Strategies for Success 2009

We are pleased to announce an upcoming seminar, "Strategies for Success 2009", hosted by the Novato Chamber of Commerce and jointly sponsored by Ghirardo CPA, Circle Bank and Warren Capital Corporation. This event will feature four experts in bank and non-bank financing options for small business owners in today's challenging economy. The workshop will cover:

  • What to look for and expect from a lender
  • Bank and non-bank financing solutions
  • How to get better prepared to increase your chances of success

The seminar will be held on July 9, 2009 from 7:30 to 9:30 a.m. and located at Unity in Marin, 600 Palm Drive, Novato.

Meet the Presenters

Paul Breimayer, has an extensive background that includes 10 years as a CPA with a Big Four accounting firm, 5 years as a Chief Financial Officer and 10 years as the Managing Director of a division of a Fortune 500 company. He is the Director of Business Consulting with Ghirardo CPA and focused on providing CFO services to small businesses, including assistance in obtaining bank and non-bank financing.

John Connelly, Vice President and Client Relationship Manager at Circle Bank, has a 17 year career in the banking industry. Previously a Senior Vice President at Bank of America, John’s principal experience is in delivering financial solutions to small to mid-sized businesses through his background in commercial banking and product management.

For 36 years, Patrick Kilkenny worked for various banks including Redwood Empire Bancorp, Allied Savings Bank, California Valley Bank and Wells Fargo Bank. He is now an Advisor/Consultant for Business Financing and is the Principal of Kilkenny Advisors.

Clay Stephens is founder and CEO of Warren Capital Corporation, a specialty finance company, headquartered in Novato. Warren Capital's 25 year history includes completing over 3,000 transactions for a value in excess of $1.5 Billion. They offer a variety of equipment financing and asset based financing products. Warren Capital has an investment banking affiliate, Wood Warren & Company, located in Emeryville, CA.

For additional information and to register for the event, please visit the Novato Chamber of Commerce web site.

Interest Free Loans?

Sound too good to be true? Here's the real story....the Small Business Administration (SBA) is responding to the current economic recession with the recently announced ARC Loan Program. This loan program is designed to provide short term relief of up to $35,000 to small businesses facing an immediate financial hardship. Here are some of the other benefits:

  • No collateral required
  • No SBA loan fees
  • No payments for at least the first 12 months

Sounds great...I would like a dozen of these!!

Unfortunately, it's not quite that simple. To begin with, each small business is limited to one ARC loan. To qualify you will also need the following:

  • Your business is suffering an immediate financial hardship (such as declining revenues or difficulty making loan or vendor payments)
  • Financial statements demonstrating that your business had a positive cash flow in 1 of the last 3 years
  • Cash flow projections for the next 2 years indicating that you will be able to meet your current and future loan payments
  • Your business is no more than 60 days past due on any loan

ARC loans are not intended for start-ups, businesses that are already severely delinquent or businesses whose past performance/future cash flow indicate that the business is not viable.

If you have any additional questions regarding the new ARC loan program or any of the many recent SBA loan program improvements, please contact your lender orour Director of Business Consulting, Paul Breimayer at Ghirardo CPA at 415-408-5021.

Now's the Time for Estate Planning!

Now's the Time for Estate Planning Work hard, invest wisely and make prudent, educated decisions. These concepts have never been more important. With the current state of the economy, developing and implementing an estate plan that is right for you should be high on your priority list. Because asset values and interest rates are still at record lows, now is a great time to make estate planning decisions that will allow greater wealth to be passed to heirs.

The Gift Tax and How to Avoid It

The federal gift tax exists for one reason: to prevent taxpayers from avoiding the federal estate tax by giving away their money before they die. So while you can’t avoid estate taxes by giving your wealth away, there are certain estate planning advantages that can be realized through gifting.

