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Volume 4, Issue 6, June 2006

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Business Owners - Reduce Payroll Taxes at No
Cost While Helping Eligible Employees Increase
Their Pay

If you are a business owner, and have employees who are eligible for the Earned Income Tax Credit (EITC), there is a program that allows you to give them part of the EITC in their paychecks during the year and deduct those paid amounts from your payroll taxes.

The program is the Advance Earned Income Credit program (AEITC), and it allows eligible employees to receive part of their EITC throughout the calendar year, instead of waiting to receive it all at once when they file their tax return.

The benefits of the AEITC program are twofold:

eligible employees increase their pay at no cost to their employers

employers can reduce their payroll taxes by deducting the amounts paid to eligible employees

The AEITC payments are made by employers from withheld income tax, as well as Social Security and Medicare taxes paid by both the employer and the eligible employee. Because the AEITC amount is not actual wages, employers are not required to withhold income, Social Security or Medicare taxes from that portion of the eligible employee’s pay.

For employees who are uncertain as to whether they qualify for the EITC, there is an EITC Assistant on the IRS website that will assist them with determining eligibility.

The IRS Publication 15, “(Circular E) Employer’s Tax Guide”, provides information about withholding tables and the AEITC program for employers. Reporting requirements for the employer’s tax return are specific – contact your local Kemper CPA Group LLP professional for assistance with the AEITC program. We can help your business – contact us today!

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Tax on Long Distance Telephone Service
Eliminated

Since 1898, the government has imposed a tax on telephone services, currently 3% of charges billed for phone services, and long-distance carriers have had to collect it from customers and send it to the government.

However, recent appeals courts have upheld a ruling that states that the federal excise tax, originally deemed a luxury tax imposed on those who were wealthy enough to own a telephone, no longer applies to current long-distance billing practices in this information-age society.

Taxpayers will now be eligible to file for refunds on the long-distance telephone service excise tax they have paid since February 28, 2003. The refund can be claimed on 2006 tax returns filed in 2007, and interest will be paid on the refunds. Individuals and businesses who spend the most on telephone service will likely see the largest refunds, while households with minimal phone usage can expect proportionally smaller refunds.

It is important to note that federal excise tax on local telephone service is not affected by this ruling, nor are any state and local taxes on phone services.

The IRS is working to create a simple process that taxpayers can use to claim the refund without having to consult old telephone bills. Additional information on the long-distance telephone excise tax is available in IRS Notice 2006-50.

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2006 Tax Law Changes for Individuals

A number of tax law changes take effect in 2006. A summary of these changes follows:

For 2006, the maximum income you can earn and still be eligible for the Earned Income Credit has increased. You may be eligible for the credit if:

You earn less than $36,348 ($38,348 if married, filing jointly) and have more than one qualifying child

You earn less than $32,001 ($34,001 if married, filing jointly) and have one qualifying child

You earn less than $12,120 ($14,120 if married, filing jointly) and do not have a qualifying child

In addition, the maximum investment income allowed in 2006 for the credit has increased to $2,800.

The exemption amount for 2006 has increased to $3,300 from $3,200 in 2005. If your adjusted gross income (AGI) exceeds a certain amount, you do not receive all of the benefit of your exemptions. Phaseouts begin at:

$112,875 for those married, filing separately

$150,500 for single individuals

$188,150 for heads of household

$225,750 for those married, filing jointly

For Social Security and Medicare taxes, the employer and employee will each pay 6.2% for Social Security tax and 1.45% for Medicare tax, but for Social Security tax, the maximum amount of wages subject to the tax in 2006 has increased from $90,000 to $94,200. All covered wages for 2006 are subject to Medicare tax.

The basic standard deduction amounts for 2006 are as follows:

$7,550 for heads of household

$10,300 for those married, filing jointly and for qualifying widows

$5,150 for those married, filing separately

$5,150 for single individuals

Standard mileage rates have changed for 2006:

44.5 cents per mile for all business miles driven

14 cents per mile for use of your car for charitable purposes

32 cents per mile for use of your car for Hurricane Katrina relief services

18 cents per mile for all medical miles driven

18 cents per mile for moving expenses

If you have any questions about the impact of these changes on your tax situation, the certified public accountants and consultants at Kemper CPA Group LLP can provide you with more specific information. Contact your local Kemper CPA Group LLP office today.

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Loose Change

The May/June 2006 issue of the “Loose Change” Newsletter includes the following articles:

Contact Kemper Capital Management LLC for all of your investing needs.

