Kerr & Kerr LLC updates their website and launches Kerr & Kerr Newsletter to communicate more frequently with clients and subscribers.

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Upcoming Events

• Giveaways:- From time to time, Kerr & Kerr will provide giveaways to subscribers. Just being a subscriber puts anyone in the winner pool. Adding appropriate comments on articles, adding us to Facebook and twitter, and generally staying active on our site is a winning start. For the month of August, plan on winning 25% off your next year’s tax return. Stay tuned for more information in the next Kerr & Kerr Newsletter release.
• Featured Clients:-We will begin featuring our clients in the month of August. Whether you are a small business or individual and would like to share your achievement, Kerr & Kerr is the place to get recognized.

Drowing in Debt?

Just like W.C. Fields’ common sense cure for insomnia (get lots of sleep), many people offer equally simplistic advice about getting out of debt: just pay off your bills! If only it were that simple. Getting into debt is easy. Getting out can be a bear.

We get into debt innocently enough: by design (to buy a new house or car or fund a college education); by accident (the transmission in the car fell out, the roof on the house fell in); or by mismanagement of our finances (because we live beyond our means or just can’t resist taking advantage of every cent of available credit).

However, we often stay in debt because we’re not sure how to get out…or even if we really want to.  Most people have a comfort zone of acceptable debt. When the amount rises above some arbitrary figure, they cut back temporarily, only to resume normal spending later.  As a result, some people have been carrying around thousands of dollars of credit card debt for years, paying hundreds—sometimes thousands—of dollars in interest each year, because it never occurs to them to pay it off, put away the plastic and start using cash. Additionally, it’s never been easier to get into debt, with the boom in special offer credit card deals arriving every day in the mail.

If your debt load keeps climbing, you’re not alone. Total U.S. consumer debt (which includes credit-card debt and non-credit-card debt, but not mortgage debt) reached $2.55 trillion at the end of 2007, up from $2.42 trillion at the end of 2006, and nearly double what it was ten years before.1

More significantly: The average American with a credit file is responsible for $16,635 in debt, excluding mortgages, according to Experian credit bureau.2

Twenty-eight percent of those contacted in a recent survey say their ability to pay off their credit card balance has become more difficult.3

How to Get Out of Debt

Whether your debt load is $1,000 or $100,000, you can bring it down to zero. Here are the steps to help make it happen:

1. Pinpoint your position. Excluding your mortgage, determine exactly how much you owe, and how much discretionary income you have available to begin whittling away at your debt load.
2. Map out your debt-elimination game plan, complete with a “Zero Debt Day” to celebrate your freedom from debt. Base your plan on three factors: time, discretionary dollars and total debt. Example: If you owe $6,000 and can allocate $300 a month exclusively to debt reduction, you’ll be debt free in approximately two years, depending on interest.
3. Stop adding new debt. Typically, we tend to pay off one bill, but pick up new debt in the process. Put away the credit cards and institute a “cash-and-carry” policy in your house.
4. Don’t be too easy on yourself. Be willing to do what it takes to get out of debt ASAP. Maybe you simply cannot afford to vacation in Colorado this summer AND New York City this winter. Allocate that extra money to reduce debt. Consider this: If you budget $200 a month for debt reduction, when you’re finally debt free you’ll have that much cash—every month—for lifestyle enhancement later.
5. At the same time, don’t make yourself miserable. If you do so, your plan will fail. Consider splitting discretionary cash in half: part for debt elimination, part for living (and playing) expenses.
6. Bite the bullet together if you’re married. Getting out of debt requires a sacrifice, one that will affect all members of your household. Enlist your partner’s support…or risk defeat.
7. Gradually build up a cash cushion for emergencies and regular expenditures. This allows you to pay cash in the future, while actually earning interest rather than paying it.
8. Learn how to put money to work making more money. This means develop at least a basic understanding of wealth building.
9. Use life insurance as a tool to make sure your debts are retired if you should die prematurely … and to make sure that your family can avoid the need for future debt. This is especially pertinent if you have a home mortgage or high amounts of consumer debt. Life insurance on your life can provide proceeds to repay your consumer debts and/or pay off a mortgage, helping assure that your family can maintain their standard of living if anything should happen to you.

