Deductions – More Than One Benefit

Charitable giving is not only a rewarding experience, but also an excellent tax tool to reap benefits when it comes to filing income tax returns. Highlighted below are the main areas to consider when planning for charitable giving.

Cash Donations
Donations under $250 given by cash, check, credit card or payroll deduction are fully deductible as charitable contributions and can be simply supported by a canceled check, credit card receipt or written communication from the charity. Taxpayers do not attach this documentation to their return, rather it is kept in their records.

A donation in an amount more than $250 must be substantiated by the charity in writing. This letter will indicate the total amount of the donation, date donated, and the value of the donation. When donating to an event, such as a dinner, gala, golf outing or other function held for charity, the value of what you received (i.e. tickets to the event or meals and drinks provided at the event) will be deducted from the total amount donated to arrive at the value of the deduction that may be taken on your income tax return. For example, if you donate $1,000 to a charity golf outing but upon attending the outing you eat a meal worth $50 and the ticket price to the event would have cost you $100, your charitable deduction is actually $850 instead of $1,000. If instead you donate $1,000 but do not attend the outing, the full $1,000 is deductible on your return.

Donations in excess of $5,000 require a qualified appraisal in order to be deductible. Those in excess of $500,000 require that the qualified appraisal be attached to the return.

Please note that cash contributions are limited to 50% of your adjusted gross income when giving to public charities. Donations to non-operating private foundations are limited to 30% of your adjusted gross income. These amounts can also be altered if you are in AMT (subject to Alternative Minimum Tax). Consult your tax advisor to be sure that your donations are in your best tax planning interests. Donations that exceed these limits may be carried forward for five years (for individuals), but will be lost after that time.

Property Donations
Donations of property, such as stock or securities, are another excellent way to give to charity. Property held long-term (longer than one year) is deductible as a donation at its current fair market value, thus by giving the property away you avoid paying the capital gains tax that you would have incurred if the property was sold. These donations are limited to 30% of adjusted gross income if given to public charities and 20% if given to non-operating private foundations. There are some limitations regarding basis in making property donations so please consult your tax advisor when considering such donations. Generally speaking, you should not donate property that has a fair market value less than your basis as this is technically a loss to you. In this scenario you should sell the stock and deduct the loss since only the lesser of fair market value or basis is deductible. You may then donate the proceeds to a charitable cause.

Another consideration in donating property is that donations of tangible personal property are limited to basis in the property, unless the property is directly related to the charity’s tax-exempt function in which case you may deduct the fair market value. Donation of services are not deductible as charitable contributions, although you may deduct mileage and out-of-pocket expenses related to the donation.

A donation of a car or truck cannot be deducted unless the charity is specifically using the vehicle. The amount that might be deductible in this case is the total that the charity receives after selling the vehicle.

Other Considerations
Taxpayers over the age of 70 ½ can donate directly from IRA funds to charitable organizations. This can help satisfy minimum distribution requirements and the portion that would not otherwise have been taxable may be a deduction. This is an excellent planning tool in that the charitable amount will be excluded from your adjusted gross income and thus save taxes in addition to the charitable deduction.

Donations of clothing to charity must be in at least “good condition” to be deductible. Clothing and similar household goods donated must be measured by standards provided by the charitable organization.

Charitable remainder trusts are another option for charitable giving (also known as CRTs). CRTs are tax exempt. This type of investment benefits both the taxpayer and the charity in that it pays an amount (that will be taxable to you) to you each year and at the end of its term distributes remaining assets to charities. When funding the CRT, the donor receives a current year deduction for the present value of the assets designated to charity. This is also practical in estate tax planning as the funds placed into the CRT are removed from the estate.

Charitable lead trusts help benefit charity while transferring assets to loved ones. Also known as a CLT, the trust pays amounts to charities over time and at the end of its term its remaining assets pass on to the beneficiaries of the trust. In funding the CLT, donors make a taxable gift equal to the present value of the amount that will be distributed to beneficiaries. Again, this is also an estate tax planning technique as these funds are removed from the estate.

When donating please confirm that the charity is a qualified charitable organization.

Please visit the G.R. Reid website for contact information or to arrange a consultation.

Commercial Insurance Services

2012-01-25T04:00:00.000-08:00

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Substance Abuse Costs Employers Billions

Substance abuse problems among employees cost businesses billions of dollars each year. According to the 2008 National Survey on Drug Use and Health, in that year, 73% of the nation's adults with alcohol or drug dependence were employed either full- or part-time. This amounts to nearly 13 million Americans working under the influence. Put another way, this data from the U.S. Substance Abuse and Mental Health Services Administration means that 8% of full-time employed adults and 10.2% of part-time employed adults are substance abusers.

For the majority of substance abusers, their problem lies with alcohol. The same study reveals that slightly more than half of Americans aged 12 or older reported being current drinkers of alcohol (51.6 percent). This translates to an estimated 129 million people, which was similar to the 2007 estimate of 126.8 million people (51.1 percent). According to information published by Ensuring Solutions to Alcohol Problems, a part of the George Washington University Medical Center, alcohol abuse costs American businesses $134 billion in productivity losses annually, and the health care costs for these employees are about twice as high as for those without an alcohol abuse problem. Employees who are heavy drinkers use twice as much sick time as other employees, spend four times as many days in the hospital than the national average, and have higher rates of job turnover. Significantly, light and moderate alcohol users, who are greater in number than heavy drinkers or alcoholics, account for 60% of alcohol-related absenteeism, tardiness, and poor work quality. And, the problems of alcohol abusers go beyond the addicted individual: about 20% of employees say they have been injured by, have covered for, or have had to work harder because of other employees' drinking.

The above data shows that alcohol and other substance abuse takes a toll on workplace productivity, and contributes to higher medical costs both for treatment of the addiction and for substance-related medical issues. Employee substance abuse problems also result in an increased occurrence of workplace accidents and higher disability and workers' compensation costs. It is clearly in an employer's best interests to seek ways to minimize the impact of employees' substance abuse on the workplace. Experts in the field stress the importance of workplace practices that educate employees about the health hazards of substance addiction and encourage employees to seek early treatment of any problems. While stressing the importance of a drug-free workplace, policies that rely primarily on discipline can result in addicted employees hiding their problems out of fear of losing their jobs, and in co-workers enabling such behavior in a spirit of friendship. In that kind of environment, an addicted employee may resist seeking any available help-such as obtaining treatment under the medical plan or taking a leave to enroll in a treatment program-until a crisis occurs.

