It's crucial to know whether your workers are employees or independent contractors. Big dollars may be at stake in the form of federal and state assessed penalties resulting from misclassification. The validity of your company's pension plan may also be at stake.

A periodic review of the status of your workers to see if they are properly classified is critical, but the process isn't easy due to the complexity of the issue. To determine whether there is an employer – employee relationship or a business relationship, there are some factors to consider: the behavioral and financial control over the worker, ownership of the tools, the permanency of the relationship (is there a contract?), work location and work hours. There is no litmus test for exactly how many factors must be satisfied, nor are the factors uniformly applied.

If you'd like to discuss these complex rules with us and see how they apply to your business in order to make sure that none of your workers are misclassified, please call our office to arrange for an appointment.

• Employees vs. Independent Contractors
• Taxable or Non-Taxable Income?
• Name Change as a Result of Marriage or Divorce
• Title Matters: Who Owns the Car?
• Write-off for Heavy SUVs Used Entirely for Business

There are situations when certain types of income are only partially taxed or not taxed at all. Some examples of non-taxable Income are:

• Adoption expense reimbursements for qualifying expenses
  
• Child support payments
• Gifts, bequests and inheritances
• Non cash employer gifts (holiday turkey)
• Non cash employer gifts (holiday turkey)
• Meals and lodging for the convenience of your employer
• Compensatory damages awarded for physical injury or physical sickness
• Welfare benefits
• Economic recovery payments
• Cash rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

• 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.

Due to Congressional action at year-end, taxpayers will need to wait to file until middle to late February if any of the following three categories apply:

• Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses, as well as, state and local taxes and the state and local general sales tax deduction. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file.
• Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction is for parents and students — covering up to $4,000 of tuition and fees paid to a post-secondary institution — is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
• Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16

What's your plan for living a long life?

Most people believe they are likely to live a long life past their 80s.

When you live a long life, you are more likely to need long-term care. Maybe you've seen this with an aging parent, a friend or a neighbor.

The real question then is "how will it impact your finances?".

Special tax incentives for people who plan.

Tax incentives are ow available to those who plan ahead.

Business Owners

Business Owners who plan now can take advantage of special tax incentives for tax-qualified long-term care insurance protection. Living a long life is likely. Planning for it is a real necessity and a smart financial move. Long-term care insurnce protection can be 100% tax deductible as a business expense. Plus, owners can choose who is covered, even spouses. Realize that it costs no more to work with an experienced professional. Your long-term care insurance agent can help you get the coverage that's best suited for you and your business.

In a nutshell, business owners can deduct the cost of long-term care insurance protection for themselves, for their spouses and sonetimes even teir parents on a favorable basis. You may use pre-tax corporate dollars to pay for your post-retirement asset protection.

A word of caution. Waiting can be a big mistake because you must "health qualify" for long-term care insurance coverage.

As the end of the year approaches, now is a good time for you to start planning for taxes by taking various actions that may save taxes for this year, next year, or both years. Act quickly to reap the most benefits—these strategies will be of no use after December 31.

Year-end planning always involves some educated guesswork, but this year poses a bigger challenge than most. With Republicans winning control of the U.S. House of Represen-tatives and picking up seats in the Senate, it is difficult to know exactly how tax changes will affect you.

Congress must decide whether to retroac-tively extend a number of tax provisions that expired at the end of 2009. In addition, without approval to extend the Bush tax cuts, individuals will face higher tax rates on their income, including capital gains. Unless Congress changes the rules, the estate tax, which isn't in effect this year, will return next year with a 55% top rate.

We have compiled a checklist of actions that can help you save tax dollars if you act before year end. These moves may benefit you regardless of what the lame duck Congress does on the major tax questions of the day. Not all actions will apply in your particular situation, so please review the following list and contact us so that we can advise you on which tax saving moves to make.

