How Long Do I Have To Keep This?

Record Retention Schedule

If you're in business, you know that space costs money. As a result, businesses often try to eliminate as much historical paperwork as possible to more effectively use their office or storage space. When working on a project like this, our clients usually want guidance on what to keep, and for how long.

We've developed a record retention schedule that gives suggestions on how long to keep various documents. Essentially, you need to keep things as long as they may be relevant to taxing or regulatory authorities, and certain other items just need to be kept indefinitely. For instance, if you're considering selling your business, the seller might want to see an in-depth financial history of many years. Some payroll records need to be kept indefinitely as well.

The retention schedule is available in our Forms area. If you have a question on an unlisted item, please feel free to drop us a line or add a comment here.

Reduce Junk Mail and Identity Theft

We all know about the rash of identity theft that has hit our community and others nationwide. One of the key sources for the data that is used to commit these crimes is unsecured mail. More than 400,000 Americans each year can trace falsely-opened credit accounts to stolen mail. Reducing the excess mail can help you reduce your exposure to this type of crime.

There are three key places you should contact to help tame the junk mail in your box.

• Remove your name from this list sold by consumer reporting agencies to credit card companies for preapproved offers.
  
  
• The Direct Marketing Association's removal tool can pull your name off of the mailing lists used by their 5,200 members - most of the junk you get. Obviously, they're not really concerned about getting your name off the list; they charge $5 to submit your request online, although you can print your request from their site and mail it to them.
  
  
• Remove yourself from unsolicited mortgage and home equity loan offers by visiting the DataQuick website.
  

Take 10 minutes to visit these sites, and you'll be on the way to protecting your identity.

Death Now Less Taxing in Washington

The Washington Supreme Court eliminates state's estate tax

The Supreme Court eliminated the differences between State and Federal rules regarding taxable estates in Washington. You probably remember that the Congress passed legislation in 2001 that raises the threshhold for a taxable estate over the next several years, and eliminates estate taxes in 2010. Washington had never increased their threshhold accordingly, so individuals were having to deal with two different sets of rules for estate taxes. Even though an estate was exempted from federal tax, it could have a Washington liability.

This difference complicated financial planning and prevented Washington residents from enjoying the estate tax relief contemplated by Congress. The Supreme Court decided that Washington was only ever entitled to a portion of the federal tax. If there were no federal tax, Washington had no right to collect the state's portion.

As a result, estates that paid Washington will receive at least a partial refund of their estate taxes. If an estate was completely exempt from Federal tax, it looks like they will receive a full refund from Washington.

This is the type of change that makes a huge difference here in the financial and estate planning community. Differing sets of standards complicate the planning substantially, and simplification will help individuals better understand the rules.

Don't Forget the Sales Tax!

As we've discussed in previous postings, the new Sales Tax deduction is a boon to Washington taxpayers. Just remember to let us know about any major purchases you've made in 2004 that would qualify for an additional deduction. Sales taxes paid on (non-business) purchases of vehicles, boats, planes, and home improvements can be deducted in addition to the base sales tax deduction given by the IRS.

Many clients tell us that they have purchased their home building materials tax-free in Oregon. These expenses aren't deductible -- no tax was paid, so there's no tax to deduct.

We'll be glad to help you with any questions you have on this new deduction!

Tsunami aid donations could be tax-deductible for 2004

Tsunami aid donations could be tax-deductible for 2004 - coshoctontribune.com

The congress has passed a bill that would allow contributions made in January for tsunami relief to be deducted on your 2004 income tax return. Usually, contributions are only deductible in the year that they're made. With the massive size of this disaster, and the timing being so close to year end, Congress wanted to encourage people to contribute to the relief efforts.

The bill has not yet been signed into law, but should be shortly. We'll provide any other relevant details as they're released.

Credit Where Credit Is Due

We all know about the IRS and their tendency to take, take, take. Did you know they also hand out money to businesses? Here's a list of some business credits they award. Are you missing out on any of them?

Work Opportunity Tax Credit - Hire certain food-stamp or SSI recipients, disabled vets, or ex-felons, and you can receive up to $2,400 per employee.

Welfare to Work Credit - Employing individuals who had been on welfare for at least 18 months can get you as much as $8,500 per employee.

Small Employer Pension Plan Credit - Small companies who have expenses related to establishing a new retirement plan can get up to $500 credit if they spend at least $1,000.

Tip Credit - Businesses in the food and beverage industries can claim a credit for payroll taxes the business has paid on tips reported by the employees, under certain circumstances.

Also, credits are available for things like employer-provided child care facilities, research and development, and creating electricity from renewable sources.

Working at home? Make it pay!

If you operate your business from your home, you may be entitled to claim the "Home-Office Deduction".

To qualify for the home-office deduction, the portion of your home that is used for business purposes must be:

used "regularly and exclusively"

your "principal place of business"

used for the employer's convenience (in the case of an employee)

You can also claim the deduction for any space you use "regularly and exclusively" to conduct administrative and managerial activities when you have no other fixed location to do so.

The deductions are limited. The office-in-home deduction can never create or increase a loss. Any disallowed expenses can be carried forward to future years.

We can help you determine whether you qualify for this deduction and the tax consequences if you eventually sell your home.

Do You Know How Much Sales Tax You Pay?

Sales Tax deduction tables issued

As promised, the IRS has finally given us the tables we can use to calculate the sales tax deduction. (See our previous post on this deduction).

I'm a little underwhelmed at the tax from the table; for instance, a family of four that makes $70,000 is only given a $1,001 sales tax deduction. At 7.6% tax, that means the IRS assumes you only spend $13,100 each year on sales-taxable items. I guess if you back out all of the non-sales-taxable expenditures you make (rent/mortgage payments, groceries, utilities, etc.) it might approach reality.

Of course, you also get to add the tax paid on certain major purchases. These are now spelled out by the IRS as the following:

• Motor vehicles - (including car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle)
  
• Aircraft
  
• Boats
  
• Homes or home building materials

Specifically excluded -- sales tax paid on business purchases.