On the other hand, employees will be more likely to come forward and get the help they need if they believe that by doing so they will receive help, not punishment. The same is true of co-workers, who can be an invaluable resource in encouraging addicted employees to seek help and to stay on track once treatment has begun. Since most medical insurance plans include at least some substance abuse benefits, workplace communications about a business's policies on alcohol/drug use should include this information. Employees are more likely to seek help if they feel it is within their reach, and they may not realize that this benefit is available to them. Employee assistance programs (EAPs) also can offer screenings, counseling, and treatment referrals for employees with substance problems; depending on the EAP, it also may have worksite awareness and supervisor training programs.

Communications to employees about any available benefits should stress that both medical plan and EAP services are confidential. This, along with a supportive (rather than punitive) environment, increases the likelihood that employees will seek the help that they need.
With many dollars in lost productivity at stake, the reasons for businesses to promote substance abuse awareness are compelling. And, because work is such an important part of most people's lives, the workplace can be an effective place for substance abuse intervention to begin.

Accounting & Tax News

2012-01-25T03:00:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

Dues paid for membership to the taxpayer's golf club are not subject to tax.

The taxpayer's members possess no proprietary rights in the entity and have no control over its activities or management. Membership in the club is not restricted, other than by the capacity of the facility and the word “member” is used by the taxpayer only as a marketing device. Accordingly, the taxpayer is not a “social or athletic club” within the meaning of N.Y. Tax Law§ 1105(f)(2) Therefore, membership dues paid for membership in the club are not subject to sales tax under N.Y. Tax Law§ 1105(f)(2). (New York Advisory Opinion TSB-A-11(33)S, 12/20/2011.)

 © 2012 Thomson Reuters/RIA. All rights reserved.

Accounting & Tax News

2012-01-25T01:00:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

Tax Filing News Briefs…

Payroll tax cut temporarily extended

The Temporary Payroll Tax Cut Continuation Act of 2011 was enacted late last year. It temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2% to 4.2% of wages paid through Feb. 29, 2012. Shortly after its passage, the IRS instructed employers to implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31, 2012. The law also includes a “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (i.e., two-twelfths of the 2012 wage base of $110,100). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2% of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100). In addition, under the new law, the social security tax rate for a self-employed individual remains at 10.4%, for self-employment income of up to $18,350 (reduced by wages subject to the lower rate for 2012). Congress is going to try to negotiate a deal to extend the payroll tax cut for all of 2012. If a deal is struck to extend it for the full year, the recapture provision for employees would not apply.

Credit for hiring veterans extended and enhanced

A law enacted last November extended and enhanced a credit for hiring qualified veterans. Before the law was passed, the credit would have been available only if the qualified veteran were hired before Jan. 1, 2012, and only certain veterans were considered qualified veterans. The new law extends the credit for hiring qualified veterans, adds two new classes of veterans who are considered qualified veterans, increases the credit for hiring certain qualified veterans, “fast-tracks” the process for certifying that an individual is a qualified veteran, and provides tax-exempt employers with a credit against payroll tax for hiring qualified veterans. The credit amount varies depending on a number of factors. It can be as high as $9,600 for hiring a qualified disabled veteran. For an employer to qualify for the credit, the qualified veteran must begin work for the employer before Jan. 1, 2013 and other requirements must be met.

New rules for deducting or capitalizing tangible property costs

The IRS has issued new regulations for determining whether amounts paid to acquire, produce, or improve tangible property may be currently deducted as business expenses or must be capitalized. The regulations will affect virtually all taxpayers that acquire, produce, or improve tangible property. They are comprehensive, voluminous and virtually rewrite the rules in this area. For example, they provide detailed definitions of “materials and supplies” and “rotable and temporary spare parts” and prescribe new rules and elective de minimis and optional methods for handling their cost. They also have rules for differentiating between deductible repairs and capitalizable improvements, among many other items. The regulations generally are effective in tax years beginning after Dec. 31, 2011. However, to add to their complexity, some of the new rules in the regulations do not supersede prior IRS guidance.

New foreign asset reporting guidance and form

The IRS issued detailed guidance on the new law requiring individuals with an interest in a “specified foreign financial asset” during the tax year to attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than $50,000 (or a dollar amount higher than $50,000 as the IRS may prescribe). In addition, the IRS issued Form 8938 (Statement of Specified Foreign Financial Assets), which individual taxpayers will use starting in the 2012 tax filing season to report specified foreign financial assets for tax year 2011. The guidance consists of detailed temporary regulations. They define terms that apply for purposes of the reporting requirement; provide rules to determine if a specified individual must file a Form 8938 with their annual return; define what are specified foreign financial assets; detail what information needs to be reported; provide guidelines for valuing specified foreign financial assets; list exceptions to the reporting requirements; and describe the penalties that apply for failure to comply with the reporting requirements.

Standard mileage rates flat or lower
The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 55.5¢ per each business mile traveled after 2011. For 2011, it was 55.5¢ for miles driven after June 30 and 51¢ per mile for miles driven before July 1. Further, the 2012 rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 23¢ per mile. For 2011, it was 23.5¢ for miles driven after June 30 and 19¢ per mile for miles driven before July 1.

Accounting & Tax News

2012-01-24T23:36:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

April 17 Tax Deadline

Taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns.

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline. The IRS will begin accepting e-file and Free File returns on Jan. 17, 2012.

Assistance Options
Last year, the IRS unveiled IRS2Go, its first smartphone application that lets taxpayers check on the status of their tax refund and obtain helpful tax information. The IRS reminds Apple users that they can download the free IRS2Go application by visiting the Apple App Store and Android users can visit the Android Marketplace to download the free IRS2Go app.

Virtual Service
The IRS has begun a new pilot program where taxpayers can get assistance through two-way video conferencing. The IRS is conducting a limited roll out of this new video conferencing technology at 10 IRS offices and two other sites, and may expand to further sites in the future. A list of locations is available on IRS.gov.

Check for a Refund
Once taxpayers file their federal return, they can track the status of their refunds by using the "Where's My Refund? tool, which taxpayers can get to using the IRS2Go phone app or from the front page of www.IRS.gov. By providing their Taxpayer Identification Numbers, filing status, and the exact whole dollar amount of their anticipated refund taxpayers can generally get information about their refund 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

Health Benefit Services News

2012-01-24T23:21:00.000-08:00

: : Julie Seiden, Managing Director,
Health Benefits Services |

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC

Is it Better to Self Fund Employee Health Benefits?

