Saturday, February 28, 2009

WARREN BUFFETT LETTER TO SHAREHOLDERS


If you want to get a very interesting view on not only the economy, but business practices you need to read Warren Buffett's letter to his shareholders. Unlike most CFO's he takes responsibility for errors in judgement. The report came out Saturday February 28, 2009. He reported that 2008 was the legendary investor's worst year ever. It also reported a grim fourth quarter, though it eked out a slight gain. (Berkshire's annual letter to shareholders.)

I think that Warren Buffett, called the Oracle of Omaha, is the only person the can write a report to the shareholders that is interesting to read. In one statement on a acquisition he quoted a country and western song lyric that went "I liked you better before I got to know you."

It is worth the time to read. Check it out.

Friday, February 27, 2009

HERE IS WHERE THE $819 BILLION OF STIMULUS IS GOING

The Washington Post has great visuals of how the $819,000,000,000 where and when the stimulus money will be spent. Check it out.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html?referrer=emaillink

Thursday, February 26, 2009

HERE COME THE TAX INCREASES

Back in October, as it became clear that Barack Obama would win the election, we started planning how to help our clients plan for the tax increases.

Since then, the economy has fallen completely off the cliff. Taxpayers across America stopped worrying about potential Obama tax hikes and started worrying they wouldn't have any income to be taxed. Shortly after the election, Obama discussed deferring tax increases to avoid squeezing the economy.

Then last week, President Obama signed an economic stimulus bill offering nearly $300 billion in tax breaks (see previous blog entries). For a while there, it looked like raising taxes on "the rich" was just a political practical joke. (Unless, of course, you think jokes should be funny.)

Now Obama has begun releasing more detailed budget proposals. And now we're starting to see plans for future tax hikes -- tax hikes that will be costly either directly or indirectly to many taxpayer.

Specifically, Obama proposes to let the Bush tax cuts expire for households making over $250,000 (to start with.) Marginal rates would climb back up to 39.6%. Capital gains taxes would climb back to 20% or even 28%. And Obama would cap the value of itemized deductions at 28%, so that even taxpayers in higher brackets save no more than 28 cents tax for each dollar of deduction. According to Bloomberg News, this would mean an extra trillion in tax over the next 10 years.

These proposed increases won't take effect until 2011 but we wanted to you to hear it from us first. We will be keeping you informed. Planning is going to be very important this year.

CAN I PUT GOLD COINS IN MY IRA?

Because of the economic downturn over the last few months my IRA has taken a big hit. I was thinking about moving from mutual funds to gold coins. One of the guys at coffee said that IRAs could not be invested in gold coins. Is he correct?

Justin

Justin, you aren't the only one that took a hit. Before I answer your question I want to make sure you realize that I am not a investment advisor. I am not making any type of judgement for or opposed to investing in gold. If I knew exactly how to invest I would not be sitting in my office but rather on the beach.

Okay, so much for the disclaimer.

It is possible for your IRA account to hold gold coins. Realize that you cannot actually hold them, they must be held by your IRA trustee. For example if you have $30,000 left in your IRA that is held by the Forth National Bank, the bank trust department that administers your IRA would have to purchase and keep the coins in the name of your IRA account. I presume that you could occasionally go to the bank and touch and fondle the coins but they could not be in your possession.

What is probably confusing the "expert" at the coffee shop (there seem to be a lot of experts at the coffee shop) is that the law states:

The acquisition of an IRA of any collectible is considered a distribution and therefore taxable. The law goes on to list precious metals as a collectible. But... to make things confusing the law later states that gold and silver coins are not considered collectibles. Go figure.

OBAMA PROPOSES TO ELIMINATE MOST FARM SUBSIDIES

(Reuters) - Reuters is reporting that President Barack Obama would phase out "so-called direct payment subsidies to U.S. farmers with sales over $500,000 a year, a senior administration official said." The proposal is part of the Obama's new budget proposal. "It would save $9.8 billion over 10 years, cutting outlays by one-fifth." There are roughly 126,000 farms with sales above $500,000 a year, says USDA -- with an average size above 2,300 acres. Direct payments were part of the 1996 farm bill and revised in the 2002 farm law. They cost more than $5 billion a year. "Because they are 'decoupled' from production, they are the safest among U.S. farm supports from trade challenges."

Wednesday, February 25, 2009

OMAHA SENATOR WANTS TO TAKE AWAY AG PROPERTY TAX CREDIT AND GIVE TO HOMEOWNERS

Bill to change Nebraska property tax credit draws fire from ag interests

(Brownfield) -- A measure to change the Property Tax Credit Act in Nebraska has been introduced in the Nebraska Unicameral. State senator Tom White of Omaha is sponsoring LB13. He says it’s meant to keep money in the state by not giving it to out-of-state owners of Nebraska property.


