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January & February

Electronic Filing

Due to changes in the tax code enacted on 12/31/12 – YES – The last day of the year – most business tax returns (forms 1065 – 1120s – 1120 – 990 – 1041s) and individual tax returns that have any business activity cannot be filed electronically until late February or early March (PER THE IRS).  Additionally,  filing on paper is NOT an option as the paper forms are not yet approved.  NOTE:  Do not delay your preparation of your returns because of this.  We will be filing completed returns as early as possible.



Qualified Charitable Deduction Update

The new tax law extends the ability to make Qualified Charitable Deductions (QCDs) of required minimum distributions (RMDs) directly (or indirectly) to charity. Similar to what happened the last time this was 'extended' late in the year, taxpayers have until 1/31/13 to make a cash contribution to a charity of a previously withdrawn RMD taken directly into their own account since 12/1/12 and have it count as a QCD occurring on 12/31/12. The money therefore did not have to flow directly from the IRA to the charity.

The law extends the QCD for 2013 RMDs.

Individuals who took their RMDs in December 2012 and now wish to make a charitable donation with those funds via check can do so prior to 2/1/13 and elect to treat it as a QCD in 2012. They won't also be able to deduct that as a donation in 2013.

This provides an opportunity to 'shift' charitable donations backwards now, which might be helpful to some individuals who have made multi-year commitments to a charity (make 2013 or 2014 pledge payments now using 2012 RMD/QCD treatment) or to those in higher brackets where the itemized deduction phase out (the 'Pease" reductions) is again going to kick in.

This will also apply to all individuals who took RMDs in December who regularly make charitable donations but might not otherwise have enough to itemize. QCD treatment could be elected for some or all of their RMD amounts for cash donations made between 12/1/12 and 1/31/13. This would lower their 2012 AGI and taxable income and also MI taxable income.

Article provided by Alan D. Miller, CPA, PFS, Tax Director & Financial Advisor, LJPR, LLC, Troy, Michigan. LJPR frequently offers continuing professional education programs through the MACPA. You can reach the author at


A 'Fiscal Cliff' Resolution: What will it mean for you?

Though they went to overtime, Washington's "fiscal cliff" negotiations eventually ended in an agreement that will spare millions of Americans from a 2013 income tax hike — though allowing a tax increase on those with higher incomes.

Here's what the new tax law looks like.

Income Tax Relief

The 2012 federal income tax rates have been extended permanently for singles with annual income below $400,000 and married couples with less than $450,000 of income. For taxpayers above those thresholds, the maximum tax rate is rising from 35 to 39.6%.

The tax treatment of investments also will be split at those same levels. Americans with income below those marks will continue to pay taxes on capital gains and qualified dividends at a maximum 15% rate. Higher-income Americans will face a higher 20% tax rate on capital gains and dividends. And, when factoring in a new 3.8% health care tax on investment income, the top rate actually rises to 23.8%.

Limits on Personal Exemptions and Deductions

In 2013, single taxpayers with income above $250,000, and married taxpayers with joint income above $300,000, will see their ability to claim personal exemptions and itemized deductions either reduced or eliminated, depending on how high their income is. Personal exemptions reduce taxable income and are expected to be valued at $3,900 per person in 2013. That value will shrink or disappear for taxpayers with income above the new limits.

Lasting Patch for the Alternative Minimum Tax

The Alternative Minimum Tax was created to prevent the wealthiest Americans from using maneuvers to avoid paying taxes. However, since it wasn't designed to reflect inflation, Congress has had to create a series of "patches" to prevent it from hitting the middle class. The deal replaced those periodic patches with a long-term fix that also reaches back to cover 2012.

Estate Tax Adjustment

In 2012, only those estates worth more than $5.12 million were subject to federal estate taxes, at a maximum rate of 35%. In 2013, the exemption will remain at that amount, but the maximum tax rate is climbing to 40%. The new law also makes permanent the ability of spouses to use any amount of the tax exemption that wasn't used by their deceased spouse — giving married couples the power to shelter more than $10 million in combined assets.

End of the Payroll Tax Holiday

While the new law generally guards most Americans from a 2013 tax increase, there's an exception: The two-year discount on payroll taxes has ended. This means your Social Security tax rate will jump from 4.2 to 6.2%. If you're self-employed, the rate goes from 10.4 to 12.4%.

Other Provisions Extended

Many other tax breaks were extended, including:

  • Deductions for state and local sales taxes.
  • The $1,000 child tax credit, dependent care credit and adoption credit.
  • Tax-free distributions from IRAs for charitable purposes.
  • Deductions for teachers' out-of-pocket expenses.
  • Student loan interest deductions.
  • The American Opportunity Tax Credit, which offsets college costs.
  • The $2,000 contribution limit for Coverdell Education Savings Accounts.The ability to make tax-free withdrawals from Coverdell accounts for elementary and secondary education costs — in addition to college expenses — was also extended.


Vishing, Phishing and Smishing — Oh, My!

High-tech thieves are everywhere. Arm yourself with knowledge, and fight back with USAA's anti-fraud services.

As the world gets increasingly mobile, so do the crooks looking to take advantage of you. They're everywhere: on your computer, at the cash machine, even lurking on your phone. "Today's consumer needs to be more vigilant than ever, all the time," says Tom Shaw, USAA's vice president of financial crimes management.

Still, there's no reason to panic or become a hermit. A little common sense can go a long way toward protecting you from identity theft and financial loss. In addition, USAA offers fraud protection services that help protect its members. However, the most effective defense is understanding the risks when you're using your computer, smartphone or tablet. In the fight against fraud, knowledge is power.

Here's a look at the 13 scams you're most likely to face.


An email that appears to be from your financial institution or another business you deal with asks you to click a link, directing you to a web page that looks legitimate. On this web page, you're asked to verify personal information, such as your account number, password or Social Security number. The email may include an attachment, which it urges you to open.

Don't bite. It's a scam to snatch your personal data. Reputable companies never gather information this way.


Think of this as phishing over the phone — the "v" is for voice. Instead of sending a bogus email, the criminals call you, claiming to be from your bank or another institution you trust, such as the local court system calling about jury duty. Even if an email or phone call appears to be legitimate, be suspicious. If they ask for a Social Security number or other personal information, think twice. Hang up and call the organization's customer service number to double-check.


This variant of the phishing concept uses text messages to lure you into clicking links that provide your personal information or download infected apps on your phone. Don't respond to text messages or automated voice messages from unknown or blocked numbers on your mobile phone.