Employee health bills are fluctuating because of uncertainty related to the 2010 healthcare reform bill. Companies are trying to contain the damage by paying employee health claims out of pocket. Joseph Berardo, Jr., CEO of MagnaCare, said that the total savings from doing this could be between 10% and 20%. MagnaCare administers self-funded health insurance plans to municipalities and businesses in New Jersey and New York.

When employers debate whether to adopt a self-funding plan, the possibility of lower monthly healthcare costs should be considered in comparison with the risk of covering employees' healthcare bills. There is no concrete answer for this issue that is right for all situations. The best answer depends on the demographics of employee bases and the company's financial situation. The risk of an employee having an accident or developing a serious illness is a major concern.

Although nearly 93% of companies with more than 5,000 workers have self-funded plans, many smaller companies don't. According to a recent survey conducted by Kaiser Family Foundation, the reason for reluctance among smaller companies is the possibility of being hit with a large employee healthcare bill and not having enough cash to pay it. The survey found that only 16% of companies with under 200 workers had self-funded plans. However, experts in this industry expect interest in these plans to rise in the future.

The Benefits Of Self-Funded Plans 

From the data gathered, it's clear that there are some benefits to self-funded plans. However, there are more benefits than those that are apparent on the surface.

1. Quality Of Data 

Employers have better access to health claims of employees. In addition to this, they also have more information about their employees' demographic information. Exposure is limited only to employees instead of a broad population. This is a major benefit over regular health plans, which only offer generalized information.

2. Customized Plans 

Employers decide what is covered in the plan. This includes benefits, exclusions and eligibility provisions. Employee cost sharing, retiree benefits and policy limits are also decided by the employer. With exemption from state rules, employers are able to decide on specific provisions without state considerations.

3. Control Of Cash

 Since coverage isn't prepaid, employers have access to interest and cash income that wouldn't be available under regular insurance policies. Self-funded plans may also delay payment of health plan fees until the services have been charged. However, if claims are lower, the employer is able to retain the savings instead of allowing the insurer to keep that money. Another benefit is that self-funded companies are not under obligation to pay state health insurance premium taxes.

4. Lower Employee Premiums 

Workers will enjoy lower premiums for both single and family plans. In addition to this, they also pay less upfront when they're enrolled in complete or partial self-funded plans than they would at a company that is fully insured.

5. ERISA Laws Replace State Regulations This federal law exempts self-funded plans from the state's regulations. This includes reserve requirements, insurance laws, premium taxes, mandated benefits and consumer protection regulations. Employers must still abide by rules from the following entities:

ADA 
U.S. Tax Code 
Health Insurance Portability & Accountability Act 
Newborns' & Mothers' Health Protection Act 
Pregnancy Discrimination Act
 Mental Health Parity Act
 Women's Health & Cancer Rights Act

The Cons Of Self-Funded Employee Plans 

Although there are many benefits to enjoy by implementing self-funded plans, there are also potential downfalls. It's important to consider these.

1. Financial Risk 
With less employees than a larger company, there is a higher statistical risk of costly claims for illnesses or accidents. Most employers with self-insured plans purchase stop-loss coverage in order to get a reimbursement for claims totaling amounts over a specific dollar level. In a description posted by the Self-Insurance Institute of America, stop-loss coverage is insurance that indemnifies a plan sponsor from claim frequency or severity that is abnormal. Companies such as Zurich, Gerber Life and Arch Insurance, which are all considered large companies, provide this type of coverage.

2. Administrative Risks 
The Department of Labor has researched how self-funded employers fail to implement efficient administrative systems. Failure to correctly administer a plan is considered a breach of fiduciary duty. Employers take full legal responsibility for operating the plan, so it's important to realize just how crucial this responsibility is. In addition to worrying about this, there are also strict rules for private claims information. Since employers have access to such information, they must take further measures to protect it and keep it secure. In some cases, this may require hiring one or more security workers.

3. Administrative Costs 
Self-insured claims can be administered within the company or handled by a subcontracted party, which is commonly called a TPA. These administrators assist employers in setting up self-insured group plans. They also coordinate stop-loss coverage, utilization review services and provider network contracts. However, there are extra costs for these services.

4. Economic Weakness
 It may be necessary to keep a self-funded plan for a minimum of three to five years in order to fully enjoy the benefits. This may be extremely difficult for some companies during economic hardship.

Be sure to weigh the benefits and disadvantages of self-funded plans before making any changes. If the task of determining how profitable such a change would be is too difficult, consider hiring the services of a professional analyst.

Financial & Wealth Services News

2012-01-24T23:06:00.000-08:00

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC

What Is An Exchange-Traded Fund?

Exchange-traded funds (ETFs) are just one of the many types of investment funds available, but they have some qualities that are unique and set them apart from other vehicles. ETFs are securities that attempt to track all types of indexes, industries, or commodities. For example, an ETF might be made up of securities representative of the technological industry or of the S&P 500.*

When ETFs were first created in the 1990s, the aim was to mimic the movements of an index of a specific financial benchmark. Today, ETFs also follow industries and commodities, not just indexes. The investment vehicle with the sole purpose of mirroring a specific index is called an index fund.

One of the reasons some investors may choose ETF funds is because they combine the diversification of a mutual fund with the flexibility of a stock. ETFs do not have their net asset values calculated each day, as do typical mutual funds, but rather their prices may fluctuate throughout the day based on the rate of demand on the open market.

Although the value of an ETF comes from the worth of the underlying assets comprising it, shares may trade at a “premium” or a “discount.” ETF shares are sold on stock exchanges; investors can buy or sell them at any time during the day. The underlying assets of the fund are not affected by market trading.

Exchange-traded funds may have expense ratios that are lower than those of an average mutual fund, and they are usually more tax-efficient than most mutual funds. Additionally, shareholders can often invest as little or as much as they desire. However, an ETF cannot be redeemed by a shareholder; rather, it can be sold only on the stock market.

A downside to exchange-traded funds is the commission fee, which is generally not associated with a mutual fund. Commissions are involved because ETFs are traded like stocks, rather than like mutual funds. However, despite this downside, an ETF can be a diversified and low-cost investment that often has a low turnover rate, so you might want to consider ETFs as part of your investment portfolio. Keep in mind that diversification is a method to help manage investment risk; it does not guarantee against loss.

