From The Wall Street Journal, see how valuable a CPA can be.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
We thank all of our clients and referral sources for their business this past year.
Hope everyone is having a Merry Christmas/Happy Holiday and has a Happy New Year!
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
This is the time of year in our CPA practice that I work with small business owners and individuals to perform tax checkups to help them project their tax liabilities for 2012 and make tax saving recommendations of moves they can make between now and year-end. Frequently, just defining the amount of taxes they owe via these planning services helps manage their cash flow so the businesses and individuals don’t have a big amount due and/or surprise each Spring when we prepare their tax returns.
For the business owner and individuals, one of the largest expenses can be taxes. For this reason alone, this expenditure requires planning and monitoring as any other major expense. A year end planning meeting with your CPA should include a discussion of:
This planning meeting should prepare the business owner or individuals to anticipate the amount of taxes that will be owed on March 15th (or April 15th if the tax burden flows through to the personal return). To be effective, tax planning needs to be done prior to New Year’s Eve.
Use our experience in year-end tax planning to enhance your bottom line. Give us a call if you would like to discuss your personal tax situation and see how we can save you taxes.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Last week, we talked about the risk that inflation plays in the bond market. Continuing on that line, I wanted to provide you with a quick example of how rising interest rates due to inflation can have an effect on the value of bonds (and bond funds).
The table below illustrates how future increases in interest rates effects the value of a $100,000 bond purchased today.
Bond Bond Value Bond Value
Maturity with 1/2% rate with 1% rate
increase in 1 year increase in 1 year
1 YR $99,500 $99,035
2 YR $99,020 $98,060
5 YR $97,825 $95,700
10 YR $96,175 $92,500
15 YR $94,900 $90,150
20 YR $93,950 $88,400
30 YR $92,650 $86,125
With this quick example, you can see how even minor rate increases can erode the value of a bond.
The reason for this is that in a rising interest rate environment, new bonds would pay better yields; therefore when you sell your older bonds, you would lose money as buyers could obtain newer bonds with higher yields.
So, as I said last week, while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
With recent volatility of the stock market, along with the uncertainty of the real estate market since the “crisis”, some investors have been considering a shift to the bond market.
However, while bonds (and bond funds) do pay regular interest, bond yields are currently very low. Additionally, bonds come with a risk that is often forgotten about today – inflation risk.
Nobody has worried too much about inflation lately. But, between the massive amount of the national debt and the impending “fiscal cliff”, higher inflation is possible.
Inflation is bad for bondholders for 2 reasons –
– Low yielding bond payments won’t allow you to keep up with the rate of inflation, meaning the interest earned on your bonds will buy less
– Inflation causes interest rates to rise, so new bonds would pay better yields; therefore if you sold your older bonds, you would lose money as buyers could obtain newer bonds with higher yields
So while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Reverse mortgages can be tempting to people whose retirement savings and home values have dropped significantly in the last couple of years. However, if you are in your 60s, you may want to carefully consider the pros and cons.
While reverse mortgages are available to homeowners who are at least 62 years of age, they are questionable for anyone younger than 70.
– Up front closing costs (including mortgage insurance of approximately 2% of appraised value) on reverse mortgages are generally higher than conventional mortgages.
– Since no payments are required to be made on loan, interest is treated as an additional advance on the loan and can balloon quickly.
– Mortgage insurance is required annually, normally 1.25% of loan balance
– Taxes and insurance must be kept current, or else loan could be considered in default
Even if you are in your 70s, consider a reverse mortgage as a “last resort”.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP® …until next week.
Happy Thanksgiving everyone!
There will not be a Tax and Money Tip of the Week this week. We would just like to take the time to wish everyone a safe and happy Thanksgiving holiday!
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP® …until next week.
Exchange traded funds (ETFs) have become a very popular investment in the last few years. Here are a few things that you should know about them if you are considering investing in ETFs –
§ An ETF is a type of investment (like a mutual fund) that bases its investment mix on an index.
§ Unlike a mutual fund, ETFs are traded on an exchange, so they can be bought and sold throughout the day (like a stock). Mutual funds can only be bought or sold once a day, generally at the market close.
§ Many ETFs have lower expense ratios than mutual funds since ETFs are based on index investing.
§ The variety of ETFs available allows you to focus an investment into a particular industry, commodity or country.
§ ETFs are generally more tax-efficient (i.e., less taxable capital gains) than mutual funds.
§ Check the track records of any ETFs you are considering.
o If total assets are less than $20 million, the sponsor may decide to close it.
o If trading is less than $500,000 per day, the bid/ask spread is likely to be wider. Generally, the more narrow this spread, the better.
Is an ETF the proper investment for you? Give us a call to discuss.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Looking for a reliable and trustworthy employee? 
These days, who isn’t?
That person may be closer than you think. Why not hire your spouse? He or she probably already performs a number of company functions for no pay. Here are 4 tax benefits you may receive by employing your spouse.
Increase the amount of retirement savings
With your spouse as an employee, the company can deduct contributions to a qualified retirement plan on his/her behalf, which increases the amount of tax-deferred savings your family will have. Depending on the type of retirement plan the company maintains, this can result in a significant tax deduction for the company.
Shift taxable income to a lower tax rate
If your company is a C-corporation, any salary paid to your spouse is a deduction for the company. Assuming your personal tax rate is lower than the company’s tax rate, you will pay less tax on your spouse’s salary based on your lower tax rate.
Additional tax deductible travel expenses
Normally, travel expenses attributable to your spouse are not deductible if he/she accompanies you on a business trip. But, if your spouse accompanies you for a valid business reason as an employee of the company, the costs of his/her airfare, taxi, hotel, etc., would be deductible to the company.
Group-term life insurance
As an employee, your spouse would be entitled to life insurance coverage under the company’s Group Term Life Insurance plan.
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.
In a recent court case (TC Summ OP.2001-17) the Tax Court allowed an interest deduction for a house that was never built. A married couple took out a loan and bought a beachfront home, tore it down and planned to build a new house on the site. However, they could not do so until a state environmental agency granted them a permit. That process dragged on for two years. By that time, the local real estate market had crashed and the couple couldn’t get a loan to cover the construction costs, so they sold the land at a loss.
Tax rules state that mortgage interest is deductible on a loan for 24 months after construction begins or for 24 months after the teardown date. The court ruled that deducting interest on a loan for a home under construction doesn’t condition deductibility on the house’s completion. And in this case, the home was never built because of unforeseen circumstances that were well beyond the couple’s control. Therefore, a mortgage interest deduction was allowed on the original acquistion loan.
The rule that disallows a mortgage interest deduction after the 24-month period ends remains as nondeductible personal interest.
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.
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