Rancher Al Davis of Hyannis with the group called Independent Cattlemen of Nebraska (ICON) says White’s bill would take away the property tax credit from agriculture and hurt the state’s producers. “What LB13 does, it will strip the property tax credit from all property but homes,” Davis says. “It’s basically income redistribution and it’s divisive. It pits the rural against urban.” If he loses the tax credit, Davis says he would see a 6% increase in his property taxes.

Tuesday, February 24, 2009

TAX DEDUCTIONS FOR POST SECONDARY EDUCATION

I was wondering if you could get me some information. My son will be going to school this fall. Are here some credits that will give us a tax break for education?

Rene

Rene, President Bush was not called the "Education President" for nothing. Under his watch there were several tax insentives put in the books the help defray the cost of education. Unfortunately everybody in Congress jumped on the bandwagon so we have several laws that we can select from. This makes it a little confusing.

In addition the the credits below there may be some deductions. You are right in that education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.

The Hope Credit
The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.


  • It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.

  • You're allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).

  • Each student must be enrolled at least half-time for at least one academic period which began during the year.

  • The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit
The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.


  • If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.

  • You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year.
  • To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent.
  • The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly).

If the taxpayer is married, the credit may be claimed only on a joint return.


For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov

Saturday, February 21, 2009

HOW DO YOU GET YOUR STIMULUS CREDIT

Larry, I here that I am supposed to get some money from the government because of the law that the president passed. How do I get my share?

Edeth

Edeth, don't get too excited. What you are talking about is what the government calls the "Making Work Pay Credit." I have detailed information on this in a previous posting.

If you are an employee you will see the credit in your paycheck. The IRS will issue revised tables for your employer very soon. The 12 months of the credit will be crammed into about nine months of paychecks. That’s about $10-$20 extra per week. Whoopee.

If your are self-employed to get any advance benefit from the credit you will have to reduce quarterly estimated payments.

Here is the rub. The exact amount of the payroll tax credit for the year will be calculated when you file your 2009 return. If your income (adjusted gross income to be exact) is over $75,000 for individuals or $150,000 for married you will have to pay the money back with your 2009 return.

Friday, February 20, 2009

USDA OFFERS RURAL GRANTS FOR EMERGING BUSINESSES

(AP) -- Groups that want help energizing their communities can apply for grants from the U.S. Department of Agriculture. The department is seeking applications for the Rural Business Enterprise Grant program, which is open to public bodies, nonprofits and American Indian tribes that want to finance small and emerging private businesses in rural areas. Grants may be used for technical assistance, acquisition of land, buildings and other things. Rural is defined as communities and cities with a population of 50,000 or less. The deadline to apply is March 31. For more information, visit http://www.rurdev.usda.gov/rbs/busp/rbeg.htm.

Wednesday, February 18, 2009

FOLLOWUP QUESTIONS ON THE STIMULUS BILL

Congress has approved new economic stimulus legislation, the American Recovery and Reinvestment Act of 2009.

Here are a few that we have been getting on the legislation. For those of you that want more information the following is a link to the Senate Finance Committee 11 page summary of the income tax provisions. summary of the key provisions

Could the new legislation affect 2008 tax returns? Generally, no. The new legislation does not have any major impact for the vast majority of individuals preparing their 2008 tax returns due April 15. Instead, these changes will largely impact 2009 tax returns filed next year, in 2010. Taxpayers should continue to prepare their 2008 tax returns as they normally would.

There are a few limited areas in the legislation that could impact 2008 tax returns. For example, for some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. More details on this and other changes — such as the first-time homebuyer’s credit —will be available soon.


When and how will people get the $400 to $800 “Making Work Pay” tax credit? Taxpayers will not get a separate special check mailed to them like last year’s economic stimulus payment. For many taxpayers, the additional credit will automatically start showing up in their paychecks this spring. For people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. For some other people, the credit can be claimed when they file their 2009 tax return next year.

More details about the “Making Work Pay” credit will be available soon, including an updated version of the withholding tables contained in Publication 15, (Circular E), Employer’s Tax Guide.

Does this new stimulus legislation have any impact on the recovery rebate credit for 2008 tax returns being filed now? No.

More information on the law as it comes available.

Larry Kopsa CPA

Tuesday, February 17, 2009

HERE IS HOW THE STIMULUS BILL WILL AFFECT YOUR TAXES

Unless you were out of the loop you know that President Obama has just signed the "American Recovery & Reinvestment Act." While much of the news focuses on the spending provisions, it also includes $287 billion in tax cuts:

  • The act includes a new "Making Work Pay" credit for 2009-10 to offset the first $400 of Social Security tax you pay ($800 for joint filers). It phases out as your adjusted gross income (AGI) tops $75,000 ($150,000 joint).