Pop-ups and viruses

As anyone who's emailed or surfed the Internet has experienced, there's no end to the traps set by online thieves. Pop-up ads are especially bad, since clicking on them could trigger your computer to download a nasty virus or spyware — software that gathers personally identifiable information, including email addresses and passwords, from your computer without your knowledge. The same goes for attachments or links that come in unsolicited emails or in unsolicited Facebook, Twitter or other social networking messages. (Tip: Hover your cursor over the link to preview the website before clicking.) Some scammers will even call to tell less savvy computer users that "problems have been detected" on their computer and they need to download special software to repair it.

Once a malicious code is on your machine, it can hijack your computer's operating system, send spam and malware to other computers, launch unrelenting pop-up ads, or even record your keystrokes and report back to its controller.

What can you do? Defend your computer with anti-virus, anti-spam, anti-spyware and pop-up blocker programs.  Remember, when you're in unfamiliar territory on the Internet, trust no one.

Search Engine Attacks

These attacks leverage the power of search engines to hide malicious links in common Internet queries, such as recent news items or lyrics for a popular song. Before clicking a search result, read the summary text to make sure it's grammatically correct and relevant and the link address is concise. Look for clues that the source isn't reputable. "If anything looks incorrect with a search result," says Shaw, "it's probably not something you should click on." McAfee online security products color-code search results to let you know which are safe and which are suspicious.

ATM skimming

Some clever crooks attach cameras or scanning devices to ATMs so they can steal your account number and password. To protect yourself, inspect the ATM, gas pump or credit card reader before using it. Don't use the machine if anything appears loose, crooked or damaged, or if you notice scratches or tape residue on the machine. If your card isn't returned after the transaction or after hitting "cancel," immediately contact the financial institution that issued the card.

Credit and debit card skimming

At retail stores and restaurants, some workers have been caught recording the information off customer payment cards, either with a small credit card scanner or by snapping a picture of your card with their phone. Keep your card in sight whenever possible. Swipe it yourself, if you have that option.

Bogus charities

Is that solicitor a community servant or a common thief? On your doorstep, on the phone and online, fraudsters appeal to your benevolent side, then take your money and run. Before donating to a charity you're not familiar with, always investigate it — start with the Better Business Bureau or — and just say no to high-pressure pitches.

Phony job offers/debt relief

Crooks are taking advantage of consumers' desperation by preying on their desire to find a job or get out of debt. The come-ons arrive in myriad forms — in email, web pop-ups and even the mailbox — and promise a hot job opportunity, debt forgiveness or great mortgage refinance rates, all if you just visit a website designed to steal what money you have left.

Fake check/overpayment schemes

If you sell items on eBay or Craigslist, watch out. In this common scam, a "buyer" contacts you and says he will pay by cashier's check. He sends a check for much more than your asking price and requests that you wire the excess money back to his "agent" or "associate." The trouble starts a few days later, when your bank rejects the cashier's check as fraudulent. If you've already wired the cash, the "excess money" and bank fees come out of your pocket and can't be recovered.

Other commonly reported variations on this fraud include foreign lotteries ("Congratulations! You've won!") in which you're sent a big check and asked to wire back taxes and fees. Or "secret shopper" programs: That's when you receive a phony check in return for evaluating the quality of a company's money-transfer service. "If you encounter an opportunity that sounds anything like these scenarios," says Shaw, "just say no."

Advance-fee fraud

This venerable con comes in many forms. You pay in advance for something, anticipating a reward of greater value. You might pay a fee to claim "found money" that supposedly belongs to you; to get in on a "can't lose" investment opportunity; or to have "lottery winnings" delivered to you. In the end, the only one who comes out ahead is the scammer.

A common form of advance-fee fraud is known as the Nigerian scam, or 419 scam, named for a section of the Nigerian criminal code. In this long-running swindle, you might receive an official-sounding letter or email that promises you a cut of millions of dollars if you help this person move money out of his country using your bank account. And — you guessed it — substantial fees are required upfront. These scammers are now trying to lure victims through text messages and phone calls.

Phone denial-of-service attacks

This elaborate con bombards your home, business or cell phone with hundreds of calls from an automated dialing system. When you answer, you may hear dead air or a recorded message. Meanwhile, a crook is raiding your financial accounts using illegally obtained information. And your financial institution isn't able to contact you to verify the transaction because your phone is busy. The criminal could raid your account online or by calling your financial institution and pretending to be you. This well-planned scheme is devised months or even weeks in advance through illegal social engineering tactics or malware tactics.

Laptop/phone/tablet theft

It may sound old-fashioned and boring, but theft of devices remains the most common computer crime because it requires zero know-how to pull off. Tablets are increasingly popular as they are easily resold on the black market. To protect yourself, use a laptop cable lock whenever possible, and keep important gear out of sight unless you're using it. Store briefcases in your trunk, not the passenger seat of your car, and make sure you use strong passwords and encryption (if available) on all your devices in case they fall into the wrong hands.


Eight IRA Mistakes to Avoid

Increase your saving potential with these IRA do's and don'ts.

Owning an IRA is a great step, but getting the most out of these retirement saving solutions requires building your knowledge of just how to use them.

"There's no question that saving through an IRA is a strategic move, but it's not quite as simple as 'set it and forget it,'" says J.J. Montanaro, a CERTIFIED FINANCIAL PLANNERTM practitioner with USAA. "Staying aware of what to do and what not to do can really pay off too." Montanaro shared eight of the most common mistakes IRA investors make, preventing them from taking better advantage of this retirement-saving tool.


1. Thinking you've missed the contribution deadline.

You have until your tax filing deadline — usually April 15 — to make an IRA contribution for the previous year. You can even claim a traditional IRA deduction and file your return before you actually make the contribution — just be sure to follow through.


2. Not contributing enough.

Contributions to a traditional IRA are tax deductible, within limits, so you can help secure your future and cut your tax bill at the same time. If you're younger than 50 years old, you can contribute up to $5,000 in 2012 and $5,500 in 2013. Maxing it out makes for maximum potential tax savings.


3. Not playing catch-up.

Age does have its rewards. If you're 50 or older, you may be eligible to contribute an extra $1,000 (for a total of $6,000 in 2012 and $6,500 in 2013) to an IRA. This catch-up contribution offers a chance to kick your savings into overdrive.


4. Assuming you can't contribute.

If you're a stay-at-home spouse, you can still open an IRA as long as contributions from both spouses don't exceed your combined taxable compensation. A spousal IRA is especially handy when the working spouse is already covered by an employer retirement plan and can't deduct IRA contributions. What you can deduct will depend on your modified adjusted gross income, but every bit counts.


5. Rolling the wrong way.

If you've recently switched jobs or left a job, you can roll the funds from your old employer's retirement plan into an IRA. Just be sure the transfer is made directly from one custodian to the next — a direct rollover. If the payout goes to you first, it will be subject to a mandatory 20% withholding tax. Then, you'll have only 60 days to move the funds you received, plus the 20% that was withheld, to a new account. If you miss the deadline, you'll have to pay income taxes on the distribution, plus an early withdrawal penalty if you're not at least age 59½. USAA advisors can help you through the rollover process.