The return and principal value of ETF and mutual fund shares fluctuate with market conditions. Shares, when sold or redeemed, may be worth more or less than their original cost.

Exchange-traded funds and mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

* The S&P 500 is an unmanaged group of securities that is widely recognized as being representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc. All rights reserved.

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.

Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security

Accounting & Tax News

2011-12-27T08:38:00.000-08:00

Congress Passes Temporary Payroll Tax Cut Extension

G.R. Reid Associates, LLP
631.425.1800

The reduced 4.2% Social Security tax rate will remain in effect at least through February.

The Senate and the House of Representatives on Friday both agreed by unanimous consent to extend the reduced rate, and President Barack Obama signed the bill—the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765)—the same day. The reduced rate had been scheduled to end after Dec. 31.

In the new year, a conference committee of representatives and senators will be appointed to discuss extending the reduced rate for the rest of 2012.

The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to 4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. The employer portion remained at 6.2%. Under the law enacted Friday, the 4.2% rate is extended through Feb. 29, 2012.

The act provides special rules for 2012 so that taxpayers with self-employment income and income from employment in excess of $18,350 (one-sixth of the 2012 Social Security wage base of $110,100) do not receive an extra benefit. If a full-year extension of the payroll tax cut is not enacted, taxpayers with income from employment for January and February that exceeds $18,350 will be required to recapture the excess benefit they receive. The recapture provision was included instead of a cap on the amount of employment income because of the compliance difficulties that would cause employers.

Because the extension affects withholding and was enacted only a little over a week before the higher payroll tax was scheduled to go into effect, it is not clear how well employers and payroll companies will be able to handle that change. The IRS on Friday notified employers that they should implement the lower payroll tax rate as soon as possible in 2012, but not later than Jan. 31 (IR-2011-124). The IRS also said that if an employer overwithholds during January, it should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2012. The IRS also said that it will issue more guidance on implementing the provisions of the two-month extension, including revised employment tax forms and information for employees who may be subject to the recapture provision.

The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors.

Congress’ use of unanimous consent to approve the extension allowed it to send the bill to the president without requiring lawmakers who had left the capital to return to Washington.

Published in the Journal of Accountancy on December 23, 2011.

Financial & Wealth Services News

2011-12-20T13:50:00.000-08:00

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC

How Should I Manage My Retirement Plan?

Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax-deferred until it is withdrawn at retirement. Distributions from a tax-deferred retirement plan, such as a 401(k) plan, are taxed as ordinary income and may be subject to an additional 10-percent federal tax penalty if withdrawn prior to age 59 ½. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.

Conventional wisdom says if you have several years until retirement, you should put the majority of your holdings in stocks. Stocks have historically outperformed other investments over the long term. That has made stocks attractive for staying ahead of inflation. Of course, past performance does not guarantee future results. The stock market has the potential to be extremely volatile. The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Is it a safe place for your retirement money? Or should you shift more into a money market fund offering a stable but lower return? And will the instability in the markets affect the investments that the sponsoring insurance company uses to fund its guaranteed interest contract?
If you’re participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace.

Here are a few guidelines to help you make this important decision.

Consider Keeping a Portion in Stocks

In spite of its volatility, the stock market may still be an appropriate place for your investment dollars — particularly over the long term. And retirement planning is a long-term proposition.
Since most retirement plans are funded by automatic payroll deductions, they achieve a concept known as dollar cost averaging. Dollar cost averaging can take some of the sting out of a descending market.
Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of the fluctuating prices of such securities. You should consider your financial ability to continue making purchases through periods of low price levels. Dollar cost averaging can be an effective way for investors to accumulate shares to help meet long-term goals.

Diversify

Diversification is a basic principle of investing. Spreading your holdings among several different investments (stocks, bonds, etc.) may lessen your potential loss in any one investment.
Do the same for the assets in your retirement plan.
Keep in mind, however, that diversification does not guarantee against investment loss; it is a method used to manage investment risk.

Find Out About the Guaranteed Interest Contract

A guaranteed interest contract offers a set rate of return for a specific period of time, and it is typically backed by an insurance company. Generally, these contracts are very safe, but they still depend on the security of the company that issues them.
If you’re worried, take a look at that company’s rating. The four main insurance company rating agencies are A.M. Best, Moody’s, Standard & Poor’s, and Fitch Ratings. A.M. Best ratings are based on financial conditions and operating performance; Fitch Ratings, Moody’s, and Standard & Poor’s ratings are based on claims-paying ability. You should be able to find copies of these guides at your local library.

Periodically Review Your Plan’s Performance

You are likely to have the chance to shift assets from one fund to another. Use these opportunities to review your plan’s performance. The markets change. You may want to adjust your investments based on your particular situation.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.
This material was written and prepared by Emerald.

Commercial Insurance News

2011-12-20T11:49:00.000-08:00

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Five Ways to Avoid OSHA Penalties

In a one-week period in September 2010, the U.S. Occupational Safety and Health Administration announced eight citations against employers; penalties totaled close to one million dollars. The agency fined a picture frame manufacturer for not protecting workers' hearing, allowing combustible dust to accumulate, and blocking exit routes. An excavating contractor is paying a six-figure fine for failing to protect workers against cave-ins. A painting contractor's scaffolding was missing railings, bracing and access ladders. Because OSHA had cited the company for these violations before, it levied a fine exceeding $200,000.
Clearly, failing to comply with OSHA regulations can be costly for employers. However, by implementing a few new procedures and attitudes, a company can reduce the chances that its name will end up in an OSHA news release.

Keep in mind that insurance does not cover many of the costs resulting from workplace accidents, such as time spent on investigating the incident, reduced employee morale, productivity lost because of the disruption and the absence of a worker, reporting costs, and the cost of OSHA penalties.

Improve record keeping.
Think of good documentation as your first defense against an OSHA inquiry. Inspectors who find information gaps in the OSHA 300 log (the record of work-related injuries and illnesses) may initiate a full-scale safety audit of the business. If your business has deficiencies in its logs for the past three to five years, devote some time to correcting them. Personnel files and workers' compensation loss records can provide much of the missing information.
Focus on ergonomics. OSHA has announced that it will pay special attention to musculoskeletal problems. Businesses that seek out ways to prevent repetitive motion disorders will avoid citations and penalties. They will also pay lower workers' compensation insurance premiums in the long run. Analyze how workers are performing their tasks and look for ways to reduce the strain on their joints, necks and backs.

