MILK IS TOXIC ACCORDING TO THE EPA

The bureaucrats at EPA, which has a $9 billion budget and employees 17,000 government workers had determined that cows milk was bad for the environment and could taint the earth.

Even though cows milk is 90% water, the EPA determined that it was essentially an oil and subject to regulations that control toxic spills. Fortunately the lobbyists from the dairy and small business were able to convince the agency to reconsider. This foolishness could have cost the economy more than $1.4 billion per year.

When you have 17,000 workers that are trying to justify their jobs we get these crazy rules. It seems that the government is trying to regulate every iota of our lives and there is danger everywhere.

CONGRESS AGAIN PLAYS POLITICS

MAJOR FLAW IN THE VOW TO HIRE VETERANS ACT LOST IN POLITICAL POPLARITY

The VOW to Hire Heroes Act includes tax incentives intended to lower the unemployment rate of this country's veterans which, according to the Bureau of Labor Statistics, stands at 7.7% (860,000 workers). Not surprisingly, the House Committee on Veterans' Affairs is already singing the act's praises (see Comprehensive Legislation to End Veteran Unemployment.

However, the VOW to Hire Heroes Act has one major problem: The design does not prevent abuse by employers which could result in no net reduction in veteran unemployment whatsoever. As the Tax Foundation reported after the President's proposal of the American Jobs Act, tax credit programs-without proper checks put into place-given to businesses who hire unemployed workers can easily be gamed. Unfortunately, this bill includes such credits.

These incentives include:
• A tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months
• A $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months
• A tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months

Targeted incentives are poor policy in general, but are especially wasteful in this case. Why? Legislators failed to include a provision saying that business must increase net employment in order to receive the credit. Given the lack of such a provision, a business could hire a veteran and fire one on the same day, eventually collect a government check of up to $9,600, and not reduce veteran unemployment by a single job.

Though unemployment is high (9% nationally, 12% among young veterans), politically popular legislation which has not been properly thought through is not the answer. After serving their country, veterans should benefit from a sustainable growing economy rather than political gimmicks that will do little to serve anyone.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Ben Kingsley played compassionate accountant Itzhak Stern in the Oscar-winning 1993 Steven Spielberg movie, "Schindler's List." Stern was a real-life accountant who worked for German industrialist Oskar Schindler, played by Liam Neeson. The accountant typed and maintained the list of names of his fellow Jews who were hired to work in Schindler's factories, preventing them from being sent to the Nazi death camps. The real Itzhak Stern appeared in the movie, along with the surviving people on Oskar Schindler's real-life list.

HAPPY THANKSGIVING

Most of All

Thanksgiving Day brings to mind
the blessings in our lives
that usually go unnoticed:
a home that surrounds us
with comfort and protection;
delicious food, for pleasure
in both eating and sharing;
clothes to snuggle up in,
books and good entertainment
to expand our minds;
and freedom to worship our God.
Most of all we are thankful
for our family and friends,
those treasured people
who make our lives extra special.
You are part of that cherished group.
On Thanksgiving, (and every day)
we appreciate you.

Happy Thanksgiving
Kopsa Otte

NEW ADDITION

We are excited to announce that
Megan had a beautiful little girl yesterday.

Adelynn Lauren
7lbs 8oz. and 20 inches long

NEBRASKA IRRIGATED FARMLAND VALUE UP 40%

No surprise here.

The Journal Star reports that "the average value of irrigated farmland in Nebraska was up 40% from a year earlier in the third quarter, according to a survey of banks by the Federal Reserve Bank of Kansas City." Moreover, "almost half of those surveyed in Nebraska expected farmland values would continue to climb." I just spoke to an attorney and he told me that a farm in Seward county was appraised at $10,250 per acre.


To read more: Journal Star

AG EXPORTS BOOM - U.S. ECONOMY STRUGGLES

As you read this think about the number.

According to the Economic Collapse every day the U.S. national debt is increasing by roughly $4 billion every single day. And as shown below our total Ag export is $137 billion for the year.

(AP/Google.com) -- The AP reports that "U.S. agricultural exports are projected to reach a record $137 billion this year and hit that same mark next year. The U.S. agricultural trade surplus is expected to top $42 billion." Ag makes up close to 10% "of U.S. exports, compared with about 80% for manufacturing. But Commerce Department data show farm exports grew much faster than manufacturing exports during the past decade -- by 123% compared to 68%." According to the AP, "high prices for farm products explains much of the increase in value for agriculture exports; the same products shipped overseas are worth much more today than they were 10 years ago."