Medical or tuition expenses are exempt from gift tax liability and do not count toward the annual exclusion amount. This is important because annual exclusion gifting allows you to transfer funds, gift tax-free, reducing your estate tax. Undervalued stocks are a great example of how to use gifting to your advantage during a recession. By transferring stock that today has a low value, but which you anticipate will recover in the future, you will not only avoid transfer taxes but will avoid paying gains on the stocks themselves.

Personal Loans Can be a Win-Win Option

Over the past several years, personal loans have become an increasingly more popular estate-planning strategy. The IRS sets minimum interest rates for personal loans, far below bank rates and depending on the maturity date. This is advantageous to the lender, as the smaller payments will decrease the amount of money being returned to the estate. When used in conjunction with the annual gift exclusion, gifts of the loan’s principal are made yearly by forgiving the amount due and thus maximizing the transfer of wealth and minimizing the estate tax. Be sure to properly document a personal loan to realize the intended benefits.

Grantor-Retained Annuity Trusts (“GRATs”)

A grantor retained annuity trust (GRAT), is a financial instrument commonly used to make large financial gifts to family members without paying a gift tax. This is advantageous in a down economy because if planned correctly, the appreciating asset can be transferred tax-free. When the GRAT is first set up, a “gift value” of the GRAT is calculated. The gift value is set equal to the initial contribution to the GRAT plus a theoretical interest earned on the principal minus the annuity payments that would be made through the end of the term. Thus at the end of the term, the value remaining in the GRAT may still be large, even though the initial IRS calculation suggests that it should have been zero. This remaining value is then passed on to the beneficiary without incurring a gift tax.

Charitable Lead Annuity Trust (”CLAT”)

A charitable lead annuity trust (CLAT) is a customized and independently managed trust that enables a donor to give a fixed annual amount to charity for either a specified amount of time or the life of one or more individuals. Once the term has concluded, the trust terminates and its remaining assets are distributed back to the donor or to one or more beneficiaries. CLATs are advantageous in a recession because the asset is kept in the donor’s name, provides income to the charitable organization and allows the beneficiary to keep the asset. The lower interest rates utilized in a CLAT result in a larger gift or estate tax deduction going to the charity and a smaller value for any gift of the remainder interest going to the beneficiary.

Act Now!

Ghirardo CPA’s estate planning consultants understand the importance of ensuring long-term financial security for your family and can help you structure a plan that takes advantage of these estate-planning tools. Click here to read more about our estate planning services.

What's Next for Your Business?

Just recently we have seen signs that the economy may be stabilizing. The stock market is up over 20% from the low reached in mid-March, consumer confidence is on the rise and several major banks have reported stronger than expected first quarter results. We’re not out of the woods yet, but the signs are much more promising than they were just eight weeks ago. So what’s next for your business? First make sure you have the resources (especially cash flow and financing) to make it through the current recession. Now is the time to position your business for the recovery that will ultimately come. Other items to consider:

1. Listen to your customers: what do they really want from you; are you providing it, could it be improved? What can you do to gain a larger portion of your customer’s business? Most business owners already have a pretty good grip on the answers to this, but as the owner/manager, customers and employees are not always telling you the way it really is. It’s a great time to approach this in a more systematic and unbiased could be very surprised at what you find!

2. Anticipate the next market move: Develop your long-term product/service strategy by asking yourself a few simple questions. Who are your toughest competitors from a product or service innovation standpoint? What emerging needs are they fulfilling? How has the current recession changed these needs? Are changing demographics or the economy re-shaping your customer base? Many larger companies increase their spending on R&D and new product development during a recession to be better positioned to take advantage of the market recovery.

3. Develop a plan: Where is your business really going? Where will it be in five years? Are you creating long-term value in your business that would someday be attractive to an outside investor? A downturn like this is a good time to pull together a strategic plan that will guide your business towards your longer-term goals after we emerge from the current economic recession.