Fix the routine violations first.
Some safety issues are simple and cost little or nothing to correct.
For example:

Blocked exits
Lack of protective equipment, such as gloves and safety goggles
Poor housekeeping
Improper storage of materials such as flammable liquids

These problems can accumulate over time if management is not paying attention. Operations with large numbers of these violations have paid substantial penalties to OSHA, so monitoring and correcting them is essential.

Have a plan for disasters.
Hurricanes in recent years and 9/11 have taught us that all organizations need to have emergency procedures in place for sudden events like storms and terrorist attacks and gradual events like flu pandemics.

Disaster plans should include:

Training for employees on what to do in the event of an emergency
Procedures for safe evacuation from the building
Workplace hygiene
Stockpiling of emergency supplies such as first-aid kits
Arrangements for operating from remote locations
Communications with employees, their families, customers and vendors

Although OSHA will not be concerned with some of these aspects of the plan, having them in place will help the business survive the event.

Look at safety as a profit driver, not a cost center.
Preventing workplace injuries costs money, but it also saves money and can improve a business's profitability. Some project owners and general contractors will consider bids only from contractors with workers' compensation experience modifications lower than 1.0. Firms with a reputation for safe operations will attract better workers.

Money saved on accidents that never occur goes straight to the bottom line.
Some workplace injuries may occur despite an employer's best efforts to prevent them. However, taking reasonable steps to improve safety in the workplace will reduce the frequency and severity of those injuries, make the business more competitive, and avoid problems when an OSHA inspector visits.

Information Technology News

2011-12-20T11:36:00.000-08:00

G.R. Reid Consulting Services, LLC
Information Technology Services
631.923.1595

Microsoft's Internet Explorer Plans For 'Silent' Updates That Will Help Reduce The Risks That Come From Running Outdated Software

Ryan Gavin, General Manager, Internet Explorer Business and Marketing recently posted on the IE blog that IE will Start Automatic Upgrades across Windows XP, Windows Vista, and Windows 7 so that users will benefit from an up-to-date browser. Gavin writes that "This is an important step in helping to move the web forward. We will start in January for customers in Australia and Brazil who have turned on automatic updating via Windows Update. Similar to our release of IE9 earlier this year, we will take a measured approach, scaling up over time. As always, when upgrading from one version of Internet Explorer to the next through Windows Update, the user’s home page, search provider, and default browser remains unchanged."

Good for Consumers, Developers and Enterprises

Gavin continues that "The Web overall is better – and safer – when more people run the most up-to-date browser. Our goal is to make sure that Windows customers have the most up-to-date and safest browsing experience possible, with the best protections against malicious software such as malware.For consumers, the safety benefits are one of the key reasons that the industry has been moving towards automatic updates. This is increasingly important since the biggest online threat these days is socially engineered malware, which typically targets outdated software like Web browsers. The latest Microsoft Security Intelligence Report, which is based on data from over 600 million systems in over 100 countries, is good reading to give you a sense of risks that stem from outdated software."

IE is how millions of Windows customers still connect to the Web, so keeping that part of Windows updated at all times is critical to keeping them safe online. With automatic updates enabled through Windows Update, customers can receive IE9 and future versions of Internet Explorer seamlessly without any issues. Wider deployment of the most up-to-date browser benefits the Web in other ways as well. Developers and online businesses can rely on better browsers to deliver richer and more capable Web experiences. We built IE9 with a focus on modern web standards ... so that developers could spend less time coding for specific browsers and spend more time building the next big thing on the Web. More of the web running an HTML5 capable browser, vs. something built ten years ago is a great thing for developers and the businesses they support."

Respecting Customer Choice and Control

Microsoft recognizes that while the benefits of upgrading are numerous, some organizations and individuals may want to opt-out and they will have choice and control of update their browsers on their schedule. The Internet Explorer 8 and Internet Explorer 9 Automatic Update Blocker toolkits prevent automatic upgrades of IE for Windows customers who do not want them. Microsoft's belief that IE9 "is the most compelling browser from business customers" they are committed to giving consumers the ability to make the decision to upgrade at their convenience. "Customers have the ability to uninstall updates and continue to receive support for the version of IE that came with their copy of Windows. And similar to organizations, consumers can block the update all together and upgrade on their own. Finally, future versions of IE will provide an option in the product for consumers to opt out of automatic upgrading," Gavin says.

Accounting & Tax News

2011-12-20T10:58:00.000-08:00

G.R. Reid Associates, LLP
631.425.1800

Standard Mileage Rates for 2012

The IRS recently released standard mileage rates for use in 2012 (Notice 2012-1). Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile. For business use of an automobile remains at 55½ cents per mile. For medical or moving expenses, it is 23 cents per mile (a half-cent decrease from the second half of 2011). For services to charitable organizations, the rate (which is set by statute) is 14 cents per mile.
Rather than using the standard mileage rates, taxpayers may instead use their actual costs if they maintain adequate records and can substantiate their expenses. The rules for substantiating these amounts appear in Rev. Proc. 2010-51. For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 23 cents per mile for 2012 (it was 22 cents per mile for 2011).

Health Benefit Services News

2011-12-20T10:54:00.000-08:00

: : Julie Seiden, Managing Director,
Health Benefits Services |

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC

2012 HSA & FSA Changes to Know About

Health savings accounts and flexible spending accounts are growing in popularity. Many people aren't aware of the changes that take place in these plans from year to year. It's important to discuss account details with an agent each year to be fully aware of the current rules or upcoming changes.

Flexible Spending Accounts 
These accounts are sometimes called flexible spending arrangements. They are tax-advantaged accounts that let employees automatically deposit a specific amount of each paycheck into them. After funds accumulate, they can be used to pay for qualified medical expenses. These accounts are different from HSAs and HRAs in the respect that they are usually offered with traditional medical plans. They also differ from HSAs in the respect that the unused funds in the account may not be carried over to the next year. Debit cards or forms are used to access funds from the account if money is needed. Flexible spending accounts allow account holders to contribute to the FSA for any costs that aren't covered by insurance. Some examples of such expenses include coinsurance, copay amounts and deductibles. If a health insurance won't cover a treatment or related health expense, FSA funds can be used to pay for it. The specified limits saw some changes from 2011 to 2012.