CONCERNS ABOUT FARM BILL PROCESS

(Nebraska Farmer) -- FarmProgress.com reports that "leadership of the House and Senate Agriculture Committees continue to work to reach a consensus on a farm bill recommendation to send to the Super Committee." According to the story, the American Farm Bureau Federation has "some concerns" about different farm programs being devised for different commodities, signaling a return to "producing for the government." A Farm Bureau spokesperson said: "Should the Super Committee fail in their effort to cut $1.2 trillion, sequestration will go into effect making across the board cuts" -- and "if that happens, the farm bill will be ugly because it will have to be done on the floor next year."

To Read More: Farm Progress

WASHINGTON D.C. UPDATE PART #4

Here are some Social Security facts that you might be interested in:

- If you are under 55 and they made no changes to the law so you can expect to receive 77% of the benefits that you normally would be eligible for; if you are over 55 you should receive 100% of the benefits.

- To fix the program Congress needs to do one of two things, or some combination: Increase income from payroll taxes by 17% AND Reduce current benefits by 14%

- Social Security was never meant to provide 100% of the living expenses for retired individuals.

- 80 million baby boomers will be eligible for Social Security in the next 10 years.

- As a cost cutting measure the Social Security Administration has quit sending out the annual Social Security Statements that you normally received around you birthday. They are going to be providing the information on line, but they can't figure out how they are going to do that. Make sure you keep your last statement.

- Right now if you retire at age 62 versus age 65 you will get 75% of full benefits. The decision depends on your individual circumstances.

- The Social Security system is not a "the more you pay in the more you get." The lower 30% get much more than they pay in and more than the higher 70%.

WASHINGTON D.C. UPDATE PART #3

The Commissioner of the Small Business and Self Employed division spoke on initiatives that the IRS is taking especially the new requirement to turn over your software files if you are audited.


The IRS now can request backup copies of your software.

This is going to give them access to entries not only to your books but also it will allow the auditor to look at adjustments and changes that were made to your books by looking at the audit trail.

This is concerning. Think about yearend adjustments that are made when cleaning up the books and then when doing tax planning. The auditor is going to see those changes and will be asking questions.

Here is an example: Assume the owner of the business takes money from the business during the year. The bookkeeper classifies this as a loan. After the yearend we are looking at the transactions and determine that this actually should have been a dividend. On March 1st of the subsequent year we either make an entry or reclassify the check. The auditor is going to know about the entry through the audit function and think that we are doing some "hankie pankie" post yearend planning.

Here are some of the questions and answers addressed by the panel from the IRS:

Q. Is this legal?
A. Yes. We have been to court several times and in all cases the judge has ruled that we should have access to the electronic books because they are the books of original entry.

Q. Could we turn off the audit function?
A. Yes but that would make us suspicious and would probably extend the audit. What are you trying to hide?

Q. What if the client uses QuickBooks as a checkbook and then the accountant takes the QuickBooks and makes entries. Can they still request?
A. Yes

Q. If the auditor has the books can he look at prior years? If he is looking at prior years he is supposed to open an audit for those years. Will they be looking at those years?
A. We have told the auditors during training not to look at prior years.

Q. HERE WAS MY QUESTION. Many clients have point of sale software that keeps track of transactions and inventory along with accounts receivable but is not downloaded into the general ledger. Is this type of software subject to review?
A. Yes. This is considered part of the books of original entry and is subject to request.

Q. What if the electronic books are kept by the accountant. Can they still be requested or subpoenaed?
A. Yes.

Because of this new initiative by the IRS we are going to have to be more diligent in our recording into QuickBooks and other electronic software and be prepared to answer questions of why entries were made to change or to make journal entries after the end of the business year.

WASHINGTON D.C. UPDATE PART #2

Independent contractors are on the radar.

- There is a new initiative to have owners that are improperly treating workers to come forward and admit their mistake. The cost would be penalty of 10% of the payroll tax due for the prior 12 months. This is an effort by the IRS to allow businesses to get it right before they start a hard clamp down on worker classification.
- The IRS is now doing an extensive study sampling worker classification
- Estimates are that $64 billion is being lost in payroll taxes by misclassification.
- Hard lobbying in Washington to eliminate the Section 530 Relief.
- Efforts by the IRS to find employers that are improperly classifying workers:
- Independent research study on the issue
- New IRS specialist to help field auditors with the issue
- More exams
- 1099/W-2 comparisons within individual industries
- Working with the states on classification. States are getting much more active
- Flagging businesses with more than 5 1099's showing more than $20,000; thus indicating the use of independent contractors and workers.