Year-End Moves for Individuals

• Postpone income until 2011 and accelerate deductions into 2010 to lower your 2010 taxes. Doing so may allow for larger deductions and credits that normally are subject to income phase outs, especially if you expect to be in a lower tax bracket next year. (Then again, doing the opposite may be more beneficial, depending on the circumstances)
• It may be advantageous to defer your year-end bonus until next year.
• Bunching your itemized deduction, such as real estate taxes and medical expenses, may save you taxes this year.
• Bunching your itemized deduction, such as real estate taxes and medical expenses, may save you taxes this year.
• Increase the amount you set aside for next year in your employer's health flexible spending account. Don't forget over-the-counter drugs, such as aspirin and antacids, do not qualify.
• Realize losses on stock while substantially maintaining your investment position. For example, you can sell the original holding, then buy back the same securities at least 31 days later. We advise meeting with us to discuss year-end trades.
• Increase your withholdings if you are facing a penalty for underpayment of federal estimated tax. Doing so may reduce or eliminate the penalty.
• Consider taking an eligible rollover distribution from a qualified retirement plan before year-end if you are facing a penalty for underpayment of estimated tax. Income tax will be withheld and applied pro rata over 2010. You can then timely roll over the gross amount of the distribution to a traditional IRA. No part of the distribu-tion will be includible in income for 2010.
• Make energy saving home improvements to your home, such as insulation and energy efficient windows, and qualify for a 30% tax credit, up to an aggregate of $1,500 for 2009 and 2010. If Congress does not act, this tax break will not be around after this year. Additionally, you can earn substantial tax credits for installing energy generating equipment (such as solar electric panels or solar hot water heaters) to your home.
• Convert your traditional IRA into a Roth IRA if doing so is expected to produce better long-term tax results. Distributions from a Roth IRA can be tax free but the conversion will be taxable. You can choose to pay the tax on the conversion with the 2010 return, or half with the 2011 return and half on the 2012 return.
• Take required minimum distributions (RMD) from your employer sponsored retirement plan if you have reached age 70 ½. Failure to do so can result in a penalty. A temporary tax law change waived the RMD requirement for 2009 only, but the usual withdrawal rules apply full force for 2010.
• Make annual exclusion gifts before yearend to save gift tax (and estate tax if it is reinstated). You can give $13,000, tax free, in 2010 to an unlimited number of people.

Year-End Moves for Business Owners

• If you hire a worker who has been unemployed for at least 60 days, your business will be exempt from their 6.2%
  share of the Social Security payroll tax on the new-hire for the remainder of 2010. Plus, if you keep that new-hire on the payroll for a continuous 52 weeks, your business could be eligible for a nonrefundable tax credit of up-to $1,000 for 2011.
• To qualify for the 50% bonus first-year depreciation allowance, put new business equipment and machinery in service before year-end. If Congress does not take action, this bonus won't be available for property placed in service after 2010.
• The maximum amount you can expense for a tax year beginning in 2010 is $500,000 of the cost of qualifying property placed in service for that tax year. Also, within the overall $500,000 expensing limit, you can expense up to $250,000 of qualified real property. Note that at tax return time, you can choose not to use expensing (or bonus depreciation) for 2010 assets.
• Set up a self-employed retirement plan if you are self employed and haven't done so yet.
• Consider establishing a retirement plan for your business. Employer contributions to qualified plans are deductible.
• Increase your basis in a partnership or S corporation if doing so will enable you to deduct a loss from it for this year.
• Consider whether to defer cancellation of debt income from the reacquisition of an applicable debt instrument in 2010. The business can elect to recognize the income ratably over five tax years beginning with the fourth tax year following the tax year in which the repurchase occurs (i.e., beginning with 2014).
• Consider using a credit card to prepay expenses that can generate deductions for this year.
• Accrual method businesses should consider accruing year-end bonuses to employees who are not controlling shareholders. They are deductible in the current year even though paid in the following year, and the bonus won’t be taxable to the employee until next year.