6. Not considering a Roth.

You might be able to save more on taxes in the long run by contributing to a Roth IRA instead of a traditional IRA depending upon your tax situation. Roth IRA contributions aren't tax deductible, but the Roth can provide tax-free withdrawals come retirement time and the IRS does not require the owner to take annual required minimum distributions. There's another way to put money in a Roth: Thanks to an IRS rule change, anyone, regardless of income levels, can convert money from a traditional IRA to a Roth IRA. Since conversions are subject to ordinary income taxes, you should consult a tax advisor regarding your particular situation.


7. Withdrawing too early.

Your IRA is designed to remain untouched until you reach age 59½. If you make a withdrawal from your traditional IRA before then, you'll have to pay taxes on the income and investment earnings and fork over a 10% penalty, with some qualified exceptions. While a Roth IRA allows you to withdraw your contributions, not including earnings, at any time without taxes or penalties (though with conversions, you may need to wait five years), you'll thank yourself later for not raiding the piggy bank.


8. Procrastinating.

More than any technicality, it's plain old procrastination that hurts investors the most. Whether it's uncertainty in the markets, cash-flow concerns or the rising cost of college, there will always be excuses to put off this year's IRA contribution. But time-honored investing principles show that consistent contributions — through good times and bad — provide the clearest path to long-term investing success. So make the commitment and take action to help secure your financial future now.


13 Tips to Make 2013 Your Lucky Year


Unlucky 13? Not on our watch. Although this number drums up all sorts of negative connotations, we'd like to reverse that trend. In support of this idea, we've come up with 13 tips to help you make 2013 a year during which financial luck has nothing to do with four-leaf clovers or horseshoes.

  1. See where you stand. Lay out your cards and see what you have. Review your net worth (assets and liabilities), cash flow (income and expenses) and insurance coverage. Map out your financial goals for the year and reconfirm your longer-term goals. Write them down and prominently post them (refrigerator, mirror, etc.) to keep them front and center.
  2. Know where it goes. Really get a handle on your money this year by recording everything you spend, every day. Categorize expenses and total them up weekly. Put pen to paper.  After a couple of months, scrutinize each category for places to cut back or cut out altogether. Finally, save what you've cut each month.
  3. Incorporate new cash. A pay raise, inheritance or tax refund can make you feel like you just hit the jackpot. Make that feeling last by incorporating the extra money into your savings and debt-elimination strategy before you blow it on a big-screen TV or fritter it away. Increase your retirement plan contributions, accelerate payments to your credit cards or other debt, or set up an emergency savings account.
  4. Attack debt. Who's often the biggest winner in the consumer debt game? (Hint: It's not the borrower.) Become the victor this year by eliminating or significantly reducing your consumer debts. First, make a commitment to not add debt. Then, put a plan in place to pay down what you have. To get a bigger emotional lift, start with the smallest balances first. To get a bigger financial lift, start with the highest interest rates first.
  5. Check your credit. Luck has nothing to do with a credit score of 760 or higher. However, that type of score will help you win big with low interest loans and look good in the eyes of landlords, insurers and prospective employers. Check your credit report for free at, and for a few bucks more see your credit score. See where you stand, ensure the information is accurate and work on it if necessary.
  6. Consolidate and simplify. "Don't put all your eggs in one basket" is typically sound financial advice. However, having so many baskets that you can't keep track of them can defeat the purpose. It's very difficult to manage your portfolio or spending habits when your money is strewn across multiple accounts and institutions. Come up with an investment plan and consolidate your holdings into no more than a few baskets. Use online bill pay and automatic investments to stay on track.
  7. Protect your family. A shocking 35 million American households are rolling the dice — they have no life insurance. Without life insurance coverage, an already bad situation can get a lot worse in a big hurry. Protect your family and make sure you've got adequate life insurance coverage to take care of them if you're not around to do it yourself. Trying to figure out how much you need? Check out the life insurance needs calculator on
  8. Protect your stuff. Lucky or not, stuff happens. Cars get wrecked. Storms and fires destroy houses. Things get stolen. To decrease the financial impact of such events, make sure you have adequate insurance coverage for your home, rented apartment or condo and valuable personal property (such as expensive jewelry).
  9. Initiate retirement savings. It's never too early (or too late) to start preparations for the golden years. Stashing a little money in your 401(k) or Thrift Savings Plan can go a long way. Starting early also can help you reduce the stress that comes with hitting the half-century mark with a hankering for retirement and double zeros in your nest egg. So this year, start a Roth or traditional IRA, an employer plan or even a nonretirement account. Whatever the way, start saving today.
  10. Save now for near-term goals. "Plan and save" is a much better financial strategy than "don't plan and borrow." Big recurring expenses such as holidays, vacations and back-to-school shopping provide the perfect opportunity to develop a monthly savings plan to accumulate, rather than borrow, the money you'll need. Would you rather make high-interest payments each month to a credit card company or make payments to yourself that earn interest?
  11. Look at liability. If you're found legally responsible following an incident or accident at your home, on the road or on the water, you could find yourself at the wrong end of a costly lawsuit. Protect yourself by making sure you have adequate levels of liability insurance offered through homeowners, renters, auto policies or separately through a personal umbrella policy.
  12. Shop smart. Consumer spending makes up roughly two-thirds of the U.S. economy, so there's no denying we're all spending a fair amount of time shopping and buying. This year, commit to adding the adjective "smart" before your purchases. Give yourself an edge by implementing a cooling-off period before big-ticket buys, doing comparison shopping and committing to cash purchases (yes, you can save and buy).
  13. Create an estate plan. Wealthy or not, everyone needs a will and/or a trust, a durable power of attorney, a health care power of attorney and a living will. Many families should also discuss guardianship arrangements for young children. Preparing these documents can be unpleasant. But the temporary pain of filling out the paperwork now can make life easier for your family later if you suddenly become incapacitated or pass away.


U.S. Government's Fiscal Years 2012 and 2011 Consolidated Financial Statements

What GAO Found

To operate as effectively and efficiently as possible and to make difficult decisions to address the federal government’s fiscal challenges, Congress, the administration, and federal managers must have ready access to reliable and complete financial and performance information—both for individual federal entities and for the federal government as a whole. Even though significant progress has been made since the enactment of key federal financial management reforms in the 1990s, GAO’s report on the U.S. government’s consolidated financial statements illustrates that much work remains to improve federal financial management. Further improvements are urgently needed.