WASHINGTON D.C. UPDATE PART #1

I am writing this from the National Tax Conference in Washington DC. This is a great conference because we hear from the "insiders" on what is happening, or not happening, with our tax policy. The Commissioner of the IRS even made a presentation. You may have seen his talk live on CSPAN, but come to think of it I would imagine not too many people would find his talk interesting so the ratings from CSPAN probably were not up there with Dancing With the Stars.

I wanted to share with you some highlights. This is really important because future tax policy is going to hit us right in our bank account. With taxes scheduled to increase substantially and with the economy waning the more we know the better we can plan.

Here is Part #1 of this 2 1/2 day conference:

+ Nobody can outguess what Congress is going to do. Even the "insiders" are concerned about the lack of direction.

+ We are fairly safe in planning for 2012. It is an election year so we won't see a lot of major changes. But in 2013 the Bush/Obama laws will be phased out and it is going to be a battle. If the past is any indication we may not know what the 2013 laws will be until late in the year. This is going to make planning in 2012 very important.

+ In 2011, we can take 100% write-off on certain leasehold improvements. This is scheduled to reduce to 50% in 2012 and then disappear in 2013. With the economy as it is we may see the ability to take 100% continue thru 2012- there is a chance but don't count on it. We are watching this for you.

+ The same is true with the write off of equipment. It reduces from $500,000 this year to $139,000 in 2012. This may also be extended. We are watching for you.

+ Many business owners are planning/hoping that Obama Care will be repealed. One of the Congressmen that spoke said that in his opinion it will not be repealed no matter who wins the White House. The Congressmen’s thinking is that it would take 60 Senators to overturn the bill and that will not happen.

+ The extremely high tax rates for people making over $200,000 are getting closer. With the exit of the Bush/Obama cuts; the Obama proposal to raise taxes on those wealthy people making over $250,000; and Obama Care laws tax increases for Medicare coming in 2014 rates could go as high as 43.4%. Plus we still have Social Security and State taxes ~ Ouch.

+ Everything is now political. It used to be a few years back that the leaders from the two parties would get together to work out solutions to problems. This does not happen anymore.

+ Estate planning is a mess. In 2011 and 2012 you can have an estate of $5 million and no estate tax. Any of the $5 million that you do not use you can pass to your spouse. In addition you can give $5 million. But in 2013 the estate drops to $1 million. Who knows how to plan? It may be time to consider gifting. We are watching for you. If you have an old will you should consider reviewing. It most likely is outdated.

+ We even had a session on the power of Social Media. If you are not using any type of Social Media, you better catch up with the times. People trust testimonials 90% but advertising 14%. Social media creates a testimonial "feeling."

+ Health Savings Accounts are a great way to reduce healthcare costs.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Danny Glover played bow-tied accountant Henry Sherman in Wes Anderson's 2001 comedy, "The Royal Tenenbaums" about an eccentric family of upper-class misfits. Besides doing the accounting, Henry also romances the matriarch of the family, Etheline Tenenbaum, played by Anjelica Huston. Other members of the all-star cast included Gene Hackman, Ben Stiller, Gwyneth Paltrow, Bill Murray, Luke Wilson and Owen Wilson, along with the voice of narrator Alec Baldwin.

11.11.11

STILL NO DETAILS ON CUTS TO FARM PROGRAMS

(Nebraska Farmer) -- FarmProgress.com reports that House and Senate Ag Committee leaders have yet to release their farm policy recommendations. "Already on the chopping block is at least $15 billion worth of farm program payments, $4 billion in popular conservation programs, $4 billion in nutrition spending and some ag research funding." The article notes that if the supercommittee "fails to do its job by Nov. 23" and "the Farm Bill is kicked back to the Ag Committees," those cuts could be much deeper.


More on this: Click Here

FLAT TAX QUESTION

Q. Hello Larry,
Not sure if you remember me, but I attended York College and had a few of your classes in '03-'05. With all of this "flat tax" talk by Presidential candidates right now, all I could think about was my classes where you would talk about that proposed flat tax that you said if it ever became law, instead of putting you out of business you'd have more business than before because it was so complex. Anyways, I was just curious what you thought about the current suggestions (Cain's 9-9-9 and Perry recent proposal-20% or normal, etc.). Thanks for listening!~ Samuel

A. Sam, sure I remember you. I hope all is going well. Looks like a nice accounting firm that you are with.

Regarding the 9-9-9 and Perry’s 20% Alternative I don’t see any way that those plans are anything other than campaign rhetoric. To start with, tax laws must originate in the House Ways and Means Committee not with the President. And even with that, as people start studying the plans they realize that there is not enough money in the plan to make it work.

Oh yea… I forgot … “you can take away all the deductions but don’t take away my ________________ (fill in the blank -depreciation/charitable/tax exempt interest/child tax credit/medical expense etc.)

