Can I self-direct investments in my IRA or other retirement or health plan into non-traditional investments like real estate or other businesses of my choosing?

In short, it is possible.  But you do have to choose a non-traditional custodian of those funds that will invest in other allowed investments beyond the normal universe.  You can't invest retirement plan assets in prohibited items in the tax law, but that list is quite specific and short.  So you need to choose a custodian that has a good legal team that designed its program well and check it out with other legal and tax advisors.  There are now several such custodians of IRA funds available to choose from.  This makes many things thought impossible to do with IRA funds now possible.

So if you really want to get a part of your IRA funds out of the traditional financial assets like bonds and equities, then I suggest that you start talking with your circle of advisors or forming a circle of advisors that will advise you wisely and support you in your decision.

In general, you can't invest in items that would benefit you or your family in some way like a personal residence, your own business, collectibles.  But there are some creative possibilities, so seek good advice if there is any question and find out the facts.

Link to www.TheResponsiveCPA.com  

It continues to be a good place to send your referrals if you do not have my current business card to give them.

Will you be a referral source for me?  My clients get $50 discounts off of their next invoice when their referral has become a client and paid me over $200.  Others that are referral sources may also get a gift.  Please call me about the details as it may change over time.

A good referral is a warm referral that would recognize and expect me to call them.

I can help forming and growing businesses as well as individual that need some help with planning for future income tax due or needs to catch-up on tax filings.  New tax provisions may allow businesses that had a poor year in 2008 to get some previous years taxes paid in back as a refund.  It takes some careful planning as they have an option to choose which of the last 5 years to carry back a loss to.  New homeowners can claim a large credit ($8000) this year and they can get it right now on their 2008 income taxes if purchased in 2009. It is a great time to plan and take advantage of new tax law provisions.

Benefit plans chosen wisely for the business owner and employees can save substantial taxes.  You just need to choose the right plan document that will save you the most in taxes with the least change in current cash flow.  This helps the self-employed person that works with their spouse in a big way, but can also help those who hire unrelated employees.  It helps legitimize your deductions and gives you good documentation if any government authority checks on your employee benefit plans or other tax deductions.

Below is a link offering you a way to get information on these benefit plans and how to implement them.  It is critical that you put the plans in place to offer these tax savings benefits to those who work for you.  Section 105 Health Reimbursement Accounts are a good place to start for the self-employed who do have their spouse help them on a regular basis.  It can easily save you a lot in taxes (many regularly save thousands per year) by putting amounts you will spend anyway under one of these plans.  Taxpayers often get little or no tax savings on medical expenses without the plan documents, but do get full business deductions with all of the resulting tax savings once the plan is in place and expenses documented. 

The following website will help you find the right kind of plan so you can design it the way that you need for your family and employees who work in your business.  It is automated and helps you design a plan the way you want that complies with the laws and IRS regulations.  You can also outsource administering these plans right on the website or use the software to keep track of your employees useage of the plans.  It is a way to help my business clients continue to move their numbers onward and upward!  Try this link today ...

http://www.flexaffiliates.com/plan/Sheldon/index.php 

This is a link that does attempt to keep up with tax changes and headlines as it is not possible for me to list all of these:  http://www.taxalmanac.com/index.php/Current_events 
It often includes articles on upcoming tax changes expected as well as legislation as it becames law.  Since we have a new administration and congress this year, it might be important for your tax planning to know about potential law changes.

These are some of the more helpful and surprising tax changes that could help many clients and prospects. 

1.  Those who have not owned a principal residence in the US for at least 3 years that purchase a home between April 9, 2008 and December 31, 2008 qualified for a $7,500 interest free loan (reduced if home price is under $75,000) just by filling out the form on their income tax return.  This amount will then be paid back by adding back $500 per year for 15 years to their income tax forms.  For home purchases in 2009 by November 30,2009 it is now $8,000 and there is no payback provision once you have stayed in your home for 36 months.  This has potential to generate some new interest in the real estate markets this year as new owners scramble to close on a home and get this big break.  This can be claimed right now on 2008 tax returns, even though the home was purchased in 2009.  New homeowners can also amend their already filed 2008 tax returns to claim this.  It does phase out for taxable income over $75,000 (or $150,000 on joint returns), so it may take some tax planning if you are close to these limits.