The above recommendations may not be easy to follow. Becoming debt free takes a determined commitment and a strong dose of self-discipline, but the end result is well worth the effort. Now’s your chance to gain control of your financial destiny, reduce money worries, and achieve a better, more stable standard of living for the long run.

1. The Nilson Report, 2008.
2. U.S. News and World Report, “The End of Credit Card Consumerism,” August 2008.
3. Javelin Strategy & Research, “Credit Card Issuer Profitability in a Difficult Economy,” July 2008

The Florida Sales Tax Holiday is set for August 12 through August 14, 2011. The Florida legislators have approved this measure with some notable changes:

 2011 Florida Sales Tax Holiday prices for eligible item have increased.

1. Books are no longer included; last year, books were eligible for the Florida Sales Tax Holiday.
2. Items such as footwear, clothing and certain accessories sold for $75 or less are now subject to sales taxes. This is much different from last year’s Florida Sales Tax Holiday when the tax relief for eligible clothing and footwear etc. was $50 or less.
3. Some school supplies selling for under $15.00 are now subject to sales taxes. Last year, this was $10 or less

A list of items that qualify for the 2011 Florida Sales Tax Holiday can be found at the State of Florida website.  Please note:

•  Businesses cannot opt out of the program. All businesses selling items on the Florida Sales Tax Holiday list must participate, with the exception of theme parks, entertainment complexes, public lodging establishments and airports.
• There are no limits on the number of items that can be purchased during the Florida Sales Tax Holiday period.
• Store coupons and discounts will reduce the sale price on the items
• The sales price on items will not be reduced by Manufacturers coupons.
• If you purchase an item included on the list within the Florida Sales Tax Holiday period and realize you were charged tax, you should take your receipt to the store owner and ask for a refund of the taxes.

Save Money and Have a Vacation!

Have you wondered how you can save money on vacation this year? The options range from two-week, first-class cruises in the Mediterranean to snoozing in the kiddy pool in the backyard. Obviously, the decision is about more than choosing where to go and what to do. It also presents an opportunity to decide how to manage a major portion of your discretionary dollars.

When it comes to vacation planning, there are several potential problems:

First, too often, most of our income is pre-allotted before the paycheck even comes in. We have mortgages, car payments, credit card debt, utility bills, grocery bills and more. These are mostly fixed, non-negotiable expenses. We have little wiggle room for discretionary expenses.  However, when it comes to our vacations, our options are big and many. Are you planning to fly the family to Italy for a Roman holiday?  Take 10 days to drive cross country to see the natural wonders? Rent a cottage by the shore or a cabin on a lake? Or just putter around the house and doze in the afternoon sun on the back deck?

Second, many Americans borrow for their vacations. It is not uncommon for a family to spend five days at a vacation resort or theme park and spend the next 12 months paying for it.  The bottom line: Your vacation is something over which you have total control. This year, why not plan to relax and have fun, but also save money? Here are some ideas that can help:¹