How do you get started with any of this? Our Director of Business Consulting, Paul Breimayer, has the experience of a CPA, CFO and division manager of a Fortune 500 company. Give him a call at 415-408-5021 for a free consultation or check out all of our consulting services on our website.

Client Alert!

The IRS is warning taxpayers to be on the alert for e-mails and phone calls which claim to come from the IRS or other federal agencies and which mention their tax refund or economic stimulus payment. These are almost certainly a scam whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers, which can be used by the scammers to commit identity theft. The e-mails and calls usually state that the IRS needs the information to process a refund or stimulus payment or deposit it into the taxpayer's bank account. The e-mails often contain links or attachments to what appears to be the IRS Web site or an IRS “refund application form.” However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for. Be aware that the IRS does not send taxpayers e-mails about their tax accounts.

American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 has been approved by Congress and signed by the President. The IRS will be implementing the tax-related provisions of this new program quickly. So what does this mean for you? Following are some of the highlights. First-Time Homebuyer Credit Expands

Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.

The American Recovery and Reinvestment Act of 2009 expands the first-time homebuyer credit to include purchases made before December 1, 2009 with a maximum credit of $8,000 which can be claimed on a buyer’s 2008 tax return.

Payroll Checks Increase This Spring

The Making Work Pay Tax Credit will mean $400 to $800 for many Americans. The IRS has issued new withholding tables for employers. Please contact us if you need help implementing the withholding adjustments required by the new economic stimulus law.

General Information

For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns.

This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

The credit will typically be handled by employers through automated withholding changes in early spring. These changes may result in an increase in take-home pay. The amount of the credit must be reported on the employee’s 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.

Though all eligible taxpayers will need to claim the credit when they file their 2009 income tax return next year, the benefit will generally be spread out over the paychecks they receive beginning this spring and continue until the end of the year. Many higher-income taxpayers will see little or no change in their take-home pay. That’s because the Making Work Pay credit is phased out for a married couple filing a joint return whose modified adjusted gross income (AGI) is between $150,000 and $190,000 and other taxpayers whose modified AGI is between $75,000 and $95,000.

Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment.

COBRA: Health Insurance Continuation Subsidy

The American Recovery and Reinvestment Act of 2009 establishes an employer-provided subsidy for employees who involuntarily lose their jobs.

Information for Employees or Former Employees

Workers who have lost their jobs may qualify for a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to nine months. Eligible workers will have to pay 35 percent of the premium to their former employers.

To qualify, a worker must have been involuntarily separated between September 1, 2008, and December 31, 2009. Workers who lost their jobs between September 1, 2008, and enactment, but failed to initially elect COBRA because it was unaffordable, get an additional 60 days to elect COBRA and receive the subsidy.

This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

$250 for Social Security Recipients, Veterans and Railroad Retirees

A one-time payment of $250 will be made in 2009 to:

  • Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration.

  • Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs.

  • Railroad Retirement beneficiaries.

The IRS will not make this payment — unlike last year’s economic stimulus program. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.

The economic recovery payment will be a reduction to any Making Work Pay credit for which the recipient qualifies. The Making Work Pay credit will be claimed on the recipient’s 2009 tax return filed in 2010.

Money Back for New Vehicle Purchases

The American Recovery and Reinvestment Act of 2009 provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles through 2009. The deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A. Purchases before February 17, 2009, are not eligible for this special deduction.

The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified AGI between $125,000 and $135,000.

Following are a few general questions and answers regarding the new recovery package: Could the new law affect 2008 tax returns? Generally, no. The new law 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.

There are a few limited areas in the law that could impact 2008 tax returns. For some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. And for first-time homebuyers there is an expanded credit available on 2008 tax returns. Please feel free to contact your Ghirardo CPA tax professional for more information.

Does this new recovery program have any impact on the recovery rebate credit for 2008 tax returns being filed now? No. But the IRS reminds taxpayers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.

For more information about the American Recovery and Reinvestment Act of 2009 visit