Morre & Company, LLP
Certified Public Accountants
Six Hamilton Landing, Suite 220
Novato, California 94949
415-382-5600 Fax: 415-382-5605
February 2007
Dear Clients and Friends:
Medicare Part B premium notices are out
Has your social security check decreased this year? If your 2005 adjusted gross income was over $80,000 ($160,000 on a joint return) then your Medicare part B premium has been increased. However, the Government warns that the Social Security Administration had only one month to implement this new law. Believe it or not, there could be errors!
If your premium was increased inappropriately, you can ask for reconsideration. Also, under limited circumstances you may be able to base your premiums on your 2006 income if it’s lower than your 2005 income. Those circumstances include one time events such as the death of your spouse, divorce, retirement, sale of property, etc.
Did your mutual insurance company become a stock company in 2003?
The Internal Revenue Service had ruled that 100% of the proceeds from the demutualization were taxable as a capital gain. If you received money from your insurance company and then received a 1099, you would have paid tax on all of the proceeds. Now a federal court disagrees with the IRS and the battle is on.
The statute of limitations to file a claim for refund for the 2003 tax year expires April 15, 2007 (or three years from the date you filed your 2003 return if that return was filed on extension). If you reported such a gain in 2003, we can prepare a protective claim for refund for you. Unfortunately, there is no easy way for us to search our database for these gains. If you believe you did report such a gain, let us know and we will check your 2003 tax return.
January is the best time to start planning for the New Year
With the start of a new year it’s a good time to start a new investment plan or make changes to your current plan. Here as some simple ways to start saving:
1. Contribute to your IRA now, at the beginning of the year. The sooner you do, the sooner it grows tax free. The limits for 2007 are $4,000 for those 49 years old or younger and for those lucky souls over 49, the limit is $5,000. If you don’t have the cash, have your 2006 tax refund automatically deposited to your IRA account.
2. Increase the contribution amount to your company pension plan (401K, 403B, etc). After a while you will probably adjust to the lower net check and not even notice the difference.
3. Setup an emergency savings account. If possible have a portion of your paycheck automatically transferred to your savings account. Otherwise establish a set amount to contribute monthly before you pay your bills.
4. Consolidate and decrease your credit card debt. Renegotiate interest rates, increase your monthly payment, and rip up the credit cards so they cannot be used again.
5. Take advantage of tax credits by making your new car a hybrid or installing energy efficient systems and equipment (this does not work for alternative tax).
6. Set up a Health Savings Account, or if you are boss of your benefits, set up a Flexible Spending Account or Health Reimbursement Plan.
Controlling tax preparation costs
The cost of tax preparation is based on the time it takes us to convert your tax information into a return. The following are ways for you to reduce that time:
1. Mail in your information instead of having a tax appointment.
2. Fill out the organizer as completely as possible.
3. Have a telephone meeting with us to clean up your QuickBooks file if you are submitting that file for your business.
4. Don’t give us additional schedules that duplicate information in the organizer or QuickBooks files. If you send us duplicate information we must reconcile it to the data in the organizer or file.
5. Reply to our emails instead of sending a new message. This way we do not have page after page of emails, many of them with duplicate information.
6. Try to provide basis information on stocks, bonds or mutual funds sold by calling your stock broker or the mutual fund. For the future, record your investment activity in a program like Quicken that will produce a “realized gain or loss report.”
Do you have a digital camera?
Since additional pictures are almost free, you can use the camera to document more things than with a film camera. Consider the following:
1. Take a picture of furniture or other donations to charity.
2. Take pictures of expensive furniture, art, jewelry, etc. in your home and keep the file on a disk in your safe deposit box. This would be good to have if your home burned.
3. Take pictures of children frequently, so you have a recent one, should a child be missing.
Please call us if you have any questions about this letter or any other tax, financial or accounting issue.
