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                                                            Review                               Winter 2010

Timely 401(k)
Deposit Rules                                 SEK&Co Announces Two
The US Department of Labor has issued         New Associate Members
a final regulation on when participant con-
tributions become “plan assets” for small
pension and welfare benefit plans with
fewer than 100 participants by provid-
ing a safe harbor period of seven business
days following receipt or withholding by
Currently, employers of all sizes must
transmit employee contributions to pen-
sion plans as soon as they can be reason-
ably segregated from the employer’s
general assets, but not later than the 15th
business day of the month following the
month in which the amount was received
by the employer or would otherwise have
been payable to the employee in cash. For
welfare plans, the maximum period is 90
days from the date of receipt or withhold-
The problem the DOL has encountered in
                                                      Kara M. Darlington, CPA                          Kristi M. Glass, CPA
reviewing compliance with this general
rule is that it is not always clear when is
the “earliest date” on which the segrega-
tion of contributions is possible.            The Members of Smith Elliott Kearns & Company, LLC are pleased to announce that
                                              Kara M. Darlington, CPA and Kristi M. Glass, CPA have been elected as Associate Mem-
 (continued "401(k) Rules" on Page 2)         bers of the Firm effective January 1, 2010.
                                              Kara M. Darlington, CPA joined the firm in 1997 after graduating magna cum laude from
                                              York College of Pennsylvania. Kara earned her CPA certificate in 1999 and was promoted
                                              to Manager in 2003. Kara manages the Hanover office audit practice as well as a significant
                                              number of the firm’s employee benefit plan audit engagements. She also specializes in pro-
                                              viding accounting and auditing services to local nonprofit and governmental organizations.
  We publish the Quarterly Review
  to keep our clients and friends             Kara’s continuing education has included tax and audit considerations of nonprofit orga-
  informed and up to date on                  nizations and audit and compliance considerations of employee benefit plans for the past
  accounting, tax, and business               13 years. She is a member is good standing with the American Institute of Certified Public
  developments.                               Accountants (AICPA) as well as the Pennsylvania Institute of Certified Public Accountants
                                              (PICPA). She is also a member of the PKF North America’s Employee Benefit Plans Com-
  If you would prefer not to receive          mittee.
  our newsletter, please call Ginger          An active member of the local community, Kara is a board member of Sweet Charities of
  Lewis at 800-841-9463 or e-mail             Hanover and Hanover Symphony Orchestra. She also remains active in various volunteer
  glewis@sek.com and we will
                                              capacities with the Hanover Chamber of Commerce, Soroptimist International of Hanover
  remove you from our mailing list.
                                              and Junior Achievement.                            (continued "Members" on Page 2)
                                                        Insight. Integrity. Results.™

Smith Elliott Kearns & Company, LLC                                                                                                        Page 2