Contribution Limits
 It was decided that 2012 would be the last year for no limits on FSA contributions. While there may not be limits in place, plans must specify a maximum percentage of compensation to be contributed to the FSA or a maximum dollar amount. The changes from 2010 to 2011 included over-the-counter medicines being eliminated from coverage if they weren't prescribed by a doctor. The year 2013 will likely see one of the biggest changes: FSA contribution limits of $2,500 annually with yearly inflation increases.

Health Savings Accounts 
HSAs are medical savings accounts that also have tax advantages. Taxpayers who are enrolled in HSA-qualified health plans with high deductibles are able to obtain them. At the time of deposit, the funds contributed to these accounts are not subject to federal income tax. Any unused funds that remain in the account at the end of the year are carried over to the next year and added to further contribution amounts. Since contribution also change with these plans each year, it's important to be aware of the changes. The changes from 2011 to 2012 include an increase in out-of-pocket HDHP maximums and HSA contribution limits. However, there are no changes with the HDHP required minimum deductibles.

HSA Contribution Limits 
Family: $6,250
 Individual: $3,100 
Catch-Up Contributions: $1,000
The individual amount of $3,100 reflects an increase of $50 from 2011s limit.
The $6,250 limit for families is an increase of $100 from 2011.
Catch-up contribution limits, which are for people over the age of 55, remain the same between 2011 and 2012.

HDHP Minimum Required Deductibles 
Self: $1,200 
Family: $2,400 
HDHP Out-Of-Pocket Maximum - Family: $12,100 
HDHP Out-Of-Pocket Maximum - Self: $6,050
The HDHP limit increased by $100 between 2011 and 2012 for singles and by $200 for families.

Another change between 2011 and 2012 is eligibility of over-the-counter medicines. Insulin is the only OTC medicine approved for reimbursement in 2012 under a health FSA, HSA or HRA without a prescription. In addition to this, it was decided that the penalty of 10 percent for ineligible expenses paid for using HSA funds would increase to 20 percent in 2012.

Accounting & Tax News

2011-12-13T14:25:00.000-08:00

Tax Breaks Soon To Expire

:: Jonathan Cohen, CPA, Partner
631.425.1800 ext. 308
G.R. Reid Associates, LLP

Business owners currently face many uncertainties regarding present and future economic conditions. While certain soon-to-expire tax provisions may be extended for another year or so in an effort to kick start the economy, there is no guarantee that will be the case. Prudent business planning entails taking advantage of any available tax breaks while they are still "on the table." Following are some of the major business tax breaks that are slated to expire December 31, 2011.

100% Bonus Depreciation 
Generally, a 100% bonus depreciation allowance may be claimed for qualified property acquired and placed in service after September 8, 2010, and before January 1, 2012. For qualified property acquired and placed in service in 2012, a 50% bonus depreciation allowance is generally scheduled to apply.

Section 179 Expensing Allowance 
For 2011, the maximum allowable amount of a qualifying asset purchase that may be expensed in full by a business is $500,000. (This amount is scheduled to be reduced to $125,000 after 2011). The maximum annual expensing amount for 2011 is reduced dollar for dollar by the amount of qualifying property placed in service in excess of $2,000,000 ($500,000 for 2012). For 2011, up to $250,000 of qualified real property (that is, qualified leasehold-improvement, restaurant, or retail-improvement property) may be expensed under IRC Sec. 179.
Note that the bonus depreciation and section 179 expensing rules together offer significant tax-planning opportunities for business taxpayers.

Research Tax Credit 
Generally, this credit applies to amounts paid or accrued before January 1, 2012, and is equal to 20% of the excess of qualified research expenses for the tax year over a base amount.

Work Opportunity Tax Credit 
Employers who hire individuals from certain targeted groups are allowed to claim a credit against income tax in an amount equal to a percentage of first-year wages of up to $6,000 per employee ($12,000 for qualified veterans). Generally, the percentage of qualifying wages is 40% of qualifying first year wages (25% for employees who have completed at least 120 hours of service, but less than 400 hours of service for the employer).

Differential Wage Payment Credit 
Eligible small business employers who pay differential pay may claim a credit equal to 20% of up to $20,000 of differential pay made to an employee during the tax year. Differential pay is generally defined as payments made to employees for periods during which they are called to active service in the U.S. uniformed services for more than 30 days. Such payments represent all or part of the wages that they would have otherwise received from the employer. An eligible small business employer is one who, on average, employs fewer than 50 employees and provides eligible differential wage payments to each of its qualified employees under a written plan.

Charitable Contribution Deductions 
Through December 31, 2011, a regular "C" corporation's so-called enhanced charitable contribution deduction is equal to the lesser of:

The property's tax basis, plus half of the property’s appreciation, or
Twice the property's tax basis for contributions of food inventory that is "apparently wholesome food."

A similar deduction applies to qualified contributions of book inventory to certain public schools, as well as computer technology or equipment to schools or libraries. Contact G.R. Reid Associates if you have any questions regarding the above information.

Commercial Insurance Services

2011-11-30T05:38:00.000-08:00

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Never Cut Corners When it Comes to Safety in The Workplace

Some employees are happy to take chances when it comes to safety. They take needless risks in an effort to save time or cut their work load. In reality, all they're doing is subjecting themselves and others to hazards that could cause a serious injury. Workers form bad habits when they repeatedly perform their jobs in an unsafe way and don't get injured. They become convinced that because of their skills they are incapable of being hurt. It's this attitude that usually ends up doing them in, because they take even more chances until eventually a serious accident does occur. Unfortunately, that one accident can turn out to be fatal.

Most of a chance-taker's careless acts can be broken down into one of the following categories:

Failing to follow proper job procedure
Cleaning, oiling, adjusting, or repairing equipment that is moving, electrically energized, or pressurized
Failing to use available personal protective equipment such as gloves, goggles, and hard hats
Failing to wear safe personal attire
Failing to secure or warn about hazards
Using equipment improperly
Making safety devices inoperable
Operating or working at unsafe speeds
Taking an unsafe position or posture
Placing, mixing, or combining tools and materials unsafely
Using tools or equipment known to be unsafe
Engaging in horseplay

Although OSHA does not cite employees for safety violations, each employee is obliged to comply with all applicable OSHA standards, rules, regulations, and orders. Employee responsibilities and rights in states with their own occupational safety and health programs are generally the same as for workers in states covered by Federal OSHA.