GAO found the following:

  • Certain material weaknesses in internal control over financial reporting and other limitations on the scope of its work resulted in conditions that prevented GAO from expressing an opinion on the fiscal years 2012 and 2011 accrual-based consolidated financial statements. About 34 percent of the federal government’s reported total assets as of September 30, 2012, and approximately 21 percent of the federal government’s reported net cost for fiscal year 2012 relate to the Department of Defense (DOD), which received a disclaimer of opinion on its consolidated financial statements.
  • Because of significant uncertainties, primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2012, 2011, and 2010 Statements of Social Insurance, GAO was unable to express opinions on the 2012, 2011, and 2010 Statements of Social Insurance, as well as on the 2012 and 2011 Statements of Changes in Social Insurance Amounts. About $27.2 trillion, or 70.5 percent, of the reported total present value of future expenditures in excess of future revenue presented in the 2012 Statement of Social Insurance relates to Medicare programs reported in the Department of Health and Human Services’ 2012 Statement of Social Insurance, which received a disclaimer of opinion.
  • Material weaknesses resulted in ineffective internal control over financial reporting for fiscal year 2012.
  • GAO’s tests of compliance with selected provisions of laws and regulations for fiscal year 2012 were limited by the material weaknesses and other scope limitations discussed in the report.

While significant progress has been made in improving federal financial management since the federal government began preparing consolidated financial statements 16 years ago, three major impediments continued to prevent GAO from rendering an opinion on the federal government’s accrual-based consolidated financial statements over this period: (1) serious financial management problems at DOD that have prevented its financial statements from being auditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.

In addition to the material weaknesses underlying these major impediments, GAO identified four other material weaknesses. These are the federal government’s inability to (1) determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce improper payments, (2) identify and resolve information security control deficiencies and manage information security risks on an ongoing basis, (3) effectively manage its tax collection activities, and (4) effectively monitor and report loans receivable and loan guarantee liabilities.

Why GAO Did This Study

The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget, is required to annually submit audited financial statements for the U.S. government to the President and Congress. GAO is required to audit these statements. The Government Management Reform Act of 1994 has required such reporting, covering the executive branch of government, beginning with financial statements prepared for fiscal year 1997. The federal government has elected to include certain financial information on the legislative and judicial branches in the consolidated financial statements as well.

COMMENT: So the government (GAO) is saying that the government does not have adequate controls over the monies under its control?  Scary!!!!!!!!!!



Forsaking Multi-tasking for Your Own Good
By Jeff Davidson

When you attempt to do two or more things at one time, you are multi-tasking and, unfortunately, you’re more likely to do unsatisfactory work.

Researchers at the Medical College of Wisconsin have found that if you perform as simple a task as tapping your foot, you activate the primary motor cortex in your brain. If your task is more involved—for instance, if it includes planning in order to tap your foot to a sequence such as one-two, one-two-three, one-two, one-two-three—then two secondary motor areas in the front portion of the brain are engaged. You are drawing upon more of your brain's functioning capacity.

Don't worry, your brain can handle it. The point is that when you engage in multi-tasking (i.e., attempting to watch TV while eating, or doodling while you talk on the telephone) your brain functioning changes to incorporate the extra activities.


"Men give me some credit for genius. All the genius I have lies in this: When I have a subject at hand I study it profoundly. Day and night it is before me. I explore it in all its bearings. My mind becomes pervaded with it. Then the effort which I have made is what people are pleased to call the fruit of genius. It is instead the fruit of labor and thought."  Alexander Hamilton


If you want to do the best at whatever you're doing, allow your brain to concentrate on one activity — focus on one thing at a time. It sounds simple enough, but this advice goes against the grain of a society telling you do many things at once in order to be more efficient. People double their activities in an effort to make things easier and better.

What is Your Hurry?

Consider some of the greatest people in history, such as Gandhi or Martin Luther King. Were they in a hurry? They acted urgently because the things they did were important, but they did not walk faster, talk faster, or try to do any of the things you do today in the name of efficiency. They had mastered the art of doing one thing at a time. I sometimes do a little exercise when speaking at conventions and executive retreats. I ask audience members to take out their watches and do nothing but stare at them for a solid minute. No one can do it! In this society, we're fed a message that emphasizes the importance of motion and activity.

When you read, think, or reflect, you "don't look busy" enough. Has the following ever happened to you? Somebody walks by your desk and, horror of horrors, you're reading! Worse yet, you're reading the newspaper! Maybe the person looks at you a little funny, or perhaps you feel a bit guilty because you're not "in motion." Yet studies show that people in executive positions need to read two to four hours each day. To be as productive as you need to be, you often act in ways that run counter to what society tells you is "productive activity."

You have to break out of the mindset imposed by others. Sometimes the best way to be productive is to sit at your desk and do nothing — at least nothing that looks like anything to people walking by. Reading or looking out the window in contemplation could be the single most important and productive thing you do in a day. Too often, you probably throw your time away at tasks when what you really need to do is reflect on them first.

The single best way to cope with a number of different projects is to begin working on one thing until its completion, then go on to the next project, and then the next, until you are finished.

Focus on Just One Task

What happens when you jump between different projects? It may feel dynamic — after all, you're exerting lots of energy. Yet there's a loss of productivity. You and a friend can test this easily at your desk or table. Decide on any three minor tasks in which the two of you can engage simultaneously. For example, one task could be stacking pennies, another could be drawing 15 stars on a blank sheet of paper, and yet another could be linking paper clips together. You each have the same number of items.

You and your friend both engage in these tasks. You stack a few pennies at a time, make a few stars on a blank piece of paper, and link some paper clips, indiscriminately alternating between the three tasks.

Meanwhile, on the other side of the table, your friend stacks an equal number of pennies to completion until he has no more. Then he turns to making stars on a page, and reaches 15. Finally he turns to linking paper clips, and finishes linking all of them.

Who do you think will not only finish faster and easier, but be in better shape mentally and emotionally? Without question, your friend. Why? He was able to focus on the task at hand, take it to completion, then turn to the next one, while you were bouncing back and forth between activities. You may have been more prone to errors, such as knocking over one of your stacks of pennies. Though you handled the situation well and were quite adept, you simply couldn't keep pace. The quality of your work was not as good. Perhaps your work was not as precise, or the 15 stars you drew on the page left a little to be desired in terms of artistic merit.

Multiply what happens in a simple test such as this by what happens all day and all year long when you flip-flop between activities, and it's easy to understand why you're not getting the best of your activities. Mentally switching from task to task is not as productive as staying on one job until completion.

Give Yourself a Break

For today, give yourself the benefit of working on one thing at a time. You may have to switch gears when the boss comes in, when that important phone call comes through, or if you receive an e-mail that has to be acted on right away. When you switch gears, switch them entirely. Give your complete and undivided attention to the pressing issue at hand. This is the most effective way to work, and you will be happy.