  • There's a new higher education tax credit of up to $2,500 for your first $4,000 in college expenses. The credit phases out as your AGI tops $80,000 ($160,000 joint). You can also use Section 529 plan funds for computer-related expenses, including software and online access (2009-10 only).

  • Buying a car? You can deduct state and local sales and excise tax you pay on a new (but not used) car, light truck, RV, or motorcycle you buy between January 1 and November 30, 2009. The deduction is limited to purchase amounts up to $49,500 and phases out as your AGI tops $125,000 ($250,000 joint).

  • Buying a home? The act increases the "first-time homebuyer" credit from $7,500 to $8,000, extends the purchase period through November 30, 2009, and eliminates the requirement to repay the credit for homes purchased in 2009. This credit phases out as your AGI tops $75,000 ($150,000 joint).

  • Buying business equipment? The act extends the current $250,000 first-year expensing limit and 50% bonus depreciation provisions for purchases through 2009.

  • Finally, the bill "patches" the Alternative Minimum Tax, to protect 24 million mostly middle-income filers from the AMT's bite.

Congress passed these new rules with less deliberation than usual, so there's bound to be confusion. To learn more, call us at 402.362.6636.

Monday, February 16, 2009

ECONOMIC SLUMP LOWERS FARM VALUES

(AP) -- Farmland values fell in the fourth quarter of 2008 in some Midwest and Western states amid weakening farm income and waning market demand. Farmland values peaked in September 2008 at historic highs, when adjusted for inflation, said Jason Henderson, the report’s author and an executive at the Federal Reserve’s Omaha branch reported late last week. “They have retrenched, but they still remain above a year ago,” Henderson said. According to the Federal Reserve’s report, non-irrigated cropland values slipped 2.8% below the previous quarter, irrigated cropland dipped 1.1% and ranchland values fell 1.7%. The largest quarterly decline was in Nebraska, where non-irrigated cropland values dropped 4.6%. Demand for farm loans also eased in the fourth quarter, particularly loans for real estate and capital purchases. Bankers expected increased demand for operating loans for both crop and livestock enterprises. More than a quarter of bankers surveyed told the Federal Reserve that they expect credit standards to tighten further in 2009.

Saturday, February 14, 2009

ANIMAL ACTIVIST ARE IN THE MIDWEST

(Brownfield Network) -- The Humane Society of the United States (HSUS) will be holding Humane Lobby Days in Indiana and Illinois Tuesday, February 10 and in South Dakota on Wednesday, February 11. Last year, the group helped pass 93 news laws to advance animal welfare in the states, HSUS says, and have worked in Congress for a long time to address these issues, a spokesman said.

Nebraska livestock interests are keeping a watchful eye on activities of the HSUS in the Nebraska legislature, according to Nebraska Pork Producers Executive Director Larry Sitzman. “We are constantly on guard, we are constantly watching all bills and all language,” Sitzman says, “because it seems like this is an organization that has the resources, the people power and the dollars to see any weakness and try to exploit that to the maximum.”

Friday, February 13, 2009

NEBRASKA CATTLE INVENTORY REPORTED BELOW PREVIOUS YEARS

(AP) -- Nebraska's cattle inventory heading into 2009 posted a decrease from previous years. The USDA says the state had 6.35 million head of cattle and calves on hand on Jan. 1, down 2% from last year and 5% from 2007. All cattle and calves in the United States as of Jan. 1 totaled 96 million head. That was 2% below the 96 million reported last year.

QUESTION ON "C" CORP FISCAL TAX YEAR

Larry, I ran across your blog and was wondering if you could answer a question for me. I was interviewing an accountant for my taxes and he was telling me that the only choice for year end for a C Corp fiscal year is either Oct. 1st or Jan. 1st. I could not find the info on the IRS web site. Thanks for your time. Kyle

Kyle, a "C" corporation can have a fiscal year ending at the end of any calendar month. Either there is a misunderstanding, or you need to find yourself a professional tax advisor who is a little more knowledgeable about such basic matters. If this is what the accountant really thinks, consider yourself lucky that this person revealed his ignorance so early in your potential relationship.

Good luck.

Larry Kopsa CPA

Thursday, February 12, 2009

RUSSIA HALTS PORK IMPORTS FROM 9 US PLANTS

(Bloomberg) -- Russia is halting pork shipments from nine U.S. pork facilities, including plants in Nebraska, the U.S. Department of Agriculture said today on its Web site. Russia was the fourth-largest buyer of U.S. pork in 2008.

Wednesday, February 11, 2009

COMMENTARY: Ruin Your Health With the Stimulus Plan

On www.bloomberg.com, former New York Lt. Gov. Betsy McCaughey, now a senior fellow at the Hudson Institute, writes that no one from either political party is objecting to the health provisions slipped in the federal economic stimulus bill (H.R. 1) without discussion. Senators and congressmen "should read these provisions and vote against them because they are dangerous to your health," McCaughey writes.