2.  All taxpayers that buy a car in 2009 will have another deduction to take on their tax return and you don't have to itemize other deductions to claim the sales and excise taxes paid.  This is all new and one you need to be sure it gets to your tax preparer as it can easily be mixed and will include many people that usually don't have any kind of extra deductions.  The gross weight has to be under 8,500 pounds, but motor homes also get this sales tax deduction.

3.  The Mortgage Forgiveness and Debt Relief Act does not tax cancellation of debt income on mortgage debt used to acquire a principal residence.  So if your lender makes a deal with you to keep you in your home, this may help you.  If you get such a deal accomplished, you will only have to reduce the cost basis of your home by the amount of debt discharged.  Since gains from the sale of principal residences are often tax free if  $250,000 ($500,000 joint) or less, reduction of cost basis is a consequense that may not cost you any tax.  So the exclusion of income is a very good benefit for those in the situation of being unable to make their full mortgage payments.   

Many home owners that have suffered a hardship but still have the means to make a lower house payment may be able to write a hardship letter and get the process or requesting loan modification started with their lender.  This does not have to be an expensive exercise nor does it require foreclosure to work.  It might help a home owner avoid foreclosure on their home.  It is best to start with a lender who has a mortgage on the property.  Ask them for "loan modification qualifications" and speak with the loss mitigation department.  You should be frank, but there is no need to threaten foreclosure.  The lender may send you a packet of information and forms if they think it will work for you.  For assistance with a hardship letter, you could start some research on the subject with:  http://loanworkout.org/2007/10/example-harship-letter/ but you could search to find others that may be closer to your exact situation.

4.  Energy efficiency improvement credit for taxpayer homes for insulation, windows, doors, roofs, air conditioners, water heaters or boilers, furnaces, electric heat-pump water heaters or advanced main air-circulating fans are now back for 2009.  They were not avaiable in 2008 as this credit was suspended for that one year.  The amounts are still limited, but now increased to 30% and up to $5,000 of what you spend in 2009 and 2010 for a maximum credit of $1500.  The $500 lifetime cap is now gone.  Energy credits still exist for solar, geothermal and wind.  It also exists for fuel cell property expenses with a $500 credit maximum.  Some of the other earlier limits in total spent are gone.  Plug-in electric car $2,500 credits are also here awaiting guidance and implementation for the credits that are now law.

5.  Another law change can save taxes for those that must take a "Required Minimum Distribution" known as a RMD.  You may have this if you are a retiree or a beneficiary of an IRA or other retirement account.  There usually is a very expensive penalty for not complying with these mandatory distributions.  But now there is no tax requirement to distribute from these accounts for 2009 only.  This will generate some very interesting tax planning possibilities for those that rely on these distributions for a large portion of their income.  Even if it is a smaller amount, you will have some other options and may qualify for additional tax benefits if you elect to not receive it in 2009.  This rule applies to many over age 70.  It also applies to employees taking distributions over their lifetime and to heirs to accounts of deceased taxpayers. This one was signed on December 23, 2008 Worker, Retiree, and Employer Recovery Act of 2008 so the news might have been missed during the holidays.  Financial institutions may not inform taxpayers of this possible tax benefit.  So we need to help find those who may benefit so that they can take appropriate action.

6.  Standard mileage rates for business use were raised to 58.5 cents per mile on July 1, 2008 from 50.5 cents per mile for the first part of 2008.  For 2009 they go back down to 55 cents per mile.  It is important to do some good record keeping of mileage when you have a vehicle used for both business and personal use.  These records can be used to claim and support a substantial deduction when your vehicle is used significantly for your business or on your job and your employer does not pay the full allowance.  Actual expenses can also be utilized when higher than the standard mileage deduction.  Other mileage rates apply for medical, charitable use, or for moving expenses.

7.  Businesses that buy vehicles in 2009 will qualify for larger depreciation limits if they deduct actual costs for the life of the vehicle.  This may generate some interest in buying needed business vehicles especially at the end of the year for current year tax savings.  Vehicles need to be actually placed in service and used for your business to utilize this.

8.  Taxpayers with 529 tuition education plans can now distribute money tax-free to pay for computers and internet technology.

9.  Many fixed income or retired individuals should now have received a $250 check if they qualified for it.  Workers qualify for a $400 "making work pay" 2009 credit that employers are reducing the tax withholding for.  $2400 of unemployment benefits will be tax-free in 2009.  There are many changes that will cause a lot of questions and confusion this year.  Do your taxes right with a tax professional and extend the filing of the paperwork whenever it cannot be completed properly by April 15.  Please check the link at the top of this section for many more changes.

