Monday, September 27, 2010

Tax law signed today

Even though Congress is avoiding major decisions on tax law changes that must occur this year until after they see who is reelected, they managed to pass a bill which Pres Obama signed earlier today into law. You will hear media hype about the Small Business Jobs Act of 2010, but what you may not hear are the details of the tax provisions that were included. Lets take a look at some of them:

The Act allows businesses to expense equipment purchases up to $500K for 2010 and 2011. It also allows for a bonus expensing of 50% of the excess for assets bought in 2010 only.

Gain on sale of certain “qualified” small business stocks are 100% excluded from income tax. This only applies for qualified stocks purchased between today and Dec. 31. Big Deal.

Certain tax credits (think R&D) formerly rendered useless by Alternative Minimum Tax will be allowed. This only applies to credits determined in 2010 and later years.

Self Employed Health insurance deductions will now also be a deduction against the self employment tax. Previously these only lowered income taxes but did not help self employed folks lower the SE tax too. This provision will actually affect a lot of taxpayers and will be a welcome change.

1099 forms are now clearly required to be issued by owners of rental real estate. Same $600 requirement as small business owners. This starts in 2011. The Act also increases first tier penalties for failure to file 1099 forms to $30 each, second tier $60.

Cell phones were pulled from the listed asset list which requires detailed record keeping to substantiate business use. No longer will IRS be able to claim that you must keep a log of all cell phone calls to determine business use.

As you can see most of these provisions have a very limited impact to a narrow group of taxpayers. What we really need is major reform, or at least certainty, on the bulk of the tax changes that expire this year (and the estate tax that expired last year) and are going to slam virtually every taxpayer unless something is done.

Wednesday, September 22, 2010

Are tests always this hard?

This week I finally received notice that my application for Accreditation in Business Valuation was accepted. I now have three more letters after my name. This was an inordinately difficult credential to obtain.

Last year I spent the better part of six months pouring over books and official materials studying for the ABV exam. I spent 40 hours in classroom lectures on the subject. All that was hard work, but the painful part was the exam.

When I arrived at the test center last fall, it started to rain. On top of that I wasn’t feeling well. Perhaps it was nervous tension over the test or possibly something I had eaten the night before. Whatever it was, my stomach wasn’t contemplating sitting in a testing center for two 4 hour blocks of time. I made it through the first 4 hour block OK, but that’s when things turned ugly.

I went out to my car to eat lunch and got soaked by the pouring rain. As I went back in to continue the test, my stomach suddenly woke up and gave me the 2 minute warning - find a restroom, NOW. I was told that the only restroom was around the outside corner of the building. After walking in the rain around the building a security guard noticed my panic stricken look and directed me down an alleyway (no roof here either) to the restroom. I made it to the restroom in time but took on several gallons of water in the journey. I returned to the test center so cold & wet that I squished when I sat down.

Once inside the testing room, you cannot leave without terminating the test. I lasted about 3 hours before round #2 began in my stomach. It felt like two cats chasing a ball of yarn inside me. The last hour alternated between me trying to focus on the questions or my rapidly pressurizing abdomen. The last 15 minutes of the exam I could barely sit still and feared a major environmental disaster was imminent. I clicked through the final questions with the fastest guesses I could muster, grabbed my stuff and duckwalked to the restroom. At this point I didn’t even care that it was still raining. (no further details here…)

By the time I got home I was soaking wet, felt like I had been slugged in the stomach, had a cold, and was convinced I had failed and would have to retake the exam. Also, my daughter’s car had broken down in the middle of nowhere on her way home from Northern California for the holiday. She abandoned it 180 miles from home and needed a ride. All in all, just another day in paradise!

All I can say is that it’s a good thing I did pass, because I don’t think I’d be willing to do that again anytime soon.

Wednesday, September 15, 2010

Deficit Solution?

My wife and I recently returned from an Alaskan fishing trip. The fishing was good, the weather was OK (for Alaska it was great), and the friends we traveled with were a lot of fun. The not so fun part came when I totaled up the credit card bills and realized how much we had “stimulated” the domestic economy. I sure hope Sarah Palin appreciates it.

While pondering my cash flow damage I recalled an article I had just read regarding the Federal deficit, and how for the nine months ending Sept 30 the government will have spent over one trillion dollars more than it took in. Makes my problem seem trivial in comparison, unfortunately I can’t ignore it like politicians do.

But I may have stumbled on a solution to both the federal deficit and my own money issues: It was recently announced by Russia’s finance minister that they have similar budget problems, and he has gone public with a request that Russians smoke and drink more. It seems the Russians tax alcohol and cigarettes heavily (as do we), and although Russian per capita consumption of these things is already very high, he acknowledges that the sin taxes raised by increased consumption of alcohol and cigarettes would help solve their budget woes and supplement funding for social services.

I don’t know why we don’t have similarly open minded politicians in this country, but I think it’s about time that someone stood up and encouraged more of this type of spending. We could solve all manner of fiscal problems if we encouraged people to drink and smoke, and there wouldn’t be any complaining about paying taxes, either. Remember, it’s for the children!

For my personal situation, I doubt smoking would help, but I think a few stiff drinks certainly will make these credit card bills easier to swallow. So, after I write this I think I’ll start doing my part to reduce the deficit. I'm sure I'll feel much better.