And don’t forget what I said in class, “people want fair and simple, but in reality that does not exist. Something can be simple but usually it is not fair so to make it fair we have to make it more complex.” Law of the universe.

Keep in touch.

APPEALS COURT OKAYS FARMER MEDICAL REIMBURSEMENT PLAN

One of our favorite tax strategies is to have a farmer employee his wife and then set up a medical reimbursement plan that covers the employee (e.g. wife) and her family (e.g. husband and kids).

Earlier this year, the IRS disallowed the deduction for a farm couple and when they went to court the tax court agreed with the IRS. Now we have some good news. The farmer appealed the decision and the appeals court said that the IRS was wrong.

The taxpayer won but I am sure that he paid a hefty price in legal and accounting fees to prove his point. The lesson to be learned is to make sure that you have your paperwork up to date. You never know when the IRS is going to come calling.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Joe Pesci plays accountant Leo Getz, who is protected by cops Danny Glover and Mel Gibson after he become a witness against his money-laundering clients in three of the four "Lethal Weapon" action-comedy movies. Leo continually gets his bodyguards in trouble, but he seems to be having a lot more fun than doing the books. By the final movie, he went through a career change and became a private detective.

NOTIFY THE IRS IF YOU MOVE

The IRS has explained how taxpayers must inform, the IRS of a change of address, effective immediately. The IRS uses a taxpayer's address of record for the various notices or documents that are required to be sent to a taxpayer's “last known address.”


The key point is that a notice or document sent to a taxpayer's “last known address” is legally effective even if the taxpayer never receives it.

U.S. SOCIAL SECURITY GOES "CASH NEGATIVE"

Social Security will add $46 billion to the U.S. budget problem this year, a figure that would increase to $267 billion if Congress adopts President Barack Obama's proposal to expand this year's tax break into 2012, according to the system's trustees. Congressional leaders of both parties are avoiding the issue, fearful of angering senior citizens and their advocates.

SOCIAL SECURITY BENEFIT INCREASE FOR 2012

Social Security benefits will go up 3.6% in 2012...the first hike in two years. The earnings limits will be heading up, too. Individuals who turn 66 in 2012 will not lose any benefits if they earn $38,880 or less before they reach that age. Individuals between ages 62 and 66 by the end of 2012 can make up to $14,640 before they lose any benefits. There is no earnings cap once a beneficiary turns 66.

More information on Social Security: Click Here

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

The opening sequence in the 1983 comedy, "Monty Python's The Meaning of Life," is a short movie called "The Crimson Permanent Assurance," in which a group of beleaguered British chartered accountants decides to fight their corporate overlords by turning into pirates and sailing off on the high seas of accountancy. "It's fun to charter an accountant and sail the wide accountant-sea," the pirates sing.

TRADE THE OLD TRACTOR IN FOR A NEW ONE

Q. I am dealing on a new tractor. The dealer wants $200,000. He said he would allow me $80,000 for my old tractor so my “boot” would be $120,000. I really think my old tractor is worth more than that. The old boy is completely depreciated out. Any thoughts?

A. Well you have a lot of issues here.

First, one of the things you have to be concerned about is whether the “old boy” will actually sell. You must decide if it is worth the risk.

Second you must consider the tax advantages that may be realized by the outright sale of your existing tractor. The tax advantage is that since you are a Schedule F farmer you do not have to pay Social Security and Medicare tax on the equipment sale but do get a Social Security and Medicare deduction on the new equipment depreciation. In your circumstances this saves you the 15.3% tax that after adjustment is a real rate of 13.3% rate for 2011 (up to a maximum of $106,000).

For example: A married taxpayer with 2 children, $30,000 of non-farm income, and $125,000 of farm income before the transaction. The new tractor is $90,000 with a $30,000 in trade with boot of $60,000. Assume instead of trading the old tractor for $30,000 he can sell it for $30,000. Here is the comparison that you must do.

Facts: Before the transaction the taxpayer is looking at a tax bill of $42,988.

Option One: With the trade in, there is a potential to show $60,000 (the cash boot trade-in) as a 179 expense election depreciation write-off on the schedule F reducing it to $65,000 farm income. Estimated taxes of $19,461

Option Two: With buying the tractor for $90,000 and selling outright for $30,000. Estimated taxes of $16,239

Every situation is different and this works very well in this example because the savings is in Social Security and Medicare tax. If this was a rental operation or a corporation the results would be different.

Lesson learned. It is good to check to see exactly how equipment purchases and trade in fits your particular situation.

Remember that the expense election limit for 2011 is $500,000 with maximum total purchases below $2 million. Next year this is scheduled to go to around $125,000 limit on max of $800,000.