The IRS has been doing some checking on S corporations and their owner compensation.  At a minimum, you should start some small salary for any owner that does any work for the corporation as soon as practical even if there is very little net income or even a loss.  Having no compensation on the officer salary line on the 1120-S is not likely to be a good strategy.  Every owner that is doing some work for the business is to be paid some wages at a fair market rate.  You can start with a small number before you have $20,000 in profits, but it is usually best to make the salary at least $7,000 and file the forms to avoid some of the potential risk of penalties.  A good rule of thumb is to have the officer/owner salaries exceed the other profit distributions to themselves.  It is usually best to go ahead and increase those salaries at least a little each year.  But it really comes down to facts of the skill and critical role of the owners, as well as how much time and effort is put into the corporate business.  This link is about this topic and good reading if you are in this situation.  http://www.nysscpa.org/cpajournal/2006/506/essentials/p46.htm.  

It is a good time to decide on the final owner wages for the year by December, so that all of the payroll reports can be completed right away in December or early in January.  This avoids delays to getting tax forms timely filed, taxes paid and minimizes penalties.  The fourth quarter of the year is the best time to follow through completely, consider paying in additional income tax withholding so that income tax penalties can be minimized if more income taxes are owed.  Please give our office a call if you need additional assistance or to discuss the facts in your particular situation.

My office does help with minor payroll questions and will prepare some amended or late filed forms when needed, but my general recommendation is for businesses to find a good payroll service that concentrates on this line of work.  This helps the business get the best possible service on this critical component.  Payroll needs to be done right and timely in order to minimize penalties for late filing or late payment, which are all too common.   Avoiding these employer penalties can make the payroll service fees a worthwhile expenditure for your business.

It has a long link and is sometimes difficult to search and find, but those who want to do more business in Colorado should start here as it will help you get started, answer many questions for you and help you frame your questions to other advisors.

http://www.colorado.gov/cs/Satellite?c=Page&childpagename=OEDIT%2FOEDITLayout&cid=1154721645662&p=1154721645662&pagename=OEDITWrapper 

The next link will also get you right into the IRS business section so that you may be able to find an answer to your question on taxes.

http://www.irs.gov/businesses/small/index.html 

I am also going to try to get better at blogging this year with more frequent updates with useful information.  I'm going to put it on my schedule and make it a priority.

For those that are trying to build their business with some online marketing, I would suggest LinkedIn for a way that may help you make some very important contacts.  Go to http://www.linkedin.com/ to get started.  Start making connections there and search for people you know that could help you make the connections that you need to make.  Join Groups, start discussions on your particular business topics, get noticed and draw others to your business.  Let's help each other succeed!

How long must these records clog up my house and my storage?  It is an important question as many are  concerned about identity theft and security of their records as well as potential lawsuit and legal issues.  It is more than a good idea to put your records on a written schedule of when to shred or destroy them, if ever.   Written retention policies are now often mandatory and used in legal cases.  Some items do need to  be kept permanently and I will attempt to answer this question below.   For more thorough answers, legal advise is recommended.  You can search the internet under "record retention guidelines" or other search terms to find some additional guidance or samples that might be more specific or a better guide than my general description below. 

A good link that I found is:  http://www.cpadirect.net/cpadirectmarketing/When_Can_I_Throw_Documents_Out.pdf 

I'll describe the items that I would expect many of my clients to encounter and need some guidance on.

What should you keep permanently?  Tax return copies and worksheets (electronic or paper versions) and correspondence that proves the government entity received the return.  This helps to prove that you filed returns if the government loses their records or a mistake was made by the government employee that put the information in their system.  Deeds, mortgages, bills of sale and records on anything you currently own will document the tax basis and keep you from paying additional tax if you did not have them.  This can include construction records, home improvements, and leasehold improvements.  Retain cancelled checks on important payments for taxes, assets and important contractual payments, even leases.  Keep correspondence on legal and important matters as well as retirement, pension and union agreements for a business.  Business financial statements, year-end trial balance records or general ledger ending balances (an annual electronic backup of these records, especialy if not printed) should be kept. 

