IRA CONTRIBUTION

Larry, I am 63 and plan on retiring at the end of the year. Can I still make an IRA contribution for 2008? Henry

Henry, the answer is yes. For the 2008 tax year you can contribute $5,000...that is assuming that you have earned $5,000. In addition, since you are over age 50 you can add an additional $1,000 for a $6,000 total. It does not matter when during the year you retire so long as you meet the compensation requirement. But you can no longer contribute to an IRA after you reach age 70 ½.

It is a pleasure serving you.

Larry Kopsa CPA

FIVE REASONS WHY THE ECONOMY MIGHT RECOVER FASTER THAN YOU THINK IN 2009

Here is Some Optimistic News

(U.S. News & World Report) -- There are a number of reasons to think that the economy might, just might, shift back into gear faster than most of us think or hope. One is plunging oil prices. Now they're below $40 thanks to slowing global demand. At the same time, gas prices have plunged from over $4 a gallon to around $1.67 nationally. (And some analysts think they're heading to a buck a gallon.) JP Morgan Chase economist James Glassman estimates that the drop in oil prices represents "a boost equivalent to a $350 billion stimulus." Another reason is falling mortgage rates. Rates for a 30-year, fixed-rate mortgage fell to a low, low 5.19% last week. That should help housing affordability and the ability of current homeowners to refinance their mortgages. Other reasons are the actions by the Federal Reserve, which has made it clear that the Fed will buy various debt securities to unfreeze the credit markets, and President-elect Obama's stimulus plan, as the new Democrat-controlled Congress will likely spend somewhere between $750 billion and $1 trillion over the next two years to boost the economy. The final reason is America's deep fundamentals. Overall, the core U.S. economy is in far better shape than it was in the 1970s, with a higher productivity and a better tax and regulatory system. Even though the U.S. economy finally succumbed to the oil shock and the credit crisis in 2008, it held up longer than many predicted thanks to its deep strengths. Who knows, maybe it will surprise the bears again in 2009.

TEST TIME

This Math test can predict who can give you the best information to help you to be more profitable. Try it without looking at the answers...No cheating!

Ok get your fingers at the ready.....Pick a number from 1-9.....times this number by 3.....then add 3.....then times by 3 again.....You should have a two digit number.....Add these two numbers together.....You then should be left with a single digit number which will tell you who your best business advisor is.

1. The IRS
2. Your banker
3. Your neighbor
4. Your bartender
5. The federal government
6. Your brother in law that has made every mistake imaginable
7. Oprah
8. Your insurance guy
9. Kopsa Otte CPA’s and Advisors :>)
10. Your momma

DEAR PRESIDENT ELECT OBAMA,

Taxing small business will not fix the healthcare crisis.

When it comes to addressing the nation's healthcare crisis, there is a right way and a wrong way to implement change. Unfortunately, many public officials think the easiest way to reduce the number of uninsured Americans is to require employers to contribute toward their employees' healthcare costs. These types of proposals are often referred to as employer-responsibility initiatives or "pay or play" legislation.

As small business owners struggle to stay afloat during difficult economic times, it's unfortunate that some elected officials choose to burden our nation's job creators with more costs they likely can't afford. The reality is that these types of proposals, which set a dangerous example are gaining support in statehouses, cities and courthouses across the country.

HERE IS WHAT'S HAPPENED IN SAN FRANCISCO

Recently, the 9th Circuit Court of Appeals ruled in favor of San Francisco's healthcare security ordinance, which requires employers with 20-99 employees to pay $1.17 per hour per employee for healthcare costs. Employers with 100 or more employees must pay $1.76 per hour per employee. These rates will increase in January 2009 to $1.23 and $1.85 respectively, and will continue to increase annually.

Employer healthcare payments can be made either to the employee through at traditional employer-sponsored plan, directly to employees as reimbursements for healthcare costs or to the city to fund its Health Access Program.

TAX REMINDERS

Here are our final tax reminders for this year to help you avoid problems:

• If you have a flexible spending account balance you must clean it out by Dec. 31 if your employer still has not adopted the 2½-month grace period which is now permitted by the IRS. If your employer has not made the change, any money left in your flex spending account is forfeited.
• Mail checks for deductible items before year end to ensure a 2008 write-off. You get to claim the deduction this year even if the checks do not clear until January.
• Make sure you know the rules if you are charging deductible items.
• For charges that you make with a retail store credit card, you are allowed to claim the deduction for the item only in the tax year in which you pay the bill.
• For transactions made with a bank credit card, you take the deduction in the tax year that you charged the goods, even though you pay the bill next year.

And our final suggestion for this year:

• Have a happy holiday season!

The income tax forms will start to arrive in mailboxes in less than three weeks.

JOE THE PLUMBER

I don’t know how I had missed the following joke during the election season, but thought that you might enjoy. It is about applying the tax policy change philosophy to plumbing bills.

Barack Obama discovers a leak under his sink and calls Joe the plumber to come and fix it.

Joe drives to Obama’s house, which is in a very nice neighborhood where it’s clear that all the residents make more than $250,000 per year (or $200,000 per year or $150,000 per year, depending on who’s speaking and when).

Joe arrives and takes his tools into the house. He’s shown the room that contains the leaky pipe under the sink. Joe figures it’s an easy job that will take less than ten minutes. Obama is standing near the door and asks Joe how much it will cost.

Joe immediately says, “$9,500.”

“$9,500?” Obama replies stunned. “But you said it’s an easy job!”

“Yeah, but what I do is charge a lot more to my clients who make more than $250,000 per year so I can fix the plumbing of everybody who makes less than that for free,” responds Joe.

Obama tells Joe there’s no way he’s paying that much, so Joe leaves.

A week later the leak gets so bad that the Obamas have had to put a bucket under the sink, and it fills up every two hours, so they call Joe back. Joe goes back to the Obamas’, looks at the leaky pipe, and says, “It’ll cost you about $21,000.”

Obama exclaims, “A few days ago you told me it would cost only $9,500!”

Joe explains, “Well, a lot of rich people are learning how to fix their own plumbing, so there are fewer of you paying for all the free plumbing we’re doing for the people who make less than $250,000 - and I refuse to charge the lesser income people for plumbing work.”

Obama tries to straighten out Joe. “But don’t you get it? If all the rich people learn how to do their own plumbing and you won’t charge the poor people, what will you do for money?”

Joe immediately replies, “I guess I’ll run for President.”

YEAR-END TAX TIPS

Here are some year-end tax tips from the IRS. Check out the IRS summary at FS-2008-26.

If you are making year-end contributions to charity, keep in mind several important tax law provisions that have taken effect in recent years. Another good summary is in the IRS release IR-2008-138. Remember that Dec. 31 is the last day for most of these actions to occur.