                                                                              SEK&Co Announces Management
                                                                              Change in the Hanover Office
                                                                             Christopher J. Distefano, CPA was appointed as the Member-In-
                                                                             Charge of the firm’s Hanover, Pennsylvania office effective January
                                                                             1, 2010. Chris succeeds John Schnitzer, who has held the leadership
                                                                             position since 1991 and was elected to serve as the Firm’s Manag-
                                                                             ing Member effective January 1, 2010.
                                                                             Chris has been with SEK&Co since 1989 and became a Member of
                                                                             the Firm in January 2002. He specializes in providing tax, consult-
                                                                             ing, and auditing services to individuals, for-profit and nonprofit
                                                                                    Additionally, he oversees the Firm’s Pennsylvania region's em-
                                                                                    ployee benefit plan audit practice and participates in the Firm’s peer
                                                                                    review practice. He is a member of the Audit & Accounting Com-
                                                                                    mittee, Accounting and Tax Services Committee, GPS Committee,
                                                                                    and is Chair of the Human Resource Committee. He is a member of
                                                                                    the AICPA as well as the PICPA. He previously was recognized as
                  John Schnitzer and Chris Distefano                                one of central Pennsylvania’s “Top Forty under 40” by the Central
                                                                                    Penn Business Journal.
                                                                                                              An active participant in the local com-
                                                                                                              munity, Distefano has served in various
                                                                                                              leadership positions with the Hanover Area
                                                             "401(k) Rules" ...                               Chamber of Commerce, Hanover Ki-
                                                             (Continued from Page 1)                          wanis Club, Hanover Community Progress
                                                             The final rule amends the participant            Council, and the Bulgarian Orphanage
                                                             contribution rules to create a safe harbor       Medical Relief Fund.
  This informal newsletter of accounting, tax and investment
  developments is published quarterly for use by clients and
                                                             period under which participant contribu-
  friends of Smith Elliott Kearns & Company, LLC.            tions to a small plan (under 100 partici-
                                                             pants) will be deemed to comply with the         "Members" ...
                Service Specializations:                                                                      (Continued from Page 1)
              Employee Benefit Plan Audits                   law if those amounts are deposited with the
           Accounting, Auditing & Assurance                  plan within seven business days of receipt       Kristi M. Glass, CPA joined the firm in
              Tax Planning & Compliance                      or withholding. This ruling is effective
                   Business Valuations                                                                        1996 after earning a bachelor’s degree in
           Estate Planning & Administration                  January 14, 2010 and applies for both pen-       accounting from Frostburg State Universi-
   Employee Benefit Plan Design & Administration             sion and welfare benefit plans. The final        ty. Kristi earned her CPA certificate in 1998
           Business Accounting & Consulting                  regulation also applies to participant loan
                  Payroll/Bookkeeping                                                                         and was promoted to Manager in 2006.
              Human Resources Consulting                     repayments.
                                                                                                              Kristi provides tax and consulting services
                                                             The DOL has determined not to change             to local businesses and individuals, special-
               Industry Specializations:
                         Healthcare                          the safe harbor provision to cover partici-      izing in accounting and tax reporting for
                         Nonprofit                           pant contributions to a pension or welfare       medical practices. She is also a Certified
                   Local Government                          benefit plan with 100 or more participants.
                  Financial Institutions                                                                      QuickBooks® ProAdvisor ™ offering
                       Construction                          Therefore, large plans are still held to the     training and support to local businesses.
                      Manufacturing                          “as soon as administratively feasible”
                                                             guidelines as mentioned above.                   Kristi is a member in good standing of the
                            Offices                                                                           AICPA and the Maryland Association of
    480 N. Potomac Street, Hagerstown, MD 21740              For a SIMPLE plan that involves SIMPLE
                        301-733-5020                                                                          Certified Public Accountants (MACPA).
                                                             IRA’s the maximum period for depositing          She is a Leadership Washington County
       19 Brookwood Avenue, Carlisle, PA 17015               contributions remains 30 calendar days
                        717-243-9104                                                                          Graduate, Class XX (2007) and serves on
                                                             after the end of the month in which the          the Academy of Finance Advisory Board.
           55 Wetzel Drive, Hanover, PA 17331
                                                             employees would otherwise have received          Kristi teaches students about rewarding
                                                             the amounts in cash.                             careers in public accounting, delivering
     804 Wayne Avenue, Chambersburg, PA 17201
                        717-263-3910                         If you have questions about these require-       presentations and leading discussions
                        www.sek.com                          ments, please call our Retirement Plan           in several local high school business
                                                             Services Group at 717-263-3910.                 classes.
Rates & Dates                                                                                                                                                                                        2010 REFERENCE SHEET