Keep permanently any audit reports from government authorities as well as tax related correspondence.  Insurance policies, employee benefit plans and business training manuals when you have hired others are important to keep.  Property appraisals should be retained.  Corporate minute books, business licenses, contracts, insurance records, accident reports, claims and policies are another set of records to keep.  Corporations also need to retain their shareholder records and transactions.  If you make special tax elections like LIFO inventory, you may need to keep some details permanently.  Patents and trademarks are items that you may also need later.

Many other records should be kept 7 years including general cancelled checks (remember to keep important ones like real estate transactions or other assets you still own); bank statements; statements indicating tax withheld (like W-2); sales, invoicing and purchasing records for business (including rental property) transactions; business payroll records and taxes; notes receivable ledgers and schedules after payoff; general ledger transaction detail, accounts receivable, payable, inventory schedules and reports; as well as settled cases for accident reports and claims.  These are items that you really may need if someone or the government attempts to prove fraud against you.  Some records are needed for this long after you file your tax return.  So if you did not file a particular tax year timely, you should extend the time for keeping those records for 7 years after you file.

There are other records that you need for 4 years or less that are really just generally needed, if at all, for your burden of proof against another party.  These include bank reconciliations, general or routine correspondence, deposit slips, employment applications, expired insurance policies.

Some items can be kept for shorter periods of time.  For important legal items it can be beneficial to have legal quidance as sometimes there are legal advantages to following your written guidelines.  Some immaterial items that do not save you any tax deductions might also qualify for earlier destruction.  Otherwise, it is usually better to error on the side of caution and retain until at least your next regular time for destruction per your policy.   

Employers really do need to have their policies in writing for a wide range of issues including acceptable use of e-mail in the business.  There are "business-critical" e-mails that should be retained and separated from "non-essential messages" that can be purged from the system.  You need to go to the trouble to define an "e-mail business record" for your business.  Additional research and legal advice is recommended if this applies to you.

This list is not meant to be all inclusive or legal advice, but to give you some helpful general categories of time so that you can begin to separate out your records and destroy the items that are not needed for any future reason.

1    Protect Your Signature. Never publish your real signature on your web site, in an email signature file, or anywhere else publicly. If you throw out papers with your signature on it, shred them.

2        Take Care with Financial Documents. Keep a shredder by every trash can where you throw out papers. Take a good look at every paper you throw out and shred every paper that has your Social Security number, credit card number, driver’s license number, or any other personal identifying number or information. This will reduce the risk of dumpster diving – where thieves go through your trash to find personal information.  You might be surprised at which papers have identifying information on them. You might need to shred mail that you don’t even want to open – for example, credit card applications. Please be careful to inspect all papers or just make a systematic rule to shred everything.

3        Protect Your Records. Be careful who has access to your financial records, even in your own house. If you have lots of house guests, teenagers with numerous friends, or neighbors over all the time, you have a slight risk of exposure. Keep your papers all in one place, and if possible, lock them up for safekeeping and limited access to people you trust. Don’t forget about the papers you leave out on top of your desk or in a mail stack.

4        Protect Your Computer. Do you have financial information on your computer? Password-protect your financial files, and keep your password in a private, safe place.

5        Be Web Savvy. Use good judgment when entering credit cards on web sites of businesses you don’t know or when presenting your card to a business that looks questionable. This will reduce the risk of skimming, where thieves posing as merchants steal your card number as they enter it in their device.

6         Be Email Savvy. Never enter your credit card number in an email to someone. Never reply to an email that requests your personal information. If you think the email is real, go to your bank branch in person to check it out. This will reduce the risk of phishing, where the thief poses as a bank to get your information.

7        Be Phone Savvy. If someone calls you and later asks for your personal information, be wary. It could be a setup, and it’s very easy to fall for. The caller will get you engaged in solving a big problem with your account and you could let your guard down. Don’t! If there’s a question in your mind about whether it’s real or not, call the business using the phone number on the back of the credit card or in the phone book.

8        Be Discreet. Watch how you hold your credit card in a public place such as a line at the supermarket (cover the numbers). Don’t say your credit card number in public, and don’t repeat it on a cell phone. This is a low risk, but cell phone conversations are easily intercepted.

9        Stay Vigilant with Statements. Make sure you receive your statements on a timely basis. If a statement is a few weeks late, follow up with the institution to find out why. Better yet, convert to online statements. This will avoid the risk of a thief changing your address and diverting the statements.

10      Keep Track of Your Reports. Monitor your accounts, bank accounts, credit cards, and credit reports regularly for unusual activity or transactions that are not correct.