Update on the "SUV tax loophole
by Heather Kettell, CPA
 

The Winter 2003 Client Alert featured an article titled "Buying a vehicle? It's all about the weight." The article described the "SUV tax loophole." Light duty trucks (which include SUVs and minivans) are rated using Gross Vehicle Weight Rating (GVWR). Vehicles in excess of 6,000 pounds are not subject to the luxury automobile limitation and are eligible for the Section 179 expense allowance up to $100,000 in 2004. However, bills are currently being introduced in Congress to remedy the loophole. A bill by the Senate Finance Committee would limit the maximum Section 179 allowance for SUVs with a GVWR of 14,000 pounds or less to $25,000. Other bills introduced in the House and Senate would reduce the tax preference for SUVs by subjecting them to annual depreciation limits for passenger cars. The bills introduced could close the loophole retroactive to tax years beginning after December 31, 2003. Buying a vehicle in 2004 may now be all about the "wait." Updates will be provided on this topic as available. If you have any questions, please give us a call.

Department of Labor's FairPay Overtime Initiative
by Brad Sears
 

Under new regulations scheduled to take effect August 23, 2004, the U.S. Department of Labor (DOL) will strengthen overtime rights for 6.7 million American workers, including 1.3 million low-wage workers who were denied overtime under the old regulations.

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least federal minimum wage ($5.15 per hour) for all hours worked and overtime pay at time and one-half the regular rate for all hours worked over 40 hours in a workweek.

However, certain sections of the FLSA provide exemptions from both minimum wage and overtime pay for employees who are employed as bona fide executive, administrative, professional, computer and outside sales employees. Employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

The DOL has outlined certain tests which must be met by each category of employees in order for them to qualify under the available exemptions to the FLSA requirements. Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more are also exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Under a special rule for business owners, an employee who owns at least a bona fide 20 percent equity interest in the enterprise in which he or she is employed, regardless of the type of business organization, and who is actively engaged in its management, is considered a bona fide exempt executive.

When state laws differ from the federal FLSA, an employer must comply with the standard which is most protective to employees. Links to state labor departments can be found at www.dol.gov/esa/contacts/state _of.htm.

Please contact us if you would like more information on the new DOL regulations.

Follow ten tips for good business telephone etiquette
 

Good telephone service can bring in new customers and strengthen your business relationships. Poor phone service will drive away business and weaken customer loyalty.

Assess your business telephone skills with the following ten questions. (Hint: You should be able to answer "yes" to each.)

1. Is the phone generally answered by the third ring?

2. Do you make a conscious effort to be friendly, courteous and helpful?

3. Do you always ask the caller's name?

4. If you need to transfer the caller, do you tell her the transfer extension in case she is disconnected?

5. Do you return calls when you say you will? If you need time, do you explain why and provide a firm reply date?

6. Do you take notes during all but the briefest conversations?

7. If you must put a caller on hold, do you explain why?

8. Do you set aside time to return calls each day?

9. When you have several points to cover, do you prepare some brief notes before calling?

10. Have you provided written telephone procedures to your staff?

Even if your own telephone manners are above reproach, make sure your employees meet the same standards. Everyone who uses the phone should be given training that includes the above guidelines.

Alternative minimum tax - -What is it and why am I paying it?
 

Alternative Minimum Tax (AMT) was originally created to ensure that all taxpayers pay their fair share of tax. It was intended primarily to affect high-income earners who were using tax shelters and other deductions to reduce their tax liabilities. However, in recent years, an increasing number of middle-class taxpayers have been assessed AMT. An estimated 3 million taxpayers will be subjected to AMT in 2004 with projections growing to approximately 30 million in 2010.
 

What is it?
To calculate AMT, compute taxable income under the regular income tax method. From that figure, add back various deductions which were utilized in arriving at regular taxable income. Common add backs include state and local income taxes, real estate taxes, miscellaneous itemized deductions and personal exemptions. After adding these deductions, the taxable income amount for AMT purposes will be greater than regular taxable income. After an adjustment for an annual exemption, the amount is then multiplied by a tax rate of 26% or 28%. If the result is greater than your regular income tax, the difference is the additional tax which is classified as AMT. For example, if the regular tax is $20,000 and the alternative minimum tax is $25,000, the taxpayer would owe $25,000 ($20,000 of regular tax and an additional $5,000 of AMT).

What causes it?
There are several underlying issues that have caused AMT to affect more taxpayers. There have been two large tax cuts in the last three years which have decreased the calculated tax under the regular method without a corresponding decrease in AMT. Additionally, Congress has been reluctant to index AMT to inflation, enabling it to creep into more returns.

How to minimize its effect
If your tax situation produces an AMT liability, it can be difficult to avoid the tax. However, timing your deductions can minimize your exposure. For example, the popular tax reduction strategy of prepaying your fourth quarter state estimated tax payment by December 31 should be reviewed to determine if any benefit is being realized. Also, taxpayers in states with high income taxes and who have substantial mortgage and property tax deductions are likely to be hit with AMT.

Looking forward
The House of Representatives recently approved the increase of the exemption amounts for AMT in the Jobs and Growth Tax Relief Reconciliation Act of 2004. The bill will proceed to the Senate for approval. Congress appears to lack the political will to tackle the AMT problem this election year, so don't expect its much-needed overhaul or repeal

Employee of the Quarter
by Sheryl Schuster, CPA
 

Our employee of the quarter, Lauren Weidner, graduated from Rutgers University - Camden in 2002 with a bachelor of science degree in accounting. She started her accounting career at Alloy Silverstein in June 2001 as an intern and began full-time employment in July 2002.

Lauren provides auditing services for various industries such as manufacturing companies and performs HUD audits for mortgage companies. She is a member of the firm's marketing committee and plays an integral part in the preparation of Client Alert. She also provides accounting and tax services for a diverse client base including law firms and medical practices.

Lauren resides in Sicklerville, New Jersey with Rob and their six-year-old son Robby. In her spare time, she volunteers at her son's school and participates in various fundraising activities. She is also involved in golf outings for charitable organizations. Lauren has become a proficient video game player and has even beaten Robby a few times! When she is not enjoying time with her son, Lauren has been diligently studying for the CPA exam.

Alloy Happenings
by Brad Sears, CPA
 

Ren Cicalese, CPA/PFS
Attended the New Jersey Hospital Association's Legislative Breakfast at Our Lady of Lourdes Medical Center on March 30.

Rich Middleton, CPA
Elected chairman of the board of directors of Partners in Home Care, an affiliate of Moorestown Visiting Nurse Association.

Tom Adams, CPA
Was recognized by the New Jersey Society of Certified Public Accountants for 25 years of membership.

Was reelected as a trustee of American Legion Post 372 Cherry Hill.

Attended the American Legion Leadership College in Sea Girt, NJ April 23-25.

Heather Kettell, CPA
Appointed as a director of the Southwest Chapter of the New Jersey Society of Certified Public Accountants.

Served as a judge in the annual Rutgers University - Camden's Eigth Annual Intercollegiate Accounting Tournament.

Sheryl Schuster, CPA
Received her master's degree in accounting with a concentration in financial analysis from Rutgers University - Camden.

Congratulations to:

Dennis Vogt, CPA on his 30th anniversary with the firm.

Lisa Kleiner on her fifth anniversary with the firm.