The bill’s health rules will affect “every individual in the United States” by creating a new bureaucracy, the National Coordinator of Health Information Technology, which will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective, according to McCaughey. The goal is to reduce costs and “guide” your doctor’s decisions. Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time.”

McCaughey writes that many of the health reform provisions in the stimulus bill come from former Sen. Tom Daschle’s book, which says that aging Americans should be more accepting of the conditions that come with age instead of treating them. "That means the elderly will bear the brunt," McCaughey writes. "Medicare now pays for treatments deemed safe and effective. The stimulus bill would change that and apply a cost-effectiveness standard set by the Federal Council."

She adds: "The health-care industry is the largest employer in the U.S. It produces almost 17% of the nation’s GDP. Yet the bill treats health care the way European governments do: as a cost problem instead of a growth industry. Imagine limiting growth and innovation in the electronics or auto industry during this downturn. This stimulus is dangerous to your health and the economy."

Tuesday, February 10, 2009

AG CENSUS SHOWS FEWER STATE FARMS BUT LARGER PRODUCTION VALUE

(Grand Island Independent) -- While there are fewer farms in Nebraska than in 2002, the value of production of existing farms is up 60%, according to the 2007 Census of Agriculture, which was released last week. Adding to the value of production during the five years between censuses is an increase in the amount of land irrigated in Nebraska that has helped to boost crop production. The number of farms in Nebraska during 2007 was 47,712, down 3% from the 2002 Census of Agriculture, according to the USDA’s National Agricultural Statistics Service, Nebraska Field Office. Market value of production was $15.5 billion, up 60% from 2002. The average market value of production per farm was $324,992, compared to $197,000 in 2002. Market value of crops in 2007 statewide was $6.843 billion, compared to $3.388 billion in 2002. For livestock, the 2007 statewide market value was $8.662 billion, compared to $6.315 billion in 2002.

Saturday, February 7, 2009

I CAN'T GET MY 1099'S

Larry, I am trying to file my tax return but I can’t get the information from my broker. He says I have to wait. I thought you said that the 1099’s have to be out by January 31st. What’s the deal?

Olivia

Olivia, I know that this is frustrating. We have several clients that are trying to get their returns done for school financial aid, or that have refunds coming that are in the same boat.

Here is the deal. Last year, Congress changed the due date from Jan. 31 to Feb. 15 for several forms: 1099-Bs, 1099-Ss and any 1099-MISC forms showing payments of lawyer fees or payments by brokers of substitute dividends or tax-exempt interest. The change also applies to brokers’ annual composite reporting statements sent to customers. This year, issuers get two extra days because Feb. 15 is a Sunday and the 16th is a holiday. Sorry you will just have to wait.

It is a pleasure serving you.

Larry Kopsa CPA

Friday, February 6, 2009

A GOOD PROPOSAL IN THE NEBRASKA LEGISLATURE

I wanted to make you aware of a bill that is currently before the Nebraska State Legislature that affects livestock producers. This Bill, LB0056 which was introduced by Senator Fischer, is currently in the Natural Resources Committee.

LB0056 would amend the livestock waste management act to provide that the current pre-discharge rule apply to three distinct and separate discharges at the same animal feeding operation and provide that discharge violations by those cases found by the Department of Natural Resources, after investigation, notice, and hearing, to have been caused intentionally or by willful neglect on the part of the applicant or permit holder.

Under the current law, one act of God that impacts three locations of one producer, would put that producer in violation of the act and could cause penalties.

If you feel it’s appropriate, you should contact your state senator to give you views on the bill. To contact your state senator, you can find his address at the Nebraska State Legislature web site at:

http://www.unicam.state.ne.us/senators/senator_list.php

Monday, February 2, 2009

MORE ON BIG NUMBERS - YOU AND EACH MEMBER OF YOUR FAMILY NOW OWE $4,000.00

Recently I posted a ditty that I titled The Law of Big Numbers. See the January 28th posting. Here is more on that topic, which I find scary.

The Congressional Budget Office is forecasting a U.S. budget deficit for the 2009 fiscal year of nearly $1.2 trillion dollars. That's close to $4,000 for every man, woman, and child in the US.

Sunday, February 1, 2009

NEBRASKA STATE LEGISLATURE ADVANCES LIVESTOCK ANTHRAX BILL

(Unicameral Update) -- Lawmakers advanced a bill from general file Jan. 27 that would revise how ranchers and state authorities respond to anthrax-infected livestock. LB99, introduced by Holdrege Sen. Tom Carlson, would modify current laws affecting the detection, containment and suppression of anthrax in livestock. Carlson said new anthrax control provisions are needed in the event of a bio-terror attack or anthrax outbreak. The bill would make state law consistent with modern veterinary and epidemiological practices, he said. LB99 advanced to select file on a vote of 41-0.