1. Do not equate money spent with fun received – Consciously look for ways to both have fun and be thrifty.
2. Set a vacation budget – Decide how much you can afford (and want) to spend. Too often, we pack our credit cards and off we go on vacation, spending money impulsively on everything we see. Then a few weeks after our return, we groan as the credit card bills start coming in … and in. Instead, select the amount you are willing to spend, and stick to it.
3. Spend money like you’re at home – It is not uncommon for vacationers to spend money on things they would never spend at home. The tourism industry is counting on that. So, before you buy that $50 memento worth $7 or shell out $200 for a 15-minute helicopter ride, ask yourself if it really is worth the money.
4. Take a less pricey vacation – A super-posh theme park or resort can cost thousands. Visits to the shore, hiking trails, museums and state and national parks can save as much as 75 percent … and be just as much fun.
5. Take shorter vacations – A series of three-day weekends can be just as rewarding as (and less stressful than) a two-week trek. Plus, the cost is more controllable. (If cash runs low, just cancel one getaway weekend.)
6. Take closer vacations – No need to pack up the family SUV and travel 2,000 miles to have fun. You can get as much “Aaaah” value from a few hours’ drive from home, exploring the sites in your own state.
7. Take a “stay-cation” – In other words, stay at home. Putter around the house, take day trips to explore local events and in the process save a ton of cash.
8. Take the time to shop for travel deals – The tourism industry is always struggling to remain competitive, so cost-saving opportunities are available. Shop online, but also don’t hesitate to call directly and ask for discounts. Be a smart consumer .
9. Plan ahead – Last-minute bookers often pay top dollars. Scheduling hotel and travel arrangements one to six months in advance can cut some costs in half.  The exception: If you shop online, some great last-minute deals often can be found with airlines and resorts trying to fill empty seats and rooms. This can work well if you decide on Monday you want to get away on Tuesday … and don’t necessarily care where you end up.
10. Pay cash. Why not postpone this year’s super trip and instead set up a vacation account at your credit union or bank? Put in $200 a month for next year’s $2,400 vacation. Imagine the feeling of being able to pay cash and not have to come home with large credit card bills.

¹Source: John Ingrisano, Director of the Family Finances Conference Center and author of The Back to Basics Book of Money.

Federal Unemployment Tax 2011

Effective July 1, 2011, the Federal Unemployment Tax Act (FUTA) rate is reduced from 0.8 to 0.6 percent for all employers liable for Federal Unemployment Tax.

What is the FUTA Tax Rate?  The Federal Unemployment Tax Act (FUTA) is a payroll or unemployment tax that is only paid by employers.  This was designed to provide for payments of unemployment compensation to workers who have lost their jobs.  It is based on the first $7,000.00 earned by each employee during a calendar year. Successor employers may be able to include wages paid by the previous employer toward the $7000.  This amount is deducted and sent directly to the IRS as wages are earned during each calendar year. Revenue from FUTA taxes is sometimes used to assist States pay their unemployment obligations to workers when the fund has become exhausted. The money is provided as a loan to the State and must be repaid, either through direct payment or an increase in the FUTA rate for that state.

The fact that the Federal Government is changing mid-year is anticipated to create issues for payroll software providers, however FUTA taxes are deposited quarterly unless the liability for any quarter is less than $500, in which case the taxes may be paid annually. Wages paid, offsets and amounts due are reported on Form 940.

Employers are subject to FUTA taxes if one of the following three conditions exists:

• If an employer paid wages of $1,500 or more in a calendar quarter or at least have one or more employees for part of a day in twenty weeks.
• If at least $1000 in wages were paid to employees working in a household or domestic capacity
• If wages of at least $20,000 were paid to farm workers in any calendar quarter or at least ten farm workers were employed during any day for twenty weeks.

• Asset protection is a method of managing risks and protecting your assets from being part of a lawsuit. Because our society has become increasingly litigious, asset protection is more critical today than it used to be. Individuals in professions like medicine, business, or owners of rental real estate may have always been concerned with asset protection, but it’s now a topic of concern for other people as well, and should be considered as a part of any comprehensive financial strategy.

The goals of an asset protection strategy include:
• Promote settlement of creditor suits
• Safeguard assets from seizure
• Protect your credit and reputation

Special considerations: The rules related to asset protection are specific to the state you live in. However, most states have laws that make it extremely difficult to prepare if creditor claims already exist. Preparing well in advance before claims arise is important. To begin, you should work with a local attorney with expertise in the area. You can also discuss the subject of risk management with your financial advisor as part of a comprehensive financial strategy.