If you notice yourself falling into patterns that resemble multi-tasking, try these solutions:
• Take a 15-minute break once during the morning, and once in the afternoon.
• Don't eat at your desk; get away so that you can recharge your battery.
• Invest in equipment or technology that offers you a significant return, (i.e., pays for itself within one year or less, or saves at least two hours a week of your time).
• Hold regular meetings with your team to discuss how everyone can be more efficient – without multi-tasking. Focus on the big picture of what everyone is trying to accomplish. Often, new solutions to problems will emerge and activities that seem urgent can be viewed from a broader prospective.
• Furnish your offices with plants, pictures, art, or decorations that inspire creativity.

About the Author
Jeff Davidson, CMC, MBA, is The Work-Life Balance Expert®. A speaker at many large companies, Jeff believes that career professionals today in all industries have a responsibility to achieve their own sense of work-life balance. He supports this quest through his websites and Jeff can be reached at


Everyone Has Gone Home
By Doug Williamson

Everyone has gone home—more than once—at the end of a long, hectic, frustrating day wondering exactly what they accomplished during their eight hours at the office. Endless meetings, mind-numbing PowerPoint presentations, inconveniently timed phone interruptions and of course, way too many e-mails. There has to be a better way!

The challenge we all face is figuring out how to rescue our individual sanity and improve our collective productivity. The fact is most offices are simply not efficient because most people are not efficient. However, contrary to popular belief, it's not a matter of how well organized we are. This is not another lean Six Sigma project, findings ways to streamline the processes. No, this it is a matter of choices, practices and disciplines to improve our mental acuity — the net result of which will be greater efficiency.

Here are some ideas that have worked well for me over the years and may be helpful for you as well. As you will see, these 10 ideas fall into three broad categories and it's all about getting the balance right.

How to Maintain Smart Discipline

Develop a strict time budget and stick to it. Decide how you want to spend your time and then track it relentlessly until you get it right. Make tough choices. Don't allow random events to make you a prisoner of someone else's agenda.

Schedule internal meetings only in the mornings between 9am and 11am. Your team needs guidance to stay on course and remain efficient. Give it to them early in the day, in small doses as a group — like a huddle. Standing is even better. Don't waste their time and yours with impromptu end-of-day meetings that typically add confusion and raise anxiety levels.

Label your meetings ahead of time. Not all meetings are created the same. Some matter more than others. Some are for decision making, others for information sharing, and others for administrative updates. Be respectful, let people know what the expectation of the meeting is and don't confuse one thing with another.

Ruthlessly organize and categorize your personal priorities. There are some great web-based tools out there for tracking your various priorities and tasks. I use Priority Matrix and find it invaluable in ensuring I remain focused.

How to Eliminate Noise and Distraction

Don't keep piles of paper on your desk. The endless piles of paper are not only distracting but they create a subliminal level of stress that is totally avoidable. Your desk is a working space, not a storage system.

Ignore reading e-mails where you are not the primary addressee. If the e-mail is not addressed to you then ignore it. Most of these particularly wasteful types of e-mails are either intended to show artificial self importance by the author or are the plain “CYA” variety. In either case, you have more important things to accomplish with your time.

Read your e-mails only during set time periods. Whether on your mobile device or desktop, the constant scanning of the In-box is a habit you can and must break. In the process, you will allow your mind to get in a groove rather than having it wander aimlessly from one issue to another.


How to Decompress

Work from home one day every two weeks. We all need a mental break and a solid block of time to address the top tier — the more thoughtful and contemplative work we all have. You will find this type of work is often best done when you change things up, put yourself in a different atmosphere and maybe even work in your pajamas.

Block off your Friday afternoons for unscheduled time. Use the end of the week to sort out any loose ends. Allow yourself a 3-4 hour buffer at the end of the week so you can reflect, tidy up and go into the weekend with your mind at ease, knowing that all the little, annoying loose ends have been attended to.

Coach, teach, talk and connect. Consider giving yourself an adrenaline boost by using some of your unscheduled Friday time to connect with people — to coach, teach or talk. Engage in some good old-fashioned relationship management to provide a sense of personal accomplishment.

Whatever you do, avoid the tempting embrace of being seduced by sweat. Instead, fall in love with the idea of working smarter.

About the Author

Doug Williamson is president and CEO of The Beacon Group, a Toronto-based firm that specializes in organizational transformation and effectiveness programs, as well as talent identification and leadership development. To learn more about Doug, contact him at You may also visit his website at



IRS Combats Identity Theft and Refund Fraud on Many Fronts

January 2013

Stopping identity theft and refund fraud is a top priority for the IRS. The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2013 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

By late 2012, the IRS assigned more than 3,000 IRS employees — over double from 2011 — to work on identity theft-related issues. IRS employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.

Refund Fraud Detection and Prevention

The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

The IRS has expanded our efforts on refund fraud detection and prevention for the 2013 tax season in several ways:

  • For 2013, there has been a significant increase in the number and quality of identity theft screening filters that spot fraudulent tax returns before refunds are issued. The IRS has dozens of identity theft filters now in place.
  • IRS Criminal Investigation tripled the number of identity theft investigations in fiscal year 2012, starting 900 investigations. Nearly 500 people have been indicted across the country. Several hundred more investigations have started since October.
  • The IRS expanded a pilot program that allows local law enforcement agencies in nine states to obtain tax return data that helps us investigate and pursue identity thieves. More than 65 law-enforcement agencies are involved in this effort.  
  • The IRS is collaborating with more than 130 financial institutions to identify identity theft fraud schemes and block refunds from reaching the hands of identity thieves. This effort has protected hundreds of millions of dollars so far.

Increasing Efforts to Help Victims

The IRS understands that identity theft is a frustrating, complex process for victims. While identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft has occurred.

While the IRS has made considerable progress in this area, more works remains. Fighting identity theft is an ongoing battle as identity thieves continue to create new ways of stealing personal information and using it for their gain. Identity theft cases are among the most complex handled by the IRS. The IRS is continually reviewing processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized. Among the steps underway to help victims:

  • IP PIN expansion. The IRS continues to expand the number of Identity Protection Personal Identification Numbers (IP PINs) being issued to victims. The IP PIN is a unique identifier that shows that a particular taxpayer is the rightful filer of the return. In 2013, the IRS has issued IP PINs to more than 600,000 taxpayers who have been victimized by identity theft. That’s more than twice as many as the previous year. The IP PIN will allow these individuals to avoid delays in filing returns and receiving refunds.
  • Victim case resolution. The IRS continues to put more and more employees on resolution of victim cases. These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. Cases of resolving identity can be complicated by the thieves themselves calling in. The IRS is working hard to streamline its internal process, but much more work remains. A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period.
  • Service options. The IRS is providing information in several ways ranging from a special section on devoted to identity theft to a special phone number available for victims to resolve tax issues. The IRS Identity Protection Specialized Unit is available at 1-800-908-4490.

