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Clients and Friends:
Now that it's June, summer surely can't be far behind - the cold and the rain have made it difficult for me to get in many rounds of golf this year. Hopefully sunny, warmer days are ahead.
We are always looking for good, new clients, and I wanted to remind all our existing clients, and friends of the firm, that an easy way to refer a friend or business associate to us is to tell them about our Free Tax Return Review service. We will review a potential clients prior year tax returns, and determine if they were filed correctly, or there are any opportunities for tax savings. So if you know of anyone that may benefit from working with us, please let them know about that "free service".
I have posted below an offer from one of our long-time clients, Codeworks, Inc. They are in the technology consulting business, and are offering a class on "Cloud Computing". I've attached a link to give you some additional information on this new technology that will surely impact all businesses in the near future. If you would like further information, please contact Codeworks directly.
http://www.infoworld.com/d/cloud-computing/what-cloud-computing-really-means-031
I've also posted two articles below, that I believe you'll find interesting:
- "They Don't Ring a Bell at the Bottom" - this is an article written by Nick Murray - I've posted articles by Nick in past issues of this newsletter; I find his comments provide an excellent perspective for the financial situation in which we find ourselves. If you sold out some/all of your equity investments as the market declined during 2008 and into 2009, and are now "on the sidelines", watching as the market has appreciated rapidly over the past 2-1/2 months, you'll find his thoughts valuable.
- Energy Efficient Tax Credits - the new tax law passed earlier this year included some substantial tax credits for those purchasing energy efficient products this year. The article provides you with some specifics about how to take advantage of those credits.
As always, please contact us if you have any questions about these issues, or any concerns you have about taxes or finances.
Bob Rounsfull |
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Looking for ways to save big on technology costs?
Want to stay abreast of the latest trends in technology?
Heard the buzz about Cloud Computing but don't know what it means?
CodeWorks, Inc. is offering an executive overview of Cloud Computing. This half-day class provides a great opportunity to learn what Cloud Computing is all about, how it can help your business, and save you money. After this introductory class, you will know what your next steps should be to take advantage of this latest technological development. Visit www.codeworksinc.com/courses/cloudcomputing.html for a course description, and call 1-847-774-6151 to register. A $100 discount is offered for clients of Rounsfull & Associates (Discount Code ROUNS).
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"They Don't Ring A Bell At The Bottom"
That was the headline of a very clever and very perceptive ad run by Merrill Lynch late in the great bear market of 1973-74, a period during which war engulfed the Middle East, oil prices suddenly tripled, inflation broke out, and first the Vice President and then the President of the United States were driven from office in the greatest constitutional crisis of the twentieth century. In seven hundred days, the Dow Jones Industrial Average went down 45%-the greatest decline, up until that time, since the Great Depression.
Then, as now, Americans abandoned equities in droves, crying what John Templeton considered "among the four most dangerous words in investing: it's different this time." They were partially-and therefore tragically-right: we'd never had oil prices triple at the hands of foreign powers, nor an impeachment crisis that ended in the fall of a President. But the investors who capitulated at prices that would never be seen again (the Dow bottomed around 580) had lost sight of the larger truth.
To wit, that though the serial crises of 1973-74 certainly were different in their specific details-as crises always are-the breadth, depth, transparency and flexibility of our dynamic, innovative and entrepreneurial economy could not be overcome by these harrowing events. That economy, and the values of the great companies operating in it, went on to heights undreamed of in those dark days.
All true, but not the point the Merrill Lynch ad was making.
When people flee equities in a great bear market, all but the most incurable pessimists usually do so with the intention of getting back in...at some point. The problem arises from two conditions, one in the investor's psyche, and one-Merrill's point- embedded in the workings of the market itself.
The human problem is that the idea of reinvesting "at some point" goes undefined, and therefore has no meaning. It is an impulse rather than a strategy, and is therefore subject to the alternating emotions of fear of getting back in too soon (and feeling foolish) and of getting back in too late (and feeling foolish). In other words, ego-expressed as fear of regret-gets tangled up in what should be a decision driven by patience and discipline. This is not usually a formula for investment success.
The other, headline problem is implicit in the market's historical function as a forward-looking discounting mechanism. It not only doesn't signal us clearly when it is finally bottoming (Merrill's bell that does not ring), but it most often turns before the economy does. As the money manager Jeremy Grantham recently wrote, "Be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a shade less black than the day before." (Emphasis added.)
If you are among those who need to be in equities for the long term-if for no other reason than to try to ward off the effects of constantly rising living costs through three-decade retirements-but who have fled to cash during this horrific decline, you have a decision to make. And like all decisions, it would be better to make it rationally and in anticipation of events than irrationally and in reaction to them.
"I'm waiting for things to turn around" isn't an investment strategy; it's the deferral of rational decision-making for fear of making a mistake. Historically, this very human impulse has been very costly. They do not, in fact, ring a bell at the bottom, and by the time the headlines grudgingly admit that the economy may be improving, the stocks of the great companies have usually been pricing in that improvement for quite a while.
Almost any strategy is better than no strategy. If you're in cash, it's probably time to make an appointment with your advisor to devise a strategy-any rational, disciplined strategy-for getting back in.