Employees should follow these guidelines:

Read OSHA notices at the jobsite
Comply with all applicable OSHA standards
Follow all lawful employer health and safety rules and regulations, and wear or use prescribed protective equipment while working
Report hazardous conditions to a supervisor
Report any job-related injury or illness to the employer, and seek treatment promptly
Exercise these rights in a responsible manner

If you are working with a risk-taker, ask him to stop and consider what jeopardy he is putting himself and others in. Then buddy up with him to find a safer way to perform the task. Remember, unsafe actions don't result in saving time if a worker gets injured in the process.

Financial Services News

2011-11-30T05:32:00.000-08:00

G.R. Reid Consulting Services, LLC 

Retirement
A Recent Survey Revealed That Many Affluent Retirees Would Go About Saving for Retirement Differently If They Had To Do It Again.

Most notably, these wealthy retirees expressed a desire for more professional help in preparing for retirement. In fact, 55% of survey respondents regretted that they didn’t start talking to a financial professional earlier.1 Savvy investors can learn from the mistakes of others. With the uncertainty surrounding income taxes, capital gains taxes, and the estate tax, the value of a professional opinion may be more important now than ever.

Retirement Wake-Up Call
According to the survey, the most recent recession gave many affluent retirees pause to reconsider their approach to retirement. About half of the retired respondents wish they had spent more time thinking specifically about the lifestyle they wanted in retirement. Furthermore, they recommended that those nearing retirement take the time to consider exactly how they would like to live out their later years. 2

Have You Thought About Your Ideal Retirement Lifestyle?
Think about the specifics. Will it be in the same house and town? What activities will fill your days? Golf? Travel? Now consider what it’s going to take financially to get you there. A review of your situation can help connect the dots between your current situation and the retirement lifestyle you desire. About half of the retirees surveyed said they wish they had concentrated more on “the numbers.” 3 A focus on the details of preparing for retirement can be an eye-opening exercise.
Remember also that retirement planning is not a fix-it-and-forget-it proposition. It might be appropriate to take a second look periodically as life changes could necessitate modifications to a retirement strategy. How has your vision of retirement changed over the years? Is it time to run “the numbers” again?

You’ve Already Gone Pro
What’s the takeaway from all of this, given that you are already working with a financial professional? There is no assurance that working with a professional will improve your investment results. But by focusing on your overall objectives, a financial professional can provide education, identify strategies for taking control of many situations, and help you consider options that could have a substantial effect on your long-term financial goals.

Please call G.R. Reid Consulting LLC for a retirement evaluation, 631-923-1595.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011. This material may not be reproduced without permission.
1–2 Investment News, January 18, 2010 3 The Wall Street Journal, January 15, 2010
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security. The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor. G.R. Reid Consulting Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc.

Accounting & Tax News

2011-11-30T05:13:00.000-08:00

:: Jason Saladino, CPA, PFS, Partner
631.425.1800 ext. 309
G.R. Reid Associates, LLP

The Benefits of Cost Segregation

Increase Your Return On Investment
Over 300 rulings, letters and IRS Memoranda have provided documentation and significant case law for the support of Cost Segregation Studies. Hospital Corporation of America vs. The Commissioner is one of the landmark decisions which gave support to the way we review and analyze properties to determine the tangible personal property that may qualify for depreciated lives of 5, 7, or 15 years rather than 39 years (if non-residential real property) or 27.5 years (if residential real property).

Even If You Are Presently Depreciating Certain Property In An Accelerated Manner, You May Still Be Leaving Money On The Table.
A cost segregation study is a federal income tax tool that increases your near term cash flow, in the form of a deferral, by utilizing shorter recovery periods to accelerate the return on capital from your investment in property. Whether newly constructed, purchased or renovated, the components of your building may be properly reclassified, through a cost segregation study, into shorter recovery periods for computing depreciation deductions.

Engineering-Based Report
G. R. Reid is aligned with a professionally licensed engineering firm with experience in engineering-related tax services. We meet all of the criteria and qualifications required by the IRS. We are confident in our understanding of the tax ramifications that must be considered when performing cost segregation or energy tax studies as they relate to the issues of recapture, passive activity limitations and the intricate steps involved in 1031 exchanges. We provide the highest quality cost segregation studies, with full audit defense, professional insurance and comprehensive reporting and full warranty of all reports in the event of an IRS audit.

Personal Insurance Services

2011-11-30T05:09:00.000-08:00

: : Neal B. Patel, Managing Director,
Personal Insurance Services | G.R. Reid Agency, LLC
631.923.1595 ext. 303

Keep Your Home Safe During Holiday Travel Time

Whether you're planning a Caribbean vacation getaway, or a trip to visit relatives for the holidays, keep in mind that an empty house is a tempting target for a burglar. But with a little common sense and some careful planning, you can reduce the possibility that your home will be broken into while you're gone.

Prepare your first line of defense:

Use sturdy locks on all doors and windows and secure before you leave
Repair any broken windows or locks. Never operate under the assumption that a burglar won't find the one that's faulty.
Enlist the help of a trusted neighbor
Tell one neighbor your itinerary and your estimated time of arrival and return. That person should have a key to your front door to periodically check on the house, and a telephone number where you can be reached in an emergency.
Don't broadcast your plans
Especially in the era of social media, never post your travel plans on Facebook or Twitter. According to a recent article in the New York Times, tech-savvy thieves are taking advantage of the detailed information provided by unsuspecting social media users.
Never let the house appear empty from the street
Stop your newspaper delivery, and have your neighbor pick up your mail and any packages left on the front porch. Arrange for someone to mow the lawn, rake leaves and clean the yard if you'll be away for an extended period. Ask your neighbor to place garbage cans at the curb on normal pickup days and put them back after the garbage pickup. If you leave your car at home, park it where you normally would. However, be sure your neighbor moves it occasionally so that it appears the car is being driven. If you're driving your car, have your neighbor periodically park in your driveway or in front of your house.
Your home shouldn't seem empty on the inside either
Plug in timers to turn lights and even a television on and off at appropriate times. Turn the ringer on your telephone down. If a burglar is around, and hears a call that goes unanswered, they'll know you're away. Don't leave a message on your answering machine notifying everyone you're on vacation. Leave your blinds, shades and curtains in a normal position. Don't close them unless you would normally do so while at home.
Don't give thieves alternate ways to enter your home
Lock garage doors and windows. You should also secure storage sheds, attic entrances and yard gates.
Don't leave valuables in plain sight
Consider locking valuables in a bank safety deposit box. If you do leave valuables at home, make sure they are engraved. This simple precaution will allow stolen property to be easily identified and returned to you if recovered later.