More information is available on, including the Taxpayer Guide to Identity Theft.

IRS Criminal Investigation

The IRS’s Criminal Investigation division is a major component of our effort to combat tax-related identity theft. We will continue to utilize the full capabilities and resources to investigate those who steal from taxpayers through identity theft.

In Fiscal Year 2012, the IRS tripled its number of criminal investigations compared to 2011 by initiating nearly 900 investigations regarding identity theft, which resulted in almost 500 indictments.

For example, in January 2012, the IRS Criminal Investigation division, the Justice Department’s Tax Division and local U.S. Attorneys, targeted 105 individuals in 23 states as part of a coast-to-coast enforcement sweep involving the potential theft of thousands of identities. In total, 939 criminal charges were included in the 69 indictments and information related to identity theft.

More actions are underway in 2013, touching on states across the nation.

Beyond the criminal actions, IRS enforcement personnel in January 2012 simultaneously conducted a sweep of approximately 150 money services businesses to help make sure these businesses are not knowingly or unknowingly facilitating identity theft or refund fraud. The visits occurred in nine high-risk locations across the country. 

In April 2012, the IRS established a pilot program in Florida, allowing identity theft victims to authorize the IRS to share information with local law enforcement, removing a hurdle previously exploited by identity thieves. The IRS has expanded the pilot to eight more states:  Alabama, California, Georgia, New Jersey, New York, Oklahoma, Pennsylvania and Texas. Together, these states represent a large percentage of the overall identity theft refund fraud threat seen at the IRS. More than 65 law enforcement agencies are participating in this effort, and over 1,000 waiver forms have been received from taxpayers. The IRS will expand this effort as needed.

IRS Criminal Investigation has also worked closely with the Tax Division of the Department of Justice on new guidelines to expedite investigations and criminal prosecutions of these fraudsters to deter identity theft refund fraud. We continue working collaboratively on this effort.

For more information, see the special identity theft section on and IRS Fact Sheet 2013-3, Tips for Taxpayers and Victims about Identity Theft and Tax Returns.


Cloud Computing? Help Keep Your Data Safe

Cloud computing is now commonplace. Instead of using applications installed on your personal computer, cloud computing enables you to use services that are delivered through a Web browser and remote servers. Its benefits are numerous: No need to install software, and no concerns about backing up your data. You're able to access your files no matter where you are or whose computer you're using.

But like any cloud, this computing potentially has a dark side and can put your data at risk, warns Jack Key, USAA's chief information security officer. Here's how to help stay safe while using this convenient tool.

Protect the Connection

Using a cloud computing service is different from using traditional software in many ways. The most important difference is that with a cloud service, all data exchanged between the user and the service — everything you see on the screen and everything you type into your Web browser — passes over the Internet. Unless you take precautions, a middleman can intercept that information. If you're working with sensitive or private information, such as credit cards, an attack such as this can be disastrous.

To help protect your data, first make sure your connection to the cloud service is encrypted. In your Web browser's URL bar, check to see if there is a small lock icon, either to the left or the right of the URL. If you don't see the lock icon, find another cloud service provider.

"You'll have an even greater level of protection if the service is using something called extended validation, which means the site has registered with a central authority to verify its identity," Key explains. "The browser bar should turn green if a service uses extended validation, which should give you a level of comfort and safety over and above the lock icon."

Next, avoid using public Wi-Fi connections for cloud computing sessions, Key adds. It can be tempting to hop on to a free, open, wireless hot spot to check your cloud-based CRM app or sales tool. But beware: Some hot spots are built with the intention of spying on traffic that passes through them. Access cloud services only through a known and encrypted wireless router.

Finally, in increasing numbers, phishing attacks are being designed to mimic cloud services. How can you ensure the site you're visiting is legitimate?


Use Strong Passwords

A cloud service is only as strong as the password used to protect it, Key emphasizes. As with any online service, make sure you use a strong password — preferably 10 characters, with a combination of uppercase and lowercase letters, numerals and symbols. It also shouldn't include a word that appears in a dictionary.

"Use multifactor authentication, if it's offered," says Key. This might include a password coupled with a PIN sent to you via text message, offering a significantly higher level of security.


Check the Security Policy

Because their reputation for security is paramount, most cloud computing providers explain their data security systems and methods in detail. Look for a security statement on the home page of any provider you consider.

A minimum security policy should ensure that SSL encryption is used. It also should detail how frequently information is backed up and where it's stored. If you don't see this information, ask before signing up.

The best cloud providers are audited or certified, or both, by independent agencies, ensuring their security policies are up to standards. Also take a moment to read the privacy policy to understand how your information will be used for marketing purposes, Key says.


Keep Sensitive Data Off the Cloud

One way to ensure hackers don't get sensitive data, such as medical records, credit card numbers and Social Security numbers, is simply not to use them with cloud services. As a workaround, you could create a proxy: Store only the last four digits of a credit card number on the cloud, then reference the full card number, stored securely elsewhere, when needed.


Perform Periodic Backups on Your Own Servers

While it's great if you use a cloud computing service to back up your files, don't rely on this service to be foolproof, Key says. Set up your own system to periodically download data you keep on the cloud service, and back it up the same way you would anything on your computer.

While you're at it, make sure any computer that accesses the cloud service is safe from malware.



Six Important Facts about Dependents and Exemptions

While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.

1. Exemptions reduce taxable income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.

2. Personal exemptions.  You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.

3. Exemptions for dependents.  Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.

4. Some people do not qualify as dependents.  While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.

5. Dependents may have to file.  If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.

6. Dependents can’t claim a personal exemption.  If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.



IRS Intensifies National Crackdown on Identity Theft;
Part of Wider Effort to Protect Taxpayers, Prevent Refund Fraud

WASHINGTON – Continuing a year-long enforcement push against refund fraud and identity theft, the Internal Revenue Service today announced the results of a massive national sweep in recent weeks targeting identity theft suspects in 32 states and Puerto Rico, which involved 215 cities and surrounding areas.

The coast-to-coast effort against 389 identity theft suspects led to 734 enforcement actions in January, including indictments, informations, complaints and arrests. The effort comes on top of a growing identity theft effort that led to 2,400 other enforcement actions against identity thieves during fiscal year 2012.

The January crackdown, a joint effort with the Department of Justice and local U.S. Attorneys offices, unfolded as the IRS opened the 2013 tax season. IRS Criminal Investigation expanded its efforts during January, pushing the total number of identity theft investigations to more than 1,460 since the start of the federal 2012 fiscal year on Oct. 1, 2011.

“As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft,” said IRS Acting Commissioner Steven T. Miller. “We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area. This is part of a much wider effort underway for the 2013 tax season to stop fraud.”

