Kulzick Associates, PA
Client Update - March 12, 2001

 This newsletter contains:

Financial Strategies
   Saving for college: Have you looked at the Section 529 option?
   Is your investment house in order?
Service of the Month
    Small Business Services
What's New In Taxes
    Major tax deadlines for March
    Spring cleaning: What records to keep and what records to toss
Smart Business
    Congress repeals OSHA's new ergonomics rule
    Keep your business healthy with a regular checkup
News From Us
    Check out our web site
    Add a friend to our mailing list
    Note for AOL users
    Unsubscribe

Saving for college: Have you looked at this new option?

There are many ways to save for college, but one thing is certain: it is never too early to start. One relatively new investment plan designed to help families save for college is a qualified state tuition program (QSTP), or "Section 529" plan. It offers a versatile way to finance higher education with some nice tax advantages.

There are two general types of Section 529 plans:

1. Prepaid tuition programs and college savings plans. Prepaid tuition programs are designed to hedge against inflation by paying for future in-state tuition costs in today's dollars. The Florida Prepaid tuition plan is this type. Florida's plan has options to attend in-state private schools (pays the state rate) and out-of-state schools (pays 5% interest on your money). For more information see http://www.fsba.state.fl.us/prepaid/

2. College savings plans are state-sponsored, tax-deferred investment plans usually offering a variety of investment options that allow the beneficiary to use funds at any accredited institution of higher learning in the United States. Qualified expenses are not limited to tuition under college savings plans. An example of this type is the one offered by New Hampshire. U. S. News and World Report has a summary and links to many of the states at http://www.usnews.com/usnews/edu/dollars/dstuit.htm

While each program varies from state to state, there are certain elements common to each.

* Anyone may establish an account in a qualified state tuition program on behalf of a designated beneficiary, regardless of the relationship with the beneficiary.

* The donor's nondeductible contribution(s) are held in a special account to be used to cover future higher education costs for that beneficiary.

* Earnings grow tax-free until they are withdrawn from the account. If funds are withdrawn for qualified higher education expenses, earnings are taxed at the student's tax rate, generally a lower rate than the donor's rate.

* Penalties apply on nonqualified withdrawals.

The donor is not permitted to direct investments, but the donor remains in control of all withdrawal decisions.

Section 529 plans are one of many choices for college funding. You should chart your course for college funding after carefully reviewing the full range of choices. Call us; we would be happy to review all your options with you.

Is your investment house in order?

The world didn't end in the year 2000, but investors lost about $3 trillion in the U.S. stock market. Now might be a good time to review and rebalance your investment portfolio in order to protect and grow your hard-earned money.

Protect the foundation

The year 2000 reinforced how important it is to diversify your portfolio to minimize your risk. Diversification means choosing investments in several asset classes. Risk refers to the possibility that your investments could decline in value or fail to provide a return greater than the rate of inflation. 

While there is no single asset mix appropriate for all investors, most people should have some combination of stocks, bonds, and cash in their portfolio. That's because stocks and bonds often react differently in the same economic climate. To select the mix that is right for you, you need to determine the following:

1. What you are ultimately going to use your money for.
2. How much you will need.
3. When you will need it.

If you don't take the time to map out these three items, it can be difficult to make sound investment choices. With well-defined goals, you can place your money in the right mix of investments (diversification) and keep an appropriate balance between risk and return.

Look inside and outside

Consider assets both inside and outside your retirement plan as you rebalance your portfolio. They are parts of the same picture. To ignore this connection could decrease your diversification and increase your risk.

Be tax-smart with your choices. For example, investments like tax-free municipal bonds and tax-deferred annuities should never be held in retirement accounts. Such investments enjoy a tax-favored treatment that is wasted when you hold them in a 401(k) or IRA. You will ultimately end up paying ordinary income tax on income that otherwise wouldn't have been taxed, or you'll sacrifice earnings for a tax benefit you never receive.

