TaxCoach Briefs:    December 10, 2009

Volume 4, Number 50

• Client Alert: Expiring Tax Breaks
• Member Resource: Cut Your Clients' Healthcare Costs
• Testimonial Of the Week: Business Owner Powerpoint Presentation
• Member Resource: Member Call-In With Ed & Keith

***** Attention All-Stars and Press Club members *****: The playback for Tuesday's webinar is now available on the All-Stars page. Our topic was building confidence to charge what you're worth. Press Club member Ed Lloyd took the Hot Seat and outlined how he calculated ROI on a tax plan to support charging — and collecting — a $20,000 fee. You'll find the playback in the Resource Center (red) on the All-Stars page, within TaxCoach. If you're not an All-Stars or Press Club member, click here for more information.

***** Attention Certified Tax Coach™ members *****: The on-line training for the CTC certification course is now available. You'll find the link in the CTC™ Toolbox within TaxCoach. It includes video versions of all segments from the first three-day CTC Academy in San Diego, plus intermediate quizzes you'll use to obtain your certification. If your enrollment has been processed, your textbook materials are on their way to you. As soon as you have them you can jump in to the on-line course — instructions are in the Course Catalog. If you're not enrolled in the program click here for more information.

TaxCoach Briefs archives.

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CLIENT ALERT (EAL)
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EXPIRING TAX PROVISIONS

As we all know, tax laws grow more complicated every year. Washington passes new tax breaks all the time – but federal budget rules mean few of those breaks are permanent. This means that each year, dozens of tax breaks expire. Some of these (like the special tax credit for training mine rescue teams), have little effect on your clients. Others can cost clients thousands if you miss them!

With that in mind, we've put together a Client Alert letting you notify your clients about some of the more important tax provisions expiring at the end of 2009:

1. The itemized deduction for state and local sales tax.
2. The additional standard deduction for state and local real estate taxes.
3. The special $250 deduction for “educator expenses” paid by teachers and other school professionals.
4. The exclusion for tax-free distributions from individual retirement plans for charitable gifts.
5. The waiver of “minimum required distribution” rules for IRAs and defined contribution pension plans.
6. The deduction for qualified tuition and related expenses.
7. The deduction for mortgage insurance premiums as “qualified residential interest.”
8. The special deduction for state and local sales tax paid to buy a new car or truck.
9. The 50% “bonus depreciation” rules for certain business property. (These rules make it especially attractive to buy new business equipment in 2009.)

The House of Representatives has passed last-minute legislation extending the first four of these provisions (along with 41 others) through 2010. The bill would pay for these extensions by taxing "carried interest" earned by certain private equity and hedge fund managers as ordinary income rather than capital gain. While that legislation is likely to pass, this is still a chance to remind your clients of your ongoing value. They'll appreciate hearing it from you.

When you click on the 'Client Alerts' button in TaxCoach, you'll see a list of alerts, with this latest on top. The file 'Expiring09' contains letters addressed to each of your clients.

You can download the file to your computer, and print on your letterhead using MS Word, or any word processor. You'll find instructions on the Client Alerts page.

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MEMBER RESOURCE (EAL)
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CUT YOUR CLIENTS' HEALTHCARE COSTS

The Medical Expense Reimbursement Plan (MERP), or Section 105 plan, is probably the single most popular strategy in the TaxCoach repertoire. In fact, long before Keith and I launched the business, I showed him how to implement a plan for his own family -- and the savings I created were instrumental in showing him the value of proactive tax planning.

Most of us are familiar with using the MERP in family proprietorships -- hire the spouse and pay them in the form of medical benefits to shift those expenses from Schedule A (where they are rarely deductible at all, and even then only to the extent they exceed 7.5% of adjusted gross income) to Schedule C, where they lower taxable income and self-employment tax.

But the MERP is also a powerful tool for cutting group insurance costs. Typically those plans include an individual deductible (say, $500) and a family deductible (usually twice the individual deductible). Employers are gradually raising those deductibles to cut premiums. Raise them high enough -- say, to $2,500/person and $5,000/family -- and you can cut premiums by up to half. The problem, of course, is that you also cut benefits. That's where the MERP comes in.

What if you could refinance your clients' healthcare benefits, the way you might refinance a house? What if you raised the deductible through the roof, then set up a MERP to cover the difference between the old deductible and the new deductible? What would happen to overall costs?

Our experience shows that most employers who adopt this strategy save 20-30%. With no reduction in benefits.

Back in July, Keith and I introduced you to an innovative firm that specializes in administering these plans for clients across the country. Those clients range from mom-and-pop shops to a local school district with over 800 employees (coincidentally, it's where Keith graduated in 1982 as valedictorian!)

That company's name is ClaimLinx, and on Tuesday, December 15, at 4PM Eastern, we'll be hosting a teleseminar with ClaimLinx founder Tom Quigley and National Sales Director Erika DeStafano. We'll outline exactly how the strategy works and how you can make this resource available to your clients.