Assets That May Be Protected From Creditors

Some assets that might be protected from creditors depending on state law, include:
• A homestead
• Property owned as tenancy by the entireties
• Life insurance — cash values/death benefits subject to state law limits
• Nonqualified annuities — deferred/immediate also subject to state law limits

Other assets that may be protected from creditors include:
• Qualified retirement plans such as
- Defined benefit plans including traditional and 412(i)plans
- Defined contribution plans including 401(k) and profit sharing plans
• IRAs are provided some protection in bankruptcy proceedings

Some exceptions apply. Consult with your legal advisor for complete details.

Certain Business Structures Can Provide Protection

Some business entities provide more asset protection than others. For example, family limited partnerships and limited liability corporations can both provide protection to the owners for their outside liabilities or personal debts.

IRS Fuel Cost Adjustments and You

The current rise in fuel costs has triggered the Internal Revenue Service to announce a modification of the IRS standard mileage rates for business, medical or moving expenses, effective July 01, 2011. Read the details below to determine if the IRS fuel cost adjustments affect you:

Business: The new business rate is now 55.5 cents per mile and covers unreimbursed automobile use of personal vehicles on work related activities. Please be aware that normal commuting between home and work does not qualify for this type of deduction.

Medical: The new medical rate is now 23.5 cents per mile and covers unreimbursed automobile expenses incurred for essential medical care; this is medical care that can qualify as a medical deduction. Such trips can include visits to the hospital, the doctor and for therapeutic treatments, etc. The actual fare for taxi, bus or train can be deducted.

Moving: The new moving rate is now 23.5 cents per mile and covers unreimbursed trip expenses for starting work at your new job location. In some situations, armed force members or retirees may qualify to claim the deduction even though they have not started working at the new job location.

Charitable: The charitable rate remains at 14 cents per mile and is used to determine the amount of itemized deduction that a taxpayer may claim for unreimbursed automobile expenses incurred in conjunction with charitable volunteer work.

Note:: The IRS standard mileage rates are determined and allowed to taxpayers for each mile driven, in lieu of deducting actual expenses on a tax return. Taxpayers can choose to deduct actual expenses (such as gas, tires, maintenance, etc.) or use the IRS standard mileage rates. The IRS standard mileage rate calculations are not only simpler but offer a greater tax deduction.

See Announcement 2011-40

Options for 2011 Tax Refund

The days of 24-hour tax refund have past.  Over the past year, several federal agencies have raised concerns about the Refund Anticipation Loan (RAL) program.  These concerns prompted several large banking organizations to discontinue RAL products last year.  Earlier this year, all the remaining banks were instructed by the FDIC to stop offering RALs at the end of the 2010 tax filing season.  Individuals who have utilized this service in the past are encouraged to plan for this change, as this option will not be available with their 2011 tax refund.

As we look forward to next year, Kerr & Kerr is excited that we will be providing a full range of other tax refund products in 2012, and beyond.   Plans are already underway to bring you the most rewarding and convenient Electronic Refund Check (ERC), Electronic Refund Deposit (ERD), and Debit Card programs.  The debit card program offers instant card activation with funds available upon IRS refund release.

As we look a future with industry policy and technology changes, Kerr & Kerr continues to explore opportunities in order to serve our clients.

Generally, most income you receive is considered taxable if that income is available to you, regardless of whether it is actually in your possession or not. There are situations when certain types of income are partially taxed or not taxed at all. Examples are as follows:

Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.

Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.

Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

Examples of Taxable Income include:

• Wages, salaries, other employee compensation including vacation pay, sick pay, and third party sick pay
• Compensation paid in goods, services, or property (Using Fair Market Value)
• Annuity distributions
• Income from jury duty
• Interest or dividend income
• Ordinary Gains
• Net profits from business and professions
• Income from LLC’s, Partnerships, Estate and trusts
• Farm net income
• Net profit from rental property
• Profit sharing and Bonuses
• Stipends
• Tip income
• Lottery winnings, and gambling winnings
• Welfare benefits
• Commissions & fees received
• Stock options
• Director fees,

Examples of Non Taxable Income include:

• Proceeds from Life Insurance
• Reimbursements for qualifying Adoption expenses
• Employee reimbursement of moving expense
• Alimony
• Inheritance, and bequests
• Death Benefits
• Child support payments
• Workers’ compensation benefits
• Meals and Lodging for the convenience of your employer
• Active Duty Military Pay
• Royalties from intangible property
• Patent or copyright income
• Housing allowance to clergy
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer

The following tax tips will help you gain an advantage with your return

1. Use up your flexible-spending account. In 2010 your employer deducted money from your paycheck to cover your child-care and medical expenses. Remember to get that money back. Gather your receipts from doctors, clinics, hospitals and pharmacies for services provided to you and your dependents during 2010. If You discovered you didn’t spend enough in 2010 to get back all your money? Call your plan manager to find out if medical services received and paid for through March 31 of 2011 qualify. The law changed several years ago to allow catch-up time so employees don’t lose their money.

2. Adopt a child. Although this is a major decision and not one to be made simply because of a tax break, if you are planning to add to your family via adoption, then Uncle Sam offers a nice benefit this year. As part of the health care reform act, the adoption tax credit was expanded. This credit helps adoptive parents pay some of the processing costs. For 2011, that amount is a maximum of $13,360 per eligible child. The increased credit applies to the adoption of any child, not just special needs children, and includes international and domestic adoptions. Even better, the adoption credit is now refundable, meaning the claim could produce a refund if you owe no tax. However, the adoption tax-break enhancements are only good though 2011 unless Congress extends them.
3. Convert to a Roth IRA. Roth IRAs are popular because when the money is withdrawn in retirement, there’s no tax due. These accounts are enjoying a new surge of popularity now that there’s no longer an income limit on who can convert a traditional IRA to a Roth account. This conversion option became available last year and also included the ability to spread any taxes due upon conversion over two subsequent tax years. The tax-deferral opportunity is gone. If you convert a traditional IRA to a Roth IRA in 2011, you’ll have to pay all conversion taxes this tax year. But for some, it still might be worthwhile to convert to a Roth.

4. Insurance as for your vehicle can be deducted on your federal tax return: Motor vehicles used for business purposes are deductable using actual expenses instead of mileage. Deductions such as depreciation, gas, oil, tires, licenses, repairs and the related, the insurance premiums may also be deductible. Remember, if the actual expenses deduction is chosen instead of the mileage deduction, mileage deduction cannot be deducted in later returns.

5. Health and long-term care insurance premiums are deductable on your federal tax return: A self-employed person can deduct 100% of health and long-term medical costs for themselves, their spouse, and their dependants. This deduction is taken as an adjustment to income and it can only be taken if the self-employed person or spouse is not covered by an employer health insurance plan.

6. Medical expenses are also deductable on your federal tax return: Depending on income, medical expenses are deductable. Remember to take into account invoices for dental work; visual care, including glasses and contact lenses; even certain therapy, smoking cessation and weight-loss programs may count. You can get printouts from your pharmacy, physicians and therapists, if you don’t have the invoices. You may not deduct any expenses for which you receive insurance reimbursements. Certain other expenses including health insurance and dental insurance premiums along with some amounts paid for long-term care insurance contracts may be deductible. These deductions are limited to costs over 7.5% of one’s income. Because medical expenses are limited to costs over 7.5% of income, don’t forget to schedule and pay for procedures before December 31. of the tax year.

7. Various miscellaneous insurance expenses can be deducted on your federal tax return: Various miscellaneous expenses may be deductable on your federal tax return for some individuals but is subject to 2% of the individual adjusted gross income. Insurance related miscellaneous expenses may include unreimbursed employee malpractice insurance and liability insurance premiums, appraisal fees for casualty losses not reimbursed by insurance, safe deposit box rentals to store investment papers such as insurance annuities. The remaining unrecovered investment in an insurance annuity may be deducted from a retiree’s tax return if they are deceased before the entire investment is recovered.

8. Job-related moving and storage expenses are deductable: Some persons may be able to deduct certain moving expenses including the cost of storing and insuring household goods and personal items. The deduction is only eligible during any 30 consecutive days after the items are moved from the previous home and before they are delivered to the new home.

