It is being called a BAILOUT. Well…okay – that’s what we will call it then.

What it means to me is another finger in an ever leaking dike. The real question is whether there are any fingers left because many holes exist. As we wait for another rendition of a Breaking News bulletin on whichever main stream news media you fancy, the financial markets are imploding. Unsure of the veracity of my claims? Try borrowing money to start a business. Have you talked to the Small Business Administration about a start-up loan lately?

Credit has nearly been seized and borrowings between banks are completely uncertain. Small business is caught smack in the middle of a big-time Texas Hold-em game and the deck is stacked. We are looking for serious leadership right now as a nation in perilous times and instead the International bankers have are parlaying a dog and pony show of Barack and John. Are you kidding me???

While special interests have the election bought and paid for, on the local front we are trying to meet payrolls. Between you, me and the lamp-post, I recommend getting back to basics. This “credit crisis” is not about home mortgages or asset values as much as it is about liquidity. Small business today must concentrate on liquidity to insure solvency.

BREAK-EVEN ANALYSIS

Daily in our conferences we talk about cash flow and sales break-even points. Commonly referred to as a “making our nut” in the sales community — we are talking about cash inflows exceeding cash outflows. At the end of the day, week and month did we make a profit? Let’s talk more about your Company in detail next time we get together.

CASH FLOW ANALYSIS

Are we making any money? If your outflows exceed the inflows, it is time to talk right now. We must always be concentrating on sell more to more people at less cost. While those three things are imperative, they are very difficult to do. I know — I am running a Small Business as well remember. Currently, we are in the process of preparing for the upcoming tax season and practicing what we preach. We understand the responsibility we have been afforded in your service.

TAX PLANNING ANALYSIS

We are currently developing a tax structured proforma for each Company we serve that considers the 2008 State and Federal Legislation being negotiated as we speak. In the coming weeks and certainly by Thanksgiving we anticipate meeting in person will all of out Company clients to review the developed tax proforma. We believe we have much to be thankful and a wealth of knowledge to assist and serve.  

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting
Group, PC., a full-service accounting firm providing tax, accounting
and business consulting services to small businesses. We welcome the
opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

In between preparing the pools for winter covering and seeding those bare spots in the lawns, we are also planning for wrapping up 2008 business years. Numerous questions remain on the horizon and mutual fund balances slip-and-slide to a seeming quagmire. What will happen with the credit crisis and interest rates? Will Congress act by December 31 to ease the Alternative Minimum Tax and stave off massive taxes to the middle class?

Another “Stimulus Payment” before year-end as Obama wants? I doubt it — but hold the reigns tight as this Presidential election campaign promises fireworks necessary to drown out the groans and screams from Bear Sterns, Lehman, Freddie, Fannie and Merrill Lynch carnage. Oh, by the way its only September 15th, did you quarterlies remember to pay your taxes today?

We’ve got our ears to the ground listening to the tremors effecting your Federal and State taxation. Give us a call to talk about what it all means to you.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611

Tax Treatment During the Rental Period

Overs report their rental income expenses on their personal income-tax returns.  Deductible expenses include money spent on advertising, cleaning and maintenance, insurance, mortgage interest, real estate taxes, repairs, and utilities.

A deduction for depreciation is also available.  Unfortunately, the depreciation period for residