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TAXING TIMES

Newsletter Volume 10 (October 2004)

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Hi all:

Item 1) I want to let you know about an about to expire tax break. After December 31 this year, we will no longer have the 50% ‘bonus depreciation' (BD) available to businesses. What the heck is bonus depreciation & what does it mean to me, you ask?

Thanks for asking. If you do not own a business, you won't give a hoot about BD, feel free to skip to item 2. If you are a business owner, BD is the sweet little tax boon we had in 2003 & 2004. It allows businesses to immediately deduct one-half the cost of new (or used) equipment purchased (including autos). This is good even for stuff bought & placed in service prior to Jan. 1, 2005. This is a different deal than the ‘expensing' of vehicles over 6000 pounds (don't get me started on that one!)

Here is an example of what means to you if you are a business owner: if you buy a piece of equipment for $10,000 & put it service before the end of the year, you can write off $5000 plus the ordinary depreciation of $250 (for buying it so late in the year) giving you a break of $5250 right away. If you waited until Jan 1 to do the same thing, your break would only be about $1000. Timing is VERY important.

This break is not contingent on you having enough profit to eat up the deduction or on buying new equipment as the so-called Section 179 expensing does. If this confuses you, please call me.

Item 2) This just in! We (WA residents) are once again allowed to deduct the sales tax we pay. I have not yet seen the final version of the bill (and it has not been signed into law yet but we are assured it will be) but there will be two ways of figuring the deduction; actual taxes paid using receipts or using IRS tables based on income. For instance (and I am making up the numbers here), someone whose income is $75,000 can deduct $700 in sales tax.

I would suggest you all start going back through check registers, credit card statements & your memory NOW & start a worksheet on sales tax spent. I plan on doing that today. Don't just look for large purchases. Remember that we pay sales taxes on some odd things here including some services such as landscaping, home repairs, remodels & restaurant dinners. Some grocery store items are also taxable. This can be a nice tax saving assignment for you so get started soon. (Note: business owners are most likely already deducting all sales taxes paid for any business purchases, so you don't need to double your work load here.)

Remember whichever method you use, this will be a deduction, not a credit.

Item 3) The next thing I would like to address is one of my favorite topics in my emailed newsletters: Identity Theft. There is a new law about to take effect: the Fair and Accurate Credit Transactions Act (FACTA - oy!). One of the provisions of this law is we get to receive a free credit report from each of the big three credit reporting agencies. The Federal Trade Commission will announce by early December a website & toll free phone number that we can use to request these reports.

For some reason (like the no call list with which I hope you are ALL signed up), we on the west coast are the first ones in the country eligible to use this service beginning December 1. For those of you not fortunate to be in a western state, these are your dates of eligibility: Midwest – March 1, South – June 1, Northeast – Sept 1.

You can ask for all three agencies to send you your report all at once, but Consumer Reports (in their November 2004 issue) suggests asking for one at a time. That way if you see an error in the first one, you can have them correct the misinformation & check with one of the others a few months later & so on. Another advantage of this method is you can keep fresh on your repots even if they are all correct by checking one every four months (every year). The magazine tells us that one in four credit reports had errors.

I read in this morning's Dear Abby (yeah, I know, I still like to read it) a letter from a woman who uses her debit card in the supermarket. She stated that there are sometimes other customers watching her punch in her PIN & she was concerned about the possible consequences. Please try to keep this information from anyone including the store's clerks.

Another identity theft danger is car break-ins. Crooks are not going for the radio of old, but check books, credit card receipts, wallets etc. Just one more thing to be aware of.

I would also like to tell you about a client of mine - a tour company in Italy . Many of you know my wife, Nancy & I love to travel during the off season & Italy has been our favorite destination. There is a company there called Tartuga Tours. Their website is www.tartarugatours.com . Their tour philosophy is very simple:

“We're not in a hurry to get where we're going - this turtle is on vacation! When in Florence , we stay at centrally-located hotels so we can wind up and down the narrow streets getting a feel for the Italian passeggiata . A little pre-dinner stroll to work up an appetite for a relaxing meal.

When we visit the famous hilltowns, we stay in farmhouses, local Inns or castles and make day trips to the nearby towns.

Perhaps you have visited one of these towns before, and might prefer to read a book under an olive tree, or take photographs, or just be on vacation.

If you're not in a hurry, have a look at the tours we've created to see if this type of travel is for you. Then join us at Tartaruga for a turtle-paced tour of Italy .”

This company is owned & run by Lino & Rita Ferracin. They live near Florence & have years of tour experience working for others. They decided to offer a different type of tour – a slow tour. This is kind of like the slow-food movement. Visits are generally week long to different cities instead of two days here & two days there etc. This way you have the time to get to know Florence , Rome , Venice and others. My kind of travel!

Of course there is another business I would like to tell you about. Your Table is Ready Catering Company ( www.yourtableisreadycatering.com ) owned by my favorite current wife, Nancy. If you are planning on a Christmas party & you need a caterer, I suggest you call her soon (425.775.2285) as her calendar is filling quickly.

 

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