Investment advisory services offered by KCPAG Financial Advisors LLC, a registered investment advisor. Securities officered through Securities America, Inc., a registered broker/dealer. Member NASD/SIPC. Thomas A. Moore, John D. Porter, Polly Reynolds, Shawna D. Horne, Jeffery C. Holt, CA insurance Lic. #0E38034, Jessica Daugherty, Sheila R. Lautenbacher, Joseph M. Mendes, CA Insurance Lic. #0C62535, Regina S. Hughes, Gregory Meador, Marcia Elder, Registered Representatives. Insurance services offered through KCPAG Insurance Services LLC. Kemper Capital Management LLC and its subsidiaries are not affiliated with Securities America.

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Regional Janitorial Supply Distributor Automates
Business Processes with the Help of Kemper
Technology Consulting and Finds Another
30 Days in the Year

The Challenge

Can you imagine doing this on the front-end operation?

Hand-writing a sales ticket for 300 lbs. of ice melt

Finding the appropriate price list to determine exact price

Walking over to the Rolodex to look up your customer’s information and determining their standard contracted discount (if it’s a new customer, then a new customer account will have to be established).

Punching the figures on a pocket calculator and transcribing to the sales ticket

Swiping the customer’s credit card on the credit card machine for payment

Stapling the credit card receipt to the sales ticket

Carrying the product to the customer’s truck

The whole process took about 15 minutes. We’re all done! Right? Not quite… Now, for the back-end operation…

Deliver the sales ticket and credit card receipt to order processing (who happens to be on break at the moment).

After stopping for a cup of coffee and grabbing a doughnut, order processing enters the transaction into the computer system, noting the sale and adjusting the inventory (of course the hand-written sales ticket is perfectly legible).

Now order processing delivers the paperwork to the accounts receivable department for entry into the accounting system.

Simple, right? Did we mention the fact that, during this 30-minute time frame, three other customers came in to purchase ice melt in preparation for the upcoming snowstorm? Did you know your inventory level? Could you have delivered the product? Did you realize that one customer left in disgust, tired of waiting in line, and drove to a nearby competitor?

The Solution

One of Kemper Technology Consulting’s clients, a distributor and wholesale provider of janitorial supplies, recognized the need to automate their processes. Kemper Technology Consulting (KTC), their Sage Accpac and IT provider, implemented the perfect solution to handle their 5,000-plus different SKUs – Sage Accpac ePOS.

KTC seamlessly integrated Sage Accpac ePOS, a point-of-sale program, providing a complete solution to both front- and back-office transaction processing.

Sage Accpac ePOS provided the following benefits to the janitorial supply distributor:

Seamless integration with Sage Accpac ERP, which resulted in a real-time integration with the back-office accounting system.

Up-to-the-minute inventory availability, pricing and customer details are available at the point-of-sale.

With its Internet-based design, single server installation made initial deployment and on-going maintenance fast and cost effective.

Use of POS terminals is uninterrupted, even if the network connection is lost.

Browser-based interface makes the solution quick to learn and easy to use, saving valuable training time and money.

The Result

With the ePOS implementation and added automation, the distributor easily adds, at minimum, an hour to each business day. While that may not sound like much, when calculated over a year, the distributor adds a full month to their business cycle (50 weeks x 5 days = 250 hours. 250 hours/8 hours per day = 31.25 days)! Manual, over-the-counter invoices have been eliminated, and inventory accuracy has increased, while pricing errors have decreased.

With ePOS, the easy point-and-click interface makes completing transactions fast and simple. Support for tracking customer loyalty, sales promotions, price discounts, customer and inventory look-up, multiple payment methods, and receipt printing have profoundly and positively impacted the distributor’s business operations. The customer’s buying experience has improved – orders are processed more quickly, and computer-generated receipts now match monthly statements.

The old process took 20-30 minutes involving 3-4 people. Now there’s ZERO order entry, ZERO applied payments and TOTAL REAL TIME integration. With Sage Accpac ePOS, the process now takes 5 minutes and one person. Our janitorial supply distributor just found that 25th hour in the day, adding 30 more days to their productivity!

To learn more about what Kemper Technology Consulting and Sage Accpac ePOS can do for your business, click here.

Kemper Technology Consulting
Robinson, IL
618-546-5633
www.kempertc.com
Evansville, IN  •  Indianapolis, IN  •  Paducah, KY  •  Effingham, IL

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Please be advised that, based upon current Internal Revenue Service (IRS) rules and standards, the advice herein is not intended to be used, nor can it be used, as the sole basis for decisions. Additional issues may exist that could affect the treatment of the individual transactions, and this narrative does not provide a conclusion with respect to all such issues.

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