      2009 INDIVIDUAL TAX RATE SCHEDULES                                                                                  INDIVIDUALS                                                                                            BUSINESSES
      MARRIED TAXPAYERS - JOINT OR SURVIVING SPOUSE                                 STANDARD DEDUCTION* - 2009                                                                                                 PAYROLL TAX DEPOSIT DUE DATES
                                                                                    Joint Return .......................$11,400         Blind or Elderly (per condition)
 TAXABLE          BUT NOT                                         OF AMOUNT                                                                                                                                       EFFECTIVE JANUARY 1, 2010
                                                                                    Single.................................. $5,700     Single/Head of House ........... $1,400
 INCOME            OVER                  YOUR TAX IS                OVER            Head of Household ............. $8,350              Married .................................. $1,100   Employer	Classification																		Day	Incurred																										Due	Date
 $      0        $ 16,700           $       0       +10%          $      0          * You may deduct the greater of your standard deduction or your itemized deductions.                    Monthly Depositors ($50,000                All during month                    15th of following month*
   16,700          67,900            1,670.00       +15%            16,700                                                                                                                  or less reported over 12
   67,900         137,050            9,350.00       +25%            67,900          REDUCTION OF ITEMIZED DEDUCTIONS*
                                                                                                                                                                                            months ending 6/30/09)**
 137,050          208,850           26,637.50       +28%           137,050          Itemized deductions are reduced by 1% if 2009 AGI is more than:
 208,850          372,950           46,741.50       +33%           208,850          	 	 166,800	-	For	all	returns	other	than	married	filing	separately
                                                                                       $                                                                                                    Semi-Weekly Depositors                     Wed, Thurs or Fri               Following Wed*
 372,950               —           100,894.50       +35%           372,950             $ 83,400	-	Married	filing	separately                                                                 (over $50,000 but less than                Sat, Sun, Mon or Tues           Following Fri*
                                                                                    * Reduction limited to standard deduction or 26 2/3% of deductions                                      $100,000 over 12 months
                             SINGLE TAXPAYERS                                       PERSONAL EXEMPTIONS                                                                                     ending 6/30/09)
 TAXABLE          BUT NOT                                         OF AMOUNT         Deduction for each taxpayer, spouse and dependent for 2009 is $3,650.                                   One Day Depositors                   Any day of month          Next banking day
 INCOME            OVER                  YOUR TAX IS                OVER                                                                                                                    * $100,000 cumulative
 $      0        $ 8,350           $        0        +10%         $      0          REDUCTION OF PERSONAL EXEMPTIONS*
                                                                                    Personal exemptions are reduced if 2009 AGI is more than:                                               during monthly or
    8,350          33,950              835.00        +15%            8,350
                                                                                         $166,800 - Single                  $250,200 - Married - Joint                                      semi-weekly period
   33,950          82,250            4,675.00        +25%           33,950
   82,250         171,550           16,750.00        +28%           82,250            $208,500 - Head of Household          $125,100 - Married - Separate                                   * Extended for Banking Holidays
 171,550          372,950           41,754.00        +33%          171,550          *Reduction continues through an additional $122,500.                                                    ** Automatic move to semi-monthly if $100,000+ cumulative rule applies
 372,950               —           108,216.00        +35%          372,950          *Reduction limited to 1/3 of the total exemption amount
                                                                                                                                                                                                                        CORPORATE INCOME TAX RATES
                                                                                    INDIVIDUAL RETIREMENT ACCOUNTS - Not in another plan & with earn-                                                         TAXABLE INCOME                         YOUR TAX IS              OF AMT OVER
                                                                                    ings - $5,000 for 2009 and 2010 - $1,000 more if at least 50 years old (same
      2010 INDIVIDUAL TAX RATE SCHEDULES                                                                                                                                                         $        0-              50,000                       0 + 15%                  $          0
                                                                                    limits for a non-working spouse). AGI limits are gradually being increased. To                                   50,001 -             75,000                  7,500 + 25%                        50,000
                                                                                    help with tax planning, these limits are for active participants in another plan
       MARRIED TAXPAYERS - JOINT OR SURVIVING SPOUSE                                                                                                                                                 75,001 -            100,000                 13,750 + 34%                        75,000
                                                                                    during 2010.
 TAXABLE          BUT NOT                                         OF AMOUNT                                                                                                                         100,001 -            335,000                 22,250 + 39%                       100,000
                                                                                               Married AGI                           Deduction                         Single AGI                   335,001 -         10,000,000                113,900 + 34%                       335,000
 INCOME            OVER                  YOUR TAX IS                OVER
                                                                                              $ 0 – $ 89,000                  $5,000/$6,000 max.                      $ 0 – $56,000              10,000,001 -         15,000,000              3,400,000 + 35%                    10,000,000
 $      0        $ 16,750          $        0        +10%         $      0
   16,750          68,000            1,675.00        +15%           16,750                $89,001 – $109,000                              Partial                 $56,001 – $66,000              15,000,001 -         18,333,333              5,150,000 + 38%                    15,000,000
   68,000         137,300            9,362.50        +25%           68,000                        > $109,000                               None                           > $66,000         	    18,333,334	 	                ----	                  a	flat	35%	                        ----
 137,300          209,250           26,687.50        +28%          137,300          ROTH RETIREMENT ACCOUNTS - Contributions are not deductible and                                                                 PERSONAL SERVICE CORPORATIONS
 209,250          373,650           46,833.50        +33%          209,250          are reduced by the amount of contributions made to all other IRAs. Allowable                                                            35%	flat	tax	rate
 373,650               —           101,085.50        +35%          373,650          contribution phases out ratably as follows:
                                                                                                                                      2009                                 2010
                             SINGLE TAXPAYERS                                        Married - Joint - AGI                   $166,000 - $176,000                $167,000 - $177,000                                            DEPRECIATION
 TAXABLE           BUT NOT                                       OF AMOUNT           Married - Separate - AGI                     $0 - $ 10,000                      $0 - $ 10,000
                                                                                     All others - AGI                        $105,000 - $120,000                $105,000 - $120,000                                                                    2009            2010
 INCOME             OVER                 YOUR TAX IS                OVER
 $      0         $ 8,375           $       0        +10%        $       0                                                                                                                  Expensing	election	on	qualified	assets	subject	to								$250,000								$134,000
    8,375           34,000             837.50        +15%            8,375                                     SOCIAL SECURITY TAXES                                                        limitations based on income and assets purchased
   34,000           82,400           4,681.25        +25%          34,000                                                                FICA Tax                 Self-Employment           SUVs limitation                                                        $ 25,000           $ 25,000
   82,400          171,850          16,781.25        +28%          82,400
 171,850           373,650          41,827.25        +33%         171,850                                    Wage Base                     Rate                       Tax Rate
                                                                                                                                                                                                                      LUXURY VEHICLES ACQUIRED 2009
 373,650                —          108,421.25        +35%         373,650           2009                     $106,800                      6.20%                        12.40%                                             (Maximum Depreciation Deduction)
                                                                                                             Unlimited                     1.45%                         2.90%                                                          Autos        Truck & Vans                        Bonus
                                                                                    2010              $106,800               6.20%                  12.40%                                           1st year                               $2,960                 $3,060               $8,000
ESTIMATED TAX PAYMENTS - 2010                                                                         Unlimited              1.45%                    2.90%                                          2nd year                               $4,800                 $4,900
                                                                                    Self-employed can deduct 1/2 of their Social Security taxes as an adjustment                                     3rd year                               $2,850                 $2,950
To avoid possible underpayment penalties, you are required to pay through with-     on their 1040.                                                                                                   Each succeeding year                   $1,775                 $1,775
holding or estimated tax payments, the lesser of:
                                                                                                         SOCIAL SECURITY ALLOWABLE EARNINGS
1. 90% of the tax shown on your 2010 tax return.                                                           Definition	of	Full	Retirement	Age	(FRA)                                              (The information above is highly condensed as a reference source and should not be
                                                                                                                                                                                                          considered as a complete presentation of the topics addressed.)
                                                                                                   Year of Birth                                Full Retirement Age
2. 100% of prior year tax liability. If your adjusted gross income for 2009 was                     1943-1954                                             66
   more than $150,000, estimated tax payment is 110% of prior year tax liability.
                                                                                                Below FRA                 Year of FRA                After FRA
                                                                                      2009        $14,160                   $37,680                   Unlimited
   Estimated tax payments for individuals are due by:                                 2010        $14,160                   $37,680                   Unlimited