9. Tax returns can be amended. Remember Federal tax returns can be amended for up to three years. If, after reviewing deductions on previous federal tax returns you find item omitted, you may be able to amend the return to include that deduction and receive any refund applicable. Additional copies of previous year’s tax returns can be secured from the IRS.

10. Start a business. Tax laws offer numerous ways for business owner to save. The Small Business Jobs and Credit Act of 2010 increased the Section 179 tax deduction. This provision allows you to deduct qualifying expenditures in the tax year in which they are made rather than depreciate it over several tax years. For 2011, the maximum Section 179 deduction is $500,000. Other popular business tax breaks also remain in effect. You can write off some of your new business startup costs, as well as many home office expenses if you run your operation from your residence. If your company is bigger and in the manufacturing sector, the domestic production activities deduction could help. It allows you to claim a percentage of your taxable income to help reduce your company’s tax bill. The main requirement is that the manufacturing be based in the United States, but the range of qualifying activities is wide. Details can be found in the instructions for IRS Form 8903, which you’ll file to claim the deduction.

11. Evaluate educational accounts. The cost of college increases every year, but tax-advantaged savings account plans can assist with the reduction of that cost burden. The key is determining which plan best suits your needs. Every state offers at least one 529 plan, a savings account set up for a child to help pay for future college costs. Your contributions to a 529 plan are not tax deductible, but the earnings are not taxed. When you take out funds to pay for eligible expenses, the distribution also is tax-free. The American Recovery and Reinvestment Act of 2009 added computer equipment and services to the list of allowable 529 expenses. But that option expired at the end of 2010. Tax-free money from another educational savings plan, the Coverdell Education Savings Account, still can be used in 2011 for computer costs. However, Coverdell accounts, which were expanded as part of the Bush tax cuts, lost some other valuable options this year. If Congress doesn’t renew the expired Coverdell provisions, such as the ability to contribute up to $2,000 a year and use the tax-free money for precollege school expenses, you might want to consider rolling Coverdell money into a 529 Plan.

12. Unemployment insurance benefits must be reported: It is important to remember that unemployment insurance compensation is considered taxable income and must be reported. Report also, any state or federal unemployment insurance benefits received during the tax year of filing.

13. Certain casualty and theft losses reimbursement is reportable: Damages from losses due to perils on your home such as floods and tornadoes, and losses due to damage to automobile may be deductible if one itemizes deductions. The losses need to be reduced first by any insurance amount received and then reduced by 10% of one’s adjusted gross income.

14. Estimate your AMT exposure. Each year the US Congress makes changes to the income levels for the alternative minimum tax, or AMT, many middle-income taxpayers still find each year that they are subject to this parallel and costly tax. This extra tax calculation, in which many commonly claimed deductions are not allowed, is required if you earn more than a certain threshold income. It was created in 1969 to ensure that wealthier taxpayers pay at least a minimum amount of tax. The main problem with the AMT is that it’s not indexed to inflation, hence the need for yearly legislative action to increase the amount of income exempt from the AMT. But just as problematic is that many deductions allowed under the ordinary tax system, such as state and local income taxes, real property taxes, miscellaneous deductions and the usual amount of medical expenses, cannot be used to offset the AMT. If you’re in a higher tax bracket and fear that you might end up paying the alternative tax, talk with your tax adviser sooner rather than later to consider ways to limit your AMT exposure.

15. File a new W-4. There are a number of reasons you want to do this in January. When Congress finalized the tax-extender bill last month, there was a bonus for you. Instead of the confusing Making Work Pay Credit we’ve had for the last two years, we get a reduction in Social Security taxes. You won’t have to adjust your tax return for this, unless you had several jobs with wages over $106,800. You will be getting an extra 2% in your paycheck, due to the reduction of Social Security taxes. For someone earning $60,000, that means an extra $100 per month (if the full $60,000 is subject to Social Security taxes).