The national effort with the Justice Department and other federal, state and local agencies is part of a larger, comprehensive identity theft strategy the IRS has embarked on that is focused on preventing, detecting and resolving identity theft cases as soon as possible.

The identity theft effort – which intensified in January as the 2013 filing season opened – involved 734 enforcement actions related to identity theft and refund fraud. The effort led to actions taking place throughout the country involving 389 individuals. The effort included 109 arrests, 189 indictments, informations and complaints, as well as 47 search warrants.

In addition to the criminal actions, IRS auditors and criminal investigators conducted a special compliance effort starting on Jan. 28 to visit 197 money service businesses to help make sure these businesses are not assisting identity theft or refund fraud when they cash checks.  The compliance visits occurred in 17 high-risk places identified by the IRS covering areas in and surrounding New York, Philadelphia, Atlanta, Tampa, Miami, Chicago, Houston, Phoenix, Los Angeles, San Diego, El Paso, Tucson, Birmingham, Detroit, San Francisco, Oakland and San Jose.

A map of the locations and additional details on the January enforcement actions and compliance visits are available on The latest updates on the identity theft enforcement efforts and individual cases are available on a special Identity Theft Schemes page on More information on enforcement actions can be found on a DOJ Tax Division page.

The identity theft push over the last several weeks reflects a wider effort underway at the IRS. Among the highlights:

  • The number of IRS criminal investigations into identity theft issues more than tripled in fiscal year 2012. The IRS started 276 investigations in fiscal year 2011, a number that jumped to 898 in fiscal year 2012. So far in fiscal year 2013, there have been more than 560 criminal identity theft investigations opened.
  • Total enforcement actions continue to rapidly increase against identity thieves. This category covers actions ranging from indictments and arrests to search warrants. In fiscal year 2012, enforcement actions totaled 2,400 against 1,310 suspects. After just four months in fiscal 2013, enforcement actions totaled 1,703 against 907 suspects.
  • Sentencings of convicted identity thieves continue to increase. There were 80 sentencings in fiscal year 2011, which increased to 223 in fiscal year 2012.
  • Jail time is increasing for identity thieves. The average sentence in fiscal year 2012 was four years or 48 months – a four-month increase from the average in fiscal year 2011. So far this fiscal year, sentences have ranged from 4 to 300 months.

More information on IRS Criminal Investigation efforts is available on IRS fact sheet FS-2013-12.

In addition to the national “sweeps” effort announced today, IRS work on identity theft and refund fraud continues to grow. For the 2013 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

To stop identity thieves up front, the IRS has made a significant increase for the 2013 tax season in the number and quality of identity theft screening filters that spot fraudulent tax returns before refunds are issued. The IRS has dozens of identity theft screens now in place to protect tax refunds.

These efforts helped the IRS in 2012 protect $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

By late 2012, the IRS assigned more than 3,000 IRS employees — over double from 2011 — to work on identity theft-related issues. IRS employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.

“We are strengthening our processing systems to watch for identity theft and detect refund fraud before it occurs,” Miller said. “And we continue to put more resources on helping people who are victims of identity theft and resolve these complex cases as quickly as possible.”

Taxpayers can encounter identity theft involving their tax returns in several ways. One instance is where identity thieves try filing fraudulent refund claims using another person’s identifying information, which has been stolen. Innocent taxpayers are victimized because their refunds are delayed.

To help taxpayers, the IRS has a special section on dedicated to identity theft issues, including YouTube videos, tips for taxpayers and a special guide to assistance. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

If a taxpayer receives a notice from the IRS indicating identity theft, they should follow the instructions in that notice. A taxpayer who believes they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. The taxpayer should contact the IRS Identity Protection Specialized Unit at 800-908-4490.  The taxpayer will be asked to complete the IRS Identity Theft Affidavit, Form 14039, and follow the instructions on the back of the form based on their situation.

Taxpayers looking for additional information can consult the special identity protection page on


Social Security and Medicare Update

The annual inflation adjustments have been made for the various social security amounts and thresholds. So, we thought it would be a good time to update you for 2013.

The social security wage base, for computing the social security tax (OASDI only), increases to $113,700 in 2013, up from $110,100 for 2012. The additional $3,600 for 2013 represents an increase of 3.3% in the wage base. There is no taxable earnings limit for Medicare (HI only) contributions.

New for 2013, the 0.9% Medicare Surtax is imposed on wages and self-employment (SE) income in excess of the following modified adjusted gross income (MAGI) threshold amounts: $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for all other taxpayers. The employer portion of the tax is not increased. This new tax is a provision of the Patient Protection and Affordable Care Act.

For social security beneficiaries under the full retirement age, the annual exempt amount increases to $15,120 in 2013 up from $14,640 in 2012. These beneficiaries will be subject to a $1 reduction in benefits for each $2 they earn in excess of $15,120 in 2013. However, in the year beneficiaries reach their full retirement age, earnings above a different annual exemption amount ($40,080 in 2013, up from $38,880 in 2012) are subject to $1 reduction in benefits for each $3 earned over this exempt amount. Social security benefits are not reduced by earned income beginning with the month the beneficiary reaches full benefit retirement age. But remember, social security benefits received may be subject to federal income tax.

Individuals may have to pay federal income taxes on up to 85% of their benefits. Inclusion within taxable income can occur if you have substantial income from wages, self-employment, interest, dividends, and other taxable income, in addition to your benefits. However, no one pays federal income tax on more than 85% of his or her benefits.

The Social Security Administration estimates the average retired worker will receive $1,261 monthly in 2013. The average monthly benefit for an aged couple where both are receiving monthly benefits is $2,048. These amounts reflect a 1.7% cost of living adjustment (COLA).

The maximum 2013 social security benefit for a worker retiring at full retirement age is $2,533 per month, up from $2,513 in 2012.



Standard Mileage Rates for 2013

The 2013 standard mileage rates for use of an automobile are 56.5¢ per mile for business miles driven (an increase of 1¢ from 2012), and 24¢ per mile for medical or moving purposes (up 1¢ from 2012). The rate for rendering gratuitous services to a charitable organization remains unchanged at 14¢ per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving expenses is based on variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rate.

A taxpayer may not use the business standard mileage rate for any vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or claiming a Section 179 deduction for that vehicle, or for more than four vehicles used simultaneously.


Patron's Gifts and Athletic Tickets

Subject to Congress changing the law, the cost of tickets to a charitable event is eligible for a contribution deduction to the extent the purchase price exceeds the fair market value of admission and privileges associated with the event.

Tickets to a charitable event are not necessarily deductible simply because they are not used by the taxpayer, even if the donor had no intention of using the tickets upon purchasing them. However, certain unused tickets (e.g., a single theater or symphony ticket by the holder of season tickets) may qualify as charitable contributions if returned for resale to the sponsoring charitable organization. The purchase of raffle, bingo, or lottery tickets is not a charitable contribution.

