Are You Beating the Average Investor With Your 401(k) by Richard Taylor

According to Nationwide Financial, the average investor with a 401(k) account earns on average a meager 3.4% return per year on their investments.  Why is the success rate of the average investor so low?  Do you know what you are earning in your account?

There are various reasons for poor results but these are some of the reasons:

The average investor enrolls with the 401(k) plan, selects investments based on data available, and never changes their allocation after the initial enrollment.  In fact, 72% of investors never look at their account and never change their allocation.  Employers typically set up programs with multiple choices of mutual funds.  These mutual funds represent a variety of investment styles ranging from aggressive to conservative, international and domestic, stocks and bonds.  Over time certain funds may perform well but others may underperform or lose money.  While it is not important to look at your account every day, we do recommend that you study your account at least once per quarter and to make sure that you are invested in the best, most consistent performing funds.

If you do not know what your account is earning, perhaps you want to go onto the web site and review your account.  The information is almost always there for you to review.  In addition, the information and data about the investment choices is also there and you can reallocate your account to the best, most consistent funds.  Keep in mind that you should always keep a proper investment allocation based upon your personal risk profile.

If you are not achieving good returns, get involved.  If you don’t have the investment expertise, get help.  Most employer sponsored plans have an advisor that you can speak with. It is your money and it is your retirement.

If you need assistance with your 401(k) or other investment needs, contact Richard Taylor.

Circus Zebra on GA Highway – If you were on the way, can you deduct expenses?

In a scene that may have seemed cartoon-like, many Georgians witnessed the site of a runaway zebra being wrangled in by Georgia police on the highway during rush hour traffic. Thankfully, the zebra was returned to the Ringling Brothers Circus without harm.

While the zebra on the loose may have been ample entertainment for many, it takes a bit more for the IRS to allow for the deduction for business entertainment. If you were on your way to the circus and planning to deduct the expense as business entertainment, you need to make sure that certain criteria are met.

Many businesses consider the occasional wining and dining of customers and clients just to stay in touch with them to be a necessary cost of doing business. The same goes for taking business associates or even employees out to lunch once in a while after an especially tough assignment has been completed successfully. It’s easy to think of these entertainment costs as deductible business expenses, but they may not be. As a general rule, your company can deduct meals and entertainment as a business expense only if specific conditions are met. What’s more, the deduction for either type of expense generally is limited to 50 percent of the cost.

Meals and entertainment directly connected to business. To be considered directly connected to business, the meal or entertainment event must meet three conditions:

  • It must have been scheduled with more than a general expectation of deriving future income or a specific business benefit from the event. In other words, a meal or dinner date arranged for general goodwill purposes does not qualify.
  • A business meeting, negotiation, or transaction must actually occur during the meal or entertainment, or immediately preceding and following it. In other words, business actually must be discussed.
  • The main character of the event, considering the facts and circumstances, is the active conduct of your company’s trade or business.

For example, an executive employee who treats a client to a golf game in order to discuss the general parameters of a business deal in an informal atmosphere is engaged in entertainment that is directly connected to business. So is a manager who discusses sensitive business plans with a subordinate over lunch at an off-premises restaurant.

Applicable limitations. In general, only 50 percent of expenses incurred for entertainment and meal expenses is deductible. A limited exception applies to entertainment or on-premise meals provided to employees.

Expenses with respect to entertainment facilities generally are not deductible at all. A facility includes any item of personal or real property owned, rented, or used by a taxpayer if it is used during the tax year for or in connection with entertainment. They include yachts, hunting lodges, fishing camps, swimming pools, tennis courts, bowling alleys, automobiles, airplanes, apartments, hotel suites and homes in vacation resorts.

Country club dues are not deductible (although the meals purchased with business clients at the club are, up to the 50 percent limit). Deductions for skyboxes or other private luxury boxes at sporting events are limited to the face value of a nonluxury box seat ticket multiplied by the number of seats in the box.

Record-keeping requirements. Even if a meal or entertainment expense qualifies as a business expense, none of the cost is deductible unless strict and detailed substantiation and recordkeeping requirements are met to the letter. Give us a call and we’ll show you how to comply with these requirements at minimum cost and expense, and how your company’s typical meal and entertainment expenses fare under the deduction rules.

You May Be Able to Deduct Taxes Paid for A New Car

If you purchased a new car between February 17, 2009 and December 31, 2009, you may be able to deduct the state and local sales or excise taxes paid.  The deduction is available for the purchase of a new car, light truck, or motorcycle with a gross vehicle weight rating up to 8,500 pounds, as well as motor homes of any weight.  Taxpayers who purchased more than one vehicle can deduct taxes for all qualifying vehicles, subject to the price limit and phaseout rules.

The deduction is only available for taxes paid on purchases up to $49,500. If the purchase amount exceeds this, then only the amount of taxes paid on the first $49,500 can be deducted.  As usual there are income limitations and phase-out rules. For taxpayers whose modified adjusted gross income exceeds $125,000 ($250,000 for married taxpayers filing jointly) the deduction begins to phase out over a $10,000 range. There is no deduction available for taxpayers with a modified adjusted gross income exceeding $135,00 ($260,000 for married taxpayers filing jointly).

At HLB Gross Collins, P.C. we are committed to helping our clients minimize the tax bite each year by identifying all eligible deductions and planning opportunities. Contact your HLB Gross Collins, P.C. representative to assist you with your tax planning and preparation needs.

Georgia One of First States to Offer Rebate for Energy Efficient Appliances

Last year, many taxpayers took advantage of the Cash for Clunkers program which encouraged trade in of gas guzzlers for a new fuel-efficient vehicle. In a similar effort, also part part of the American Recovery and Reinvestment Act of 2009, Georgians can now earn rebates from $25 to $199 for the purchase of new energy efficient appliances.  Georgia is one of the first states to roll out this program which will continue until the money runs out. Nationwide, $300 million is available for this program which is allocated to each state based on population.  Georgia was allotted about $8.6 million to go toward this program.

Following is a summary of what appliances are eligible for the rebate and how much the corresponding rebate would be:

  • $30 for a qualifying room air conditioner
  • $50 for a refrigerator
  • $50-$99 for a washer, dishwasher or gas storage water heater, depending on the unit’s efficiency
  • $99 for a gas condensing water heater, central air conditioner or oil furnace
  • $199 for an electric heat pump water heater, gas tank-less water heater, solar water heater, air source heat pump, gas furnace, oil burner or gas boiler

Consumers can get only one rebate per appliance category, per household. The maximum rebate total per household is $1,200.

To apply for the rebate, go to or call 866-296-1633. Many appliance retailers will also have information regarding the program and may be able to assist with the application.

Donate to Haiti by February 28 To Deduct on 2009 Return

As we previously reported, Congress passed  legislation making a special and temporary exception for Haiti relief.  Due to this legislation, taxpayers have the option to deduct qualified Haiti disaster relief contributions made after January 11 and before March 1, 2010 on their 2009 or 2010 federal return.  Donations made on or after March 1, 2010 will still be deductible when you file your 2010 tax return. However, if you would like to take advantage of the tax deduction on your 2009 return, be sure to make your qualified deduction prior to March 1, 2010.

To read more about how this planning opportunity, click here.

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