Be aware of the tax bite

Don't ignore income taxes as you rebalance your portfolio. If you sell assets that you hold outside a retirement plan, the tax man will want his share.

Get a good night's sleep

You have many investment choices in creating a balanced portfolio. There is also a psychological element in a well-balanced portfolio. Never put your money in investments that you don't understand or that create too much stress for you. Investments with less risk have historically had a lower rate of return. You may have to save more money or save money for a longer period of time to meet your goals, but the reward might be a good night's sleep and less worry.

Many things contribute to a well-balanced portfolio, and your investment decisions today can have a long-term impact on your financial future. So take time now to review your portfolio and get your investment house in order.

Based on our extensive experience with over 1,000 clients, we provide a broad range of services that are especially tailored for you - the small business owner. You have questions - we have the answers for you and for your small business.

Do you need our services? Follow the link if you're not sure if you could benefit from our Small Business Services. Why keep struggling through long nights and weekends or arguing with problem employees? We can ease the load.

Why is Kulzick Associates, PA your best choice? Check this link for more information on why we are your best choice for Small Business Services.

More information on the wide range of Small Business Services we provide is available on the web at Small Business Services.

If you have a small business, we can help. If you are already a client, check the links for information on the many additional services we provide that could benefit you.

Major tax deadlines for March

March 1 - Farmers and fishermen who did not make 2000 estimated tax payments must file 2000 tax returns and pay taxes in full.

March 15 - 2000 calendar-year corporation income tax returns are due. 

March 15 - Deadline for calendar-year corporations to elect S corporation status for 2001.

March 15 - Deadline for calendar-year corporations to contribute to certain retirement accounts and still receive a tax deduction for 2000.

April 1 - Florida local county (such as Miami-Dade) tangible personal property tax returns are due.

April 2 - Deadline for taking your first required distribution from IRAs and qualified retirement plans if you turned 70 ½ last year and postponed taking your 2000 withdrawal until 2001.

April 16 - 2000 individual income tax returns are due.

April 16 - First quarter 2001 individual estimated tax is due.

April 16 - Deadline for individuals to contribute to certain retirement accounts (such as IRAs) and still receive a tax deduction for 2000.

*April 16 - First installment of 2001 U.S. Corporate Income tax payment is due for those businesses qualified to pay estimates quarterly.

Note: Businesses are required to make federal and state tax deposits on dates determined by various factors that differ from business to business. For information on the tax deadlines that apply to your business, contact our office.

Spring cleaning: What records to keep and what records to toss 

Deciding which records to keep and for how long can be a confusing process. A well-organized system will help you retain important paperwork and minimize the clutter. Use legal requirements and your common sense as guidelines for how long to hold on to records.

Tax records. You should keep tax records for at least as long as it is possible for the IRS or other tax authority to audit your return. Generally, the IRS has three years after the return is due or filed, whichever is later, to examine your return and assess additional tax. This is called the "statute of limitations." The Florida statute of limitations is being reduced from five years to three years in a phased manner.

If you've made a major error on your return (defined as omitting more than 25% of your gross income), the IRS has six years to examine your return. To be on the safe side, keep your tax detail records for seven years after a tax return is filed. There is no statute of limitation for fraudulent filing or for returns that are not filed at all.

The IRS does not require that you keep your records in any particular way. The only requirement is that you keep your records in a manner that allows you and the IRS to determine your correct tax liability. Keep checks, receipts, and other records that document the income and deductions you reported on your tax return. Copies of tax returns themselves should be retained permanently.

Investment records. Investment records generally should be kept until the investment is totally liquidated, plus a period of seven years. For certain property sales, records should be kept permanently. You can usually toss monthly or quarterly investment statements if you receive a comprehensive annual statement.

Other records. Important records, including vehicle titles, will and trust documents, insurance policies, contracts, and birth and marriage certificates, should be kept in a safe place. An inventory of your valuable property, along with photographs or a video, should be made and kept current, in the event your house is robbed, damaged, or destroyed.