Financial Services News

2011-10-26T15:46:00.000-07:00

What is Diversification?

G.R. Reid Consulting Services, LLC 

Virtually every investment has some type of risk associated with it. The stock market rises and falls. An increase in interest rates can cause a decline in the bond market. No matter what you decide to invest in, risk is something you must consider.

One key to successful investing is managing risk while maintaining the potential for adequate returns on your investments. One of the most effective ways to help manage your investment risk is to diversify. Diversification is an investment strategy aimed at managing risk by spreading your money across a variety of investments such as stocks, bonds, real estate, and cash alternatives; but diversification does not guarantee against loss.

The main philosophy behind diversification is really quite simple: “Don’t put all your eggs in one basket.” Spreading the risk among a number of different investment categories, as well as over several different industries, can help offset a loss in any one investment.

Likewise, the power of diversification may help smooth your returns over time. As one investment increases, it may offset the decreases in another. This may allow your portfolio to ride out market fluctuations, providing a more steady performance under various economic conditions. By potentially reducing the impact of market ups and downs, diversification could go far in enhancing your comfort level with investing.

Diversification is one of the main reasons why mutual funds may be so attractive for both experienced and novice investors. Many non-institutional investors have a limited investment budget and may find it challenging to construct a portfolio that is sufficiently diversified.

For a modest initial investment, you can purchase shares in a diversified portfolio of securities. You have “built-in” diversification. Depending on the objectives of the fund, it may contain a variety of stocks, bonds, and cash vehicles, or a combination of them.

Whether you are investing in mutual funds or are putting together your own combination of stocks, bonds, and other investment vehicles, it is a good idea to keep in mind the importance of diversifying. The value of stocks, bonds, and mutual funds fluctuate with market conditions. Shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

G.R. Reid Consulting Services, LLC and AAM is not a registered investment advisor and is independent of American Portfolios Financial Services Inc.and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011. This material may not be reproduced without permission.

Accounting & Tax News

2011-10-26T12:52:00.000-07:00

Green and LEED Standards for Energy Efficiency and Tax Incentives on Commercial Properties

:: Jonathan Cohen, CPA, Partner
631.425.1800 ext. 308
G.R. Reid Associates, LLP

G. R. Reid Associates, LLP is now in aligned with LEED Accredited Professionals, the American Institute of Architects’ (AIA) Executive Leadership, the United States Green Building Council Executive Leadership, and the Internal Revenue Service (IRS) to give clarity and awareness to the engineering processes involved in certification of public and private buildings. The science of engineering and the principles of tax and accounting will allow us to arrive at financial solutions that result in increased cash flow, minimized tax payments and maximum return on investment and energy for our commercial clients. These IRS-sanctioned services include Energy Tax Credits, Energy Policy Act Certifications (179D Studies), Cost Segregation Studies, Research and Development Studies, Repair and Maintenance Studies, Historic Tax Credits Studies, Engineering Insurance Appraisals, Energy and Carbon Audits. Without an engineering-based cost segregation study, taxpayers are unable to take full advantage of the tax law; therefore, they surrender significant cash flow to the IRS. Our alliances with a unique combination of experience and professional talent has enabled G.R. Reid to develop unique ways to identify and qualify commercial properties for energy accreditation and related tax benefits. Form more information, contact us.

Commercial Insurance Services

2011-10-26T10:01:00.000-07:00

The Pros and Cons of Employee Leasing

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC

Employee leasing firms earned $68 billion in gross revenues in 2008, according to the National Association of Professional Employer Organizations. Their clients, primarily small businesses with fewer than 20 employees, outsource to leasing firms the responsibilities for payroll administration, employee benefits, workers' compensation claim management, human resource management, and related operations. Businesses trying to reduce costs and focus on growth may find employee leasing to be an attractive option. It is an option, however, that comes with advantages and disadvantages for both employer and employee.

The NAPEO cites a number of benefits from employee leasing. The benefits for employers include:

• Access to professionals with expertise in human resources, payroll, risk management, and employee benefits.
• Assistance with labor law compliance.
• Professional claim management.
• Reduced and controlled administrative costs.
• Professionally written employee handbooks, policies, and procedures.
• Relief from some employment-related liabilities.
• Reduced workers' compensation costs resulting from improved workplace safety.

Employees may also benefit from leasing in several ways.

Access to benefits that might not have otherwise been available, such as 401(k) plans, cafeteria plans, insurance, and credit union membership.
Timely and accurate paychecks.
Protection under federal labor laws.
Improved communication among and between employees.
Employees who move from one leasing client to another do not lose eligibility for benefits.
Efficient and timely claim processing.
Assistance with employment-related issues.

Employee leasing carries some risks. A poorly managed leasing firm may mishandle payroll and benefits or may go out of business, leaving the client with its obligations. The employer may also be legally liable for the actions or inactions of the leasing firm. For example, if the leasing firm fails to comply with regulations, it may be the employer who bears ultimate responsibility. Also, the employer is ceding control of its workforce to a third party who may or may not do things the way the employer would. Employee relations may suffer during the transition to leasing.
From the employee's standpoint, the employer will have to fire and the leasing firm will have to re-hire him. Also, there is no guarantee that the leasing firm's benefits will be as good as those the employer offered. Some employers have also used leasing as a means to avoid dealing with unions, though federal rules may limit their ability to do this.

Employers who decide to lease their employees should carefully evaluate the leasing firms it considers. The financial stability of the firm and of the insurance companies providing its benefits are a major consideration, as the failure of either may leave the employer with unfunded obligations. The firm's experience in the employer's industry, track record of success, and safety record are also important. Another consideration is the range of benefits the firm offers; a plan that does not meet the employer's needs will not be worth the expense of hiring the leasing firm.

Employee leasing is a big step and not one to be taken lightly. Employers must weigh the upsides and downsides of leasing and make decisions that is best for their employees and their businesses.

G. R. Reid

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Congress Passes Payroll Tax Cut Extension

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