        April 15, 2010       September 15, 2010                                     Social Security is reduced based on earnings in excess of limitation above.
                                                                                     Earnings         $2                $3                 n/a
        June 15, 2010        January 17, 2011                                        Reduction        $1                $1                 n/a
                                                                                                                      PRSRT STD
                                                                                                                 U.S. POSTAGE PAID
                                                                                                                     Permit No. 39
                                                                                                                 Hagerstown, MD 21741

            P.O. Box 947
 Hagerstown, Maryland 21741
  Return Service Requested

 Timely 401(k) Deposit
   Rules ................................1
 New Associate Members ....1
 Management Change ..........2
 Rates and Dates ..................3
 The Better Way ...................4
 2010 Mileage Rates ............4

         Printed on Recycled Paper

The Better Way
Hi Bracket is a creature                     to deduct sales tax paid on an
of habit so right after cel-                 automobile even though you                   2010 Standard
ebrating Groundhog Day, he                   don’t deduct other sales tax in
would start organizing his tax               lieu of state income tax. Also,             Mileage Rates Set
information to send to his tax               after being absent for 2008, the
return preparer. He knows it is
best to get the information in
                                             credit for energy efficient items
                                             and insulation is back for 2009.
                                                                                 The standard mileage rate
                                                                                 for business use of autos
early and he had done it for so              The Better Way might be to                                           Standard Mileage Rates
                                                                                 during 2010 has decreased
many years that he knew ex-                  talk with your tax preparer and     from 55 cents to 50 cents       Type of                2010 rate
actly what was needed. In fact,              cover what you did in 2009. You                                     Expense                (per mile)
                                                                                 per mile. Taxpayers may
he didn’t even feel he needed                may think you know what an          base their deduction on
to talk with his preparer since              asset cost you but we have seen                                    Business ................ 50 cents
                                                                                 either the standard mileage
they had worked together so                  a great saving on capital gains     rate (plus business-asso-
long and the less time spent,                when it is learned that the asset                                  Charitable .............. 14 cents
                                                                                 ciated parking fees, tolls,
the less the cost – well maybe.              was inherited or was at one         and, to the extent allow-
He dropped it off as usual.                  time owned jointly when one                                        Medical/Moving ..... 16.5 cents
                                                                                 able, interest and taxes) or
Guess what? Things are not                   party is now deceased. Many         deduct their actual expens-
the way they used to be and                  changes and most certainly tax      es incurred for business
the future will probably hold                increases are on the way so a       use of an auto.
                                             little planning rather than busi-                                   reimbursement or expense
many additional changes.
                                             ness as usual may save money        Employers may use the           allowance arrangement and
For 2009, there are sev-
                                             in the long run. Heck, in these     standard mileage rate           thereby substantiate the
eral changes that could affect
                                             times, it might even make sense     when computing pay-             amount of such expenses,
many people such as the abil-
                                             to pay taxes sooner rather than     ments for employees' auto       if the accountable plan re-
ity to deduct partial real estate
                                             later.                              expenses incurred under a       quirements are satisfied.
tax even if you don’t itemize
deductions and the possibility               Stay in touch! 

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