Before you purge documents, review them for their importance. Call us if you have questions about retaining records. For further information see Keeping Copies of Your Tax Returns

Smart Business

Congress repeals OSHA's new ergonomics rule

Congress just repealed the controversial new Occupational Safety and Health Administration (OSHA) ergonomic rules. Under the repealed rules, employers would have been required to provide employees with information about repetitive strain injuries, take steps to rid the workplace of injury-causing conditions, and provide medical care and paid leave for affected workers. 

It's estimated that the regulations would have affected about 6.1 million workplaces and over 102 million workers. The cost of complying with this new standard was estimated to be in the billions. Opponents of the rules said they would force employers to hire new workers, cut productivity, and compensate workers for injuries that may not have occurred on the job.

President Bush has pledged to review the ergonomics issue. Legislation has been introduced that will require OSHA to issue a new set of regulations within two years.

Even though OSHA's ergonomic standard has been repealed, it's smart business to look around your workplace and make the changes necessary to keep your employees healthy and productive.

Keep your business healthy with a regular checkup

Every year thousands of new businesses are started. Yet within five years, about 80 percent of them fail. Whether you have been in business for a few years or for many years, a regular business checkup might help you remain among the successful few. Below are a few of the broad range of questions that every businessperson should be asking themselves at least annually:

Does your business have a plan?
Successful businesses recognize the importance of a written business plan. The process of writing a plan can help you identify potential problems as well as opportunities. A written plan also forces you to think about where you have been and where you are going.

Is your form of doing business still appropriate for you?
The tax and nontax consequences can be significant. The basic forms of business include sole proprietorship, partnership, corporation (both "C" and "S"), and limited liability company.

Does your company hire and retain good workers?
High employee turnover often results in high customer turnover. Money alone does not make happy employees. Find out what's important to your employees. Flexible hours, casual dress, or benefits can be as important to employees as salary.

How is your cash flow?
A company can have a healthy profit picture and at the same time have a critical cash flow problem. Look for ways to speed collections, such as sending invoices when merchandise is shipped, giving early payment discounts, and imposing finance charges for late payment. Don't pay bills earlier than necessary, but pay early enough to take advantage of cash discounts offered by your suppliers. Consider establishing lines of credit before you need them.

Is your inventory excessive?
Identify suppliers that can ship quickly to reduce the amount of inventory that you carry. If you have inventory that hasn't moved in a while, you may want to give it to a charitable organization and get a tax deduction for your donation.

Who will your next customer be, and what must you do to win or keep that customer? 
Never assume that growth is automatic or that it will last forever. The success of most businesses can be attributed to repeat customers. Conduct customer surveys. Train employees to listen to customer feedback, both good and bad. Offer customer discounts or privileges to preferred customers.

Take the time to identify areas in which your business can improve. We have helped many businesses improve their profits and growth prospects by providing an experienced, fresh outside viewpoint. Every business needs a periodic review to succeed in this difficult, rapidly changing environment.

We've maintained a free information site on the web since 1997. There are currently over 220 pages containing a wide variety of useful information. You can access either through indexes or through a "search" function. To check it out, click here.

Add a friend to our mailing list

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Note for AOL users

If you are using AOL, you will need to access the internet in order to use the links in this newsletter or access our website. Unlike every other service, AOL remains a separate, proprietary system that is not part of the internet. However, recent customer and government demands have forced AOL to provide access links between their system and the internet.

To access the internet from the AOL proprietary system, you must either be using version 5 or later of AOL's browser (earlier versions cannot directly access the internet) OR go to AOL, link to the internet, minimize your AOL browser, and then bring up and use either Microsoft's Internet Explorer or Netscape's Navigator. These are the browsers everyone else uses and both are free. You can download them from Microsoft or Netscape. If you are using any ISP except for AOL, you are already accessing the internet and should have no problems.

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© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010312.