To connect to the conference, dial (218) 862-1000, and enter participant access code 712276#. No advance registration is necessary. So be sure to join us, Tuesday, December 15, at 4pm Eastern, to learn how to help your clients beat the high cost of healthcare!

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MEMBER TESTIMONIAL OF THE WEEK (KAV)
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Ed, Keith, I just used the business owner power point presentation to a group of insurance interns in their company's training facility here in Newport Beach. The quality of the power point was terrific and the talk was very well received as a result of the great material Tax Coach provided! Thanks for all you do!!

Ken Blake, CPA, EA
Brea, CA

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MEMBER RESOURCE (KAV)
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MEMBER CALL-IN WITH ED AND KEITH

OK, last week Ed had to miss the call-in for an emergency root canal. Yesterday, we lost power at the office — and minutes before 1pm! Ed had to run home in order to conduct the call — at least he had power at his house (but I didn't!)

So once again we braved technological adversity and had a great call, even without all the players. (I've said this before, but we can only hope:) Ed and I will be back next week, "as usual." Here are some excerpts from the log of the questions raised by callers this week:

• When running a direct mail campaign, have you had success in making follow up phone calls? Or have you found that a well executed campaign will generate all the incoming calls you need?
• Do you have any tips on creating and nurturing referral relationships with attorneys and financial advisors? I generally find attorneys to be cautious and introverted (yourself excepted, Ed!); while financial advisors are often aggressive and more interested in selling their products though you instead of creating a two-way referral relationship
• The client engagement letter in the playbook includes a paragraph with a warning that disclosing tax advice to others may waive a privilege of non-disclosure. Is this admonition really necessary? Please elaborate.
• What are you recommending to stay in compliance with the Section 7216 Regulation?
  (A: Discussion and resources are in the Playbook under the Gathering Client Data heading)
• From everything that I'm reading there seems to be no tax benefits from creating a QSUB. In your opinion, are there any?
• On the education plans where you hire your college bound child would it work for under age 21 if they were not claimed as dependent?
• What would happen, in regards to the IRS, if an LLC treated as a disregarded entity (partnership) converts to an Inc. under state law, not by filing an 8832? Would it be treated as a new entity with new EIN, or would it file an 1120 under the old EIN?
• Ed, I have a c-corp 100% owned by a husb .... they have always taken a "draw" out ..... then they started taking income out to the wife and giving her a 1099. Any suggestions on how to get money out w/o a payroll?
• What is the best way to get real estate out of a C corp if the FMV of the real estate is less than tax basis?
• Can C-corp shareholder/employee compensation be completely in benefits such as sec 105 medical, term life, etc., or does there need to be a portion in cash subject to FICA?
• Prospective client for planning tells me that she owns a Scedule C business and her husband owns another schedule c business however they show all income as hers and none as his. He says he thinks this is a good arangement because of his recurring cancer he will never need SS. How fast should I run from this couple? or is there something that I have missed that might make this a legitimate strategy?
• Would something like a Temperpedic mattress be deductable if prescribed by a doctor?
• Ed - Do you have any contacts or experience in establishing an ESOP?
• When targeting businesses (who have an existing accountant) during tax season; should you focus on pitching tax planning after tax season, or should you go for the current tax prep. work too? How do you deal with the response "I already have an accountant and we're in the middle of doing our tax returns"
• Can you deduct health club dues if a doctor has prescribed regular exercise as a treatment for anxiety & depression?
• Can you talk around the issues/strategies (if any) where an SCorp leases back home office space from the SCorp Owner?

If you're looking for pointers on tax strategies or profiting from TaxCoach too, join us for the next call, on December 16, at 1pm Eastern. Ask a question or just listen in on the repartee. Check the "Contact Us" button within TaxCoach for registration instructions.

Members occasionally ask if we can record and archive these calls. The answer is that we want to keep them as informal and uninhibited as possible. We’ve discussed specific tax-planning clients and cases, for example – but we don’t want to put ourselves on record as offering individual tax advice. We’ve also discussed outside tax software and marketing services (both good and not-so-good), and we don’t want to put ourselves on record with those comments either. Member Call-Ins are intended to be casual discussions among peers – and we don’t want recording them to threaten that chemistry.

Please note that while our elite members (All-Stars, Press Club, and Hall of Fame) can still schedule time directly with Ed as part of their coaching programs, we simply cannot answer marketing and tax-strategy questions via email or unscheduled calls. We'll have call-ins as many Wednesdays as we can, and we'll talk to you then.

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We're happy to answer your questions on TaxCoach content or features. (Save marketing and tax strategy questions for Member Call-Ins.) For best response, email support@taxcoachsoftware.com. If we think the answer will be useful to all of our members, we'll publish it (anonymously) here in the 'Member Q & A' section of TaxCoach Briefs.

Regards,

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