A special exception exists for sports fans. They can deduct 80% of donations to colleges or universities for the right to buy tickets to an athletic event in the institution’s stadium, regardless of whether the tickets would have been readily available without the payment. However, the amount paid for other benefits (such as the cost of the tickets, the right to use the skybox, guest passes to visit the skybox, and reserved parking privileges) are not deductible as charitable contributions.


Tax Rules for Gamblers

Whether the economy is expanding or contracting, gambling remains a popular pastime. So, if you are an amateur (nonprofessional) gambler, you may need to know the applicable federal income tax rules that follow.

Whether you play cards, roll dice, bet the ponies, or enjoy the slots as a casual gambler, your gambling winnings are fully taxable and must be reported on your tax return. You can also deduct your gambling losses, but only up to the extent of your winnings. Note that any excess losses cannot be carried over to future years.

If you qualify as a professional gambler, your wagering winnings and losses are reported as a profit or loss from a business on your tax return. However, your deductions for wagering losses are limited to your winnings, and any excess wagering losses cannot be carried over to future years (same as for amateurs). You may also be able to deduct travel expenses and other out-of-pocket costs of being a professional gambler. Note that it is extremely difficult to qualify as a professional gambler.

In any case, you must adequately document wagering losses (and out-of-pocket nonwagering expenses if you are a pro) to keep the IRS happy. The government says you must compile the following information in a log or similar record:

1.The date and type of specific wager or wagering activity.

2.The name and address or location of the gambling establishment.

3.The names of other persons (if any) present with you at the gambling establishment. (Obviously, this is not possible when the gambling occurs at a public venue such as a casino, race track, or bingo parlor.)

4.The amount won or lost.

For example, the IRS says you can document income and losses from wagering on table games by recording the number of the table that you played and by keeping statements showing casino credit that was issued to you. For lotteries, your wins and losses can be documented by winning statements and unredeemed tickets.

Last but not least, be aware that amounts you win may have to be reported to you (specific minimums apply) on IRS Form W-2G (Certain Gambling Winnings) by the gambling establishments. In some cases, federal income tax may have to be withheld, too. Anytime a Form W-2G is issued to you, the IRS gets a copy.


Benefits of Using a Family LLC

Because limited liability companies (LLCs) provide flexibility in allocating rights to profits and capital, they are frequently used to shift income and property appreciation from higher bracket, older generation taxpayers to lower bracket children and grandchildren. Family LLCs are created by the transfer of property from one or more individuals to the LLC for the common benefit of the family members. The transferred assets are titled in the name of the LLC. Typically, the senior family members (parents) transfer assets to a family LLC in exchange for membership interests, which, under the terms of the operating agreement, carry certain rights, such as management control and income distributions. This initial capitalization of the LLC is generally a tax-free event.

If you are interested in gradually transferring partial ownership of assets to your children, a good method might be to transfer them to a family LLC and subsequently gift membership interests in the LLC to your children. With that in mind, here is some information about using a family LLC to transfer ownership of assets.

Using a family LLC to own a family’s assets, whether it be business or investment assets, can be beneficial. One reason is that consolidation in one entity simply makes it easier to manage the assets compared to individual ownership by you and your children or by you and trusts for your children. Consolidation may also allow you to take advantage of investment or diversification opportunities based on the size of the combined assets held by the LLC.

Another advantage of holding assets in a family LLC is to protect the assets from creditors. The creditor of an LLC member generally cannot access the assets of the LLC or participate in management. Instead, the creditor can only receive distributions to which the member would have been entitled. Additionally, your children, as LLC members, could not reach the assets of the LLC or compel the LLC to make distributions. A buy/sell agreement between LLC members can also be used to prevent the membership interests from being sold or transferred outside the family group, such as a transfer resulting from the divorce of a child.

Since an LLC is governed by an operating agreement that can be amended as needed, it offers a great deal of operating flexibility to help you respond to changing circumstances. In contrast, an irrevocable trust document cannot be amended. Additionally, if you have concerns over giving your children immediate access to the transferred assets, the operating agreement can contain provisions to prevent members from easily converting their interest to cash and to control the extent and timing of distributions. An operating agreement can also be used to require arbitration of family and business disputes, as well as to establish other ground rules, such as the sharing of expenses involved in a dispute.

A family LLC also offers the advantage of simplifying the process of making gifts to your children. The gift of an interest in the LLC is much easier than gifting undivided interests in each asset to your children and can be accomplished by a simple assignment form.

All of these are excellent business reasons to consider using a family LLC. Additionally, a family LLC offers some estate and gift tax advantages such as permitting a reduction in the value of your estate, having a lack of marketability and, where applicable, allowing for a minority interest. However, these tax advantages should be secondary to the economic, legal, or family reasons we discussed as the basis for creating the family LLC.

Please contact us if you would like to learn more about family LLCs and how this structure can be used to meet your specific needs.


Compare How Traditional and Roth IRAs Help Save Money

Both traditional and Roth IRAs help you save money for your retirement but offer different advantages. Here are highlights of some of their similarities and differences.



Traditional IRA

Roth IRA

Eligibility to contribute

You can contribute if you (or your spouse if filing jointly) have taxable compensation but not after you are age

70½ or older.

Regardless of your age, you can contribute if you (or your spouse if filing jointly) have taxable compensation and your modified adjusted gross income is below certain amounts (see 2012 and 2013 amounts).

Type of contributions

You can deduct your contributions if you qualify.

You can only make after-tax (non-deductible) contributions.

Contribution limits

The most you can contribute to all of your traditional and Roth IRAs is the smaller of: For 2012, $5,000, or $6,000 if you’re age 50 or older by the end of the year ($5,500 or $6,500 for 2013); or your taxable compensation for the year.



Contribution deadline

Your tax return filing deadline (not including extensions). For example, you can contribute for 2012 until April 15, 2013.



You can withdraw money anytime.


Required minimum distributions

You must start taking distributions by April 1 following the year in which you turn 70½ and by December 31 of later years.

Not required if you are the original owner.

Tax on withdrawals and distributions

You must include in gross income any deductible contributions and earnings that are distributed and may have to pay an additional 10% early withdrawal tax unless you are age 59½ or qualify for another exception.

None, if it’s a qualified distribution. Otherwise, part of the distribution may be taxable and you may have to pay an additional 10% early withdrawal tax unless you are age 59½ or qualify for another exception.


Disclaimer: This article is for general information purposes only, and is not intended to provide professional tax, legal, or financial advice. To determine how this or other information in this newsletter might apply to your specific situation, contact us for more details and counsel.


15427 Vivian - Taylor, Michigan 48180 – voice (734) 946-7576  fax (734) 946-8166

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