Monday, September 24, 2012

Managing work-related stress

Every professional has to deal with stress in some form. We are simultaneously juggling our careers, our family, and various clubs and activities. I discovered these helpful tips for dealing with stress from the website TargetWoman, which is an Award winning Information portal dedicated to Women. Here are some helpful ways to manage work stress:
  • Don’t miss breakfast: Poor nutrition alters biochemical profile, start the day with nutritious low-fat breakfast. Eat regular balanced meals throughout the day.
  • Effective time management: You have limited time in the day, so make the most of it.  Analyze core values, schedule activities, create realistic expectations, straighten priorities and divide time for different aspects of your life. Learning to say ‘no’ in a friendly but firm manner, requesting help when you certainly need it, and not desiring to meet unrealistic goals is also important.
  • Breaks help: Take small breaks from work. Ensure you make use of lunch times and other break times. It helps to increase productivity.
  • Take deep breaths: At times when you are feeling overwhelmed by the amount of tasks or if you face a confronting situation, take deep breaths. You body and mind will benefit from the extra oxygen and you will feel relaxed and cool.
  • Choose your company: The company of optimistic and confident people will help in finding new dimensions to various issues that you are likely to face in work area. You will develop a positive attitude and will feel confident and less pessimistic. Keep away from negative company -- negativism sucks positive energy. Learn to take things lightly. Smile and laugh often.
  • Use the gym: Exercise regularly for physical as well as mental benefits.  Exercise helps relieve stress.  Learning the art of meditation can bring about long lasting wonders for the psyche.
  • Plan back-ups: Unforeseen domestic changes will add up to stressful situations. Develop strategies to face unexpected developments like backup ride for kids, plan for dinner etc.
  • Network: Meeting new people outside work area, developing friendship with like-minded individuals, sharing views on current affairs, participating in social welfare programs improves your sense of social connection.

Carolyn Kobek, CPA

Monday, September 17, 2012

Financial Literacy – Never too early to learn

According to a phone survey conducted by the American Institute of CPAs, 61 percent of parents pay their children an allowance, averaging $65 per month.  However, only 1 percent of parents said their children save any of their allowance.  Teaching children financial responsibility early can have a huge impact on their financial habits as they become adults.

Along with another local CPA, I spent several hours this summer volunteering with girls aged 13-15 discussing topics such as balancing a checkbook, budgeting and saving, and credit cards.  We even talked about payroll deductions and examined a W-4 and W-2.  These are topics that are rarely mentioned in school.

Several of the girls had opened their own checking accounts, and they had overheard their parents talk about credit cards.  However, many of them were shocked to learn what is deducted from a paycheck.  And, they had never really thought about budgeting.

While I cannot say I kept them fully engaged each hour, many of the girls asked relevant questions.  Because the math skills varied among the girls, we kept examples simple.  We used a financial calculator in Excel to show the impact of paying more than the minimum payment on a credit card, which was surprising to girls who were paying attention.

I hope to continue this volunteer project in the future.  I truly believe the more children see good examples of financial responsibility, the more confident they will be to take control of their financial future.  In the meantime, I’m open to any ideas to make W-2s and budgets more exciting to teenagers.

Jessica Miles, CPA

Monday, September 10, 2012

Tax record retention policies

Have you ever wondered how long you should keep the documents and record that support the items included on your income tax returns? When determining how long to keep records, we typically look at the relevant statute of limitations period – the period of time a taxpayer can amend a return to claim a credit or refund or the IRS can assess additional tax. For most taxpayers this period is three years from the original due date of the return or the date the return is filed, if later. However, if a return includes a substantial understatement of income (defined as omitting 25% or more of the gross income reported on the return), the statute of limitations period is extended to six years.

A good rule of thumb for keeping tax records is to add a year to the statute of limitations period. Using this approach, you should keep most of your income tax records for a minimum of four years. Certain tax records should be kept longer. Records documenting the cost basis of property that could be sold (like investment property or business fixed assets) should be retained based on the record retention period for the year the property is sold. Tax returns, IRS and state audit reports, business ledgers and financial statements normally should be retained indefinitely.

Keep in mind there may be non-tax reasons to keep certain tax records beyond the time needed for tax purposes. For example, insurance policies, leases, real estate closing statements and employee payroll records might need to be kept longer. As a final note, with many businesses moving to a more “paperless” environment, the same recommendations apply to computer records and electronic storage systems, as to paper documents.

Jim Story, Manager - Tax Department

Tuesday, September 4, 2012

Converting your C-Corp - It may be now or never

You may have recently considered the pros and cons of converting your C Corporation to an S Corporation or LLC.  The Tax Adviser recently included a detailed article emphasizing that now may be the time.  So why is now a critical time?  I'm so glad you asked:

  • Due to the extended Bush tax cuts, tax rates are currently at historic lows.  These rates once again are set to expire at the end of this year.  With great uncertainty in a presidential election year, we cannot count on the tax cuts being renewed.
  • Unfortunately real estate values are also at historic lows.  Because converting a C corporation to a passthrough entity (partnership or S Corporation) can trigger gain based on the fair market value of the corporation’s assets, lower real estate value can be a good thing from a tax standpoint. 

Once you come to the decision (and work up the nerve) to convert your C Corp, you must decide between an S Corporation or LLC.  Both forms are passthrough entities - meaning income will be passed through to the individual level and will be reported and taxed when you file your individual tax return.

Converting to an S Corporation is easier and less costly than converting to a LLC.  I’m assuming you are now thinking “OK - stop right here.  Why would I even consider converting to a LLC?”  Depending on your corporation’s current needs and future goals, converting to an S Corporation may not be desirable (or even possible).  Here are a few basic rules for becoming an S Corp:

  • It must be a domestic corporation.
  • The corporation cannot have more than 100 shareholders.
  • Shareholders can only be individuals who are US citizens or residents, certain estates, certain trusts, and certain tax-exempt organizations (i.e. partnerships cannot be a shareholder in an S Corp).
  • The corporation can only have one class of stock outstanding.  Special allocations of earnings to certain shareholders can create a separate class of stock, which will revoke the corporation’s S election.  Generally, all shareholders will need to have identical rights to distributions and liquidation proceeds.

Usually the “one class of stock rule” is the most challenging limitation for our small C Corp clients.  Transactions such as compensation arrangements and leases between the corporation and shareholder can violate the "one class of stock" requirement.

Every business is unique.  This brief discussion by no means describes all of the issues you will need to consider when converting your C Corp.  If you have any questions, please don’t hesitate to contact one of our tax specialists at Robinson Grimes.

Jessica Miles, CPA