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Volume 4, Issue 10, October 2006

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You're Invited!

Microsoft and Kemper Technology Consulting are pleased to invite you to attend a special sneak peek of Windows Vista and the 2007 Microsoft Office system. Discover how these Microsoft solutions can help take your business to the next level of productivity and profitability.

This event will take place at 9:00 a.m. on November 8, 2006 in the Keller Convention Center, Suite A, in Effingham, Illinois. Registration begins at 8:30 a.m. Click here to RSVP.

We look forward to seeing you there!

Fall Tax Planning

In many parts of the country, the leaves have already started turning and are ready to fall – a sure sign of one thing: year end. While you can’t delay year end any more than you can push back the start of fall, there are still a number of strategies you can pursue now in order to ease your tax burden for 2006.

The following are a few items to consider as you plan for year-end:

Retirement accounts: Contributing the maximum to your 401(k) and IRA can help reduce your tax burden. The maximum 2006 contribution for 401(k) and 403(b) retirement plans is $15,000 for those under age 50, and $20,000 for those ages 50 and over. All 401(k) contributions must be made before the end of the year. For IRAs, the maximum you can contribute in 2006 if you are under age 50 is $4,000; for those ages 50 and up, the maximum increases to $5,000. You have until April 15, 2007 to open an IRA and make contributions for 2006.

529 college savings plans: If you live in a state where 529 contributions are tax deductible, take advantage of the opportunity to contribute enough to be eligible for the maximum deduction.

Charities: Give to charity before year end to take advantage of the deduction on your 2006 tax return. Be mindful of the rules surrounding the donation of cars and clothing and household items – for cars, the value depends on the price the charity received for the sale of the car, and for clothes and other household items, you will need to obtain paperwork that shows the value of the items.

Mortgage and property taxes: If you pay your January mortgage payment in December, you can deduct it on your 2006 income tax return. If you pay state and local taxes – property taxes, for example – that aren’t normally due until 2007 in the coming months, you can also deduct them on your 2006 return.

A word of caution… The Alternative Minimum Tax (AMT): If you may be subject to AMT this year, or if you have been in previous years, use caution with regard to your tax-saving strategies, as some can trigger AMT. Deductions are not handled as they are with regular tax calculations when they are calculated under AMT rules. Careful consideration of your complete tax situation is necessary to determine the best outcome for you.

The certified public accountants and consultants at Kemper CPA Group LLP are available to help you with all of your year-end tax planning needs. Contact an office near you to set up an appointment today!

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Highlights of the Pension Protection Act of 2006

In August, President Bush signed the Pension Protection Act of 2006 into law. The act improves the existing pension system by putting a number of safeguards in place, including requiring companies with under-funded pension plans to pay additional premiums and those who terminate their plans to supply the pension insurance system with extra funding. In addition, the act raises caps on employer contributions to their pension plans so that they can pay more during their more profitable years to offset smaller contributions during financially-strained years.

While the act’s primary purpose is to address current issues with the company pension system, it also includes a number of provisions that address defined-contribution plans, such as IRAs and company-sponsored 401(k)s.

The new law provides further direction for employers who wish to institute automatic 401(k) plan enrollment; while some employers had already been automatically enrolling their employees, the law makes it easier for them to do so, beginning in 2008.

Employees can now receive investment advice from 401(k) and IRA providers, with the advice fee not dependent on the type of investment option the employee chooses.

Taxpayers who are receiving an income tax refund from the IRS may now choose to deposit the refund directly to their IRA accounts; the IRS will allow taxpayers to split their refund for deposit in up to three separate bank accounts beginning during the 2007 tax filing season.

The new law made permanent a higher dollar amount for IRA contributions. Beginning in 2006, the maximum contribution is $4,000; in 2008, the amount increases to $5,000, and, thereafter, will be adjusted for inflation. The $1,000 IRA catch-up contribution for workers age 50 and over was also made permanent.

The act simplified 401(k) rollovers into Roth IRAs for distributions after December 31, 2007; the rollover is now more direct, eliminating the intermediary step of rolling the account first into a traditional IRA and then into a Roth IRA.

Military Reserves called into active duty between September 11, 2001 and December 31, 2007 can take early distributions from their IRAs and 401(k)s without penalties; they will have two years after their active duty period ends to pay the distributions back and avoid being taxed on the distributions.

Previously scheduled to sunset at the end of 2006, the Saver’s Credit, which allows lower- and middle-income individuals to claim a non-refundable tax credit for retirement plan contributions, has been made permanent by the law; the adjusted gross income amounts used to determine the credit will be inflation-adjusted beginning in 2007.

The Pension Protection Act of 2006 also included several other noteworthy provisions not addressed above. For additional information regarding the new law’s impact on your specific tax situation, contact the accounting professionals at Kemper CPA Group LLP today.

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Tax Credit on Toyota Hybrids Cut

Toyota has reached the legal production limit of 60,000 hybrid vehicles, the number at which the federal tax credit for hybrid vehicles begins to be phased out. Effective October 1, 2006, the tax credit available for the purchase of Toyota and some Lexus hybrids has been reduced by 50 percent.

The largest of these credits available – for the popular Toyota Prius – has been reduced from $3,150 to $1,575. Toyota’s other hybrid vehicles, including the Camry and Highlander and some Lexus hybrids, will be eligible for reduced credits from $775 to $1,300.

Additionally, in accordance with the schedule set by the hybrid tax credit law, the credit will be reduced by an additional 50 percent effective April 1, 2007, and will be eliminated altogether beginning October 1, 2007. Toyota hybrid vehicles purchased prior to the October 1, 2006 deadline will still be eligible for the full credit.

The makers of several other popular hybrids have not yet reached the 60,000 limit, and the full tax credits for those models are also still available. A complete listing of the tax credits for each hybrid vehicle model, as well as additional criteria for claiming the credit, is available on the IRS website.

The tax professionals at Kemper CPA Group LLP can provide you with additional details related to hybrid vehicle tax credits. Contact us today for further details.

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Loose Change

The September/October 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, 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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What's New with QuickBooks 2007?

If you’re already using QuickBooks and are planning to upgrade, or if you’re a new QuickBooks user and will be starting out with the 2007 version, here is a listing of some of the features available in QuickBooks Pro 2007, as well as a comparison to the 2006 version:

The QuickBooks Pro 2007 software suite offers these and many additional features to help you manage your small business accounting. And the friendly professionals at Kemper Technology Consulting can help with QuickBooks consulting, installation assistance and training classes. Whether you’re a seasoned QuickBooks user, or just starting out, we can help you utilize this powerful tool for your small business. Contact us today!

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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