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Energy Efficient Tax Credits
If widely fluctuating energy costs and environmental concerns have you looking for ways to go green, here are some tips on how going green can cut energy costs and reap tax saving energy credits. Better yet all of these tax credits are available against Alternative Minimum Tax (AMT) this year and none of them are subject to any annoying phase out limits designed to prevent higher income taxpayers from benefiting from them. So, just about everyone should be eligible to take advantage of these tax saving credits.
Making Energy Efficient Improvements to Your Home
A great way to cut energy costs and save up to $1,500 in federal income taxes is to make certain energy efficiency improvements to your home. You just need to be sure to pick the right product.
The credit (which is called the nonbusiness energy property credit) you're entitled to equals 30% of what you pay for (a) qualified energy efficiency improvements (such as, certain energy efficient insulation, windows, doors and roofs), and (b) qualified residential energy property (such as, certain energy efficient heat pumps, hot water heaters or boilers, and advanced main air circulating fans) on your principal residence (no vacation homes). Expenditures made from subsidized energy financing can qualify for the credit if they otherwise meet the requirements for those credits. However, there is a $1,500 cap on aggregate credits claimed in 2009 and 2010 for all types of eligible expenditures. In other words, the $1,500 cap applies to the aggregate amount of credits claimed in both years combined.
If there is any possibility you'll be subject to AMT next year, you may want to make these improvements before the year end. Why? This credit can be used to offset AMT in 2009, but absent Congressional extension, it won't be in 2010.
Note:Basically the same credit existed in 2006 and 2007, but back then it had a $500 lifetime cap. This lifetime cap does not apply (and has no impact on) the credit available in 2009 and 2010. This means you are eligible for the up to $1.500 of nonbusiness energy property credits in 2009 2010, even if you previously claimed $500 of credits on your 2006 and/or 2007 return.
A good place to start your search for products that qualify for this credit is at www.energystar/taxcredits where you'll find a table listing requirements for various products. Then, to ensure the product satisfies the required energy saving conditions for the nonbusiness energy credit, be sure to check the product package materials or manufacturer website before making the purchase. According to the IRS, you can rely on the manufacturer's written certification statement, which is typically included with the product package materials or on the manufacturer's website. You just need to keep a copy of this certification as part of your tax records.
Purchasing a Hybrid Vehicle
If you are considering a hybrid vehicle purchase in 2009, the hybrid vehicle credit of up to $3,400 may be enough to get you going. Thanks to the Stimulus Act, the really good news for 2009 purchases is that the credit is now allowed against AMT. Top this with the fact that the credit has no AGI phase out limit and you've got a whole new ballgame. But, you need to be careful the amount of credit available depends on the hybrid you buy and some of the most popular models are no longer eligible for the credit. Also, only purchases of new (not used) vehicles qualify.
The actual credit allowed varies by vehicle. Furthermore, the credit is phased out once a manufacturer sells 60,000 hybrid vehicles. Lexus, Toyota, and Honda all hit this mark in previous years, so no 2009 purchase of their hybrids qualifies for a credit. Ford and Mercury hit this mark in the last quarter of 2008. This means the full credit will be allowed for purchases of their hybrids through 3/31/09, 50% of the credit will be allowed for purchases made from 4/1/09 9/30/09, and 25% of the credit will be available for purchases made from 10/1/09 3/31/10. So, if you're interested in a Ford or Mercury hybrid, you'll want to make the purchase before 10/1/09 to get 50% (rather than 25%) of the credit.
Note:There's also a credit for advanced lean burn technology vehicles, but no one had produced vehicles to which this credit applied until the last half of 2008 when Mercedes and Volkswagen debuted their versions. Since then, BMW and Audi have added vehicles to this list.
Please give us a call if you want to know the available credit amount for a specific vehicle.
Using the Solar, Wind, Geothermal or Fuel Cell Energy to Power Your Home
Although the costs of qualifying expenditures tend to be pretty steep, if you install solar, wind, geothermal, or fuel cell energy saving equipment in 2009, you may be able to take advantage of the residential energy efficient property (REEP) credit. The REEP credit equals 30% of expenditures to install: (1) qualified solar water heating equipment, (2) qualified small wind energy equipment, (3) qualified geothermal heat pumps, (4) qualified solar electricity generation equipment, and (5) qualified fuel cell equipment (up to $1,000 per kilowatt hour). Expenditures made from subsidized energy financing can qualify for the REEP credit if they otherwise meet the requirements for those credits.
The credit only applies to equipment you place in service in your U.S. residence, and it cannot be claimed for equipment used to heat a swimming pool or hot tub. The credit for fuel cell equipment is only available for your principal residence; however, the two solar credits apply to any residence (including vacation homes).
As with the nonbusiness energy property credit, a good place to start your search is at www.energystar.gov/taxcredits. Then, be sure the product satisfies the required energy saving conditions for the REEP credit, be sure to check the product package materials or manufacturer website before making the purchase. According to the IRS, you can rely on the manufacturer's written certification statement, which is typically included with the product package materials or on the manufacturer's website. You just need to keep a copy of this certification as part of your tax records.
As you can see, there are some pretty nice tax savings to be had from making certain energy saving and environmentally friendly expenditures in 2009.
If you have any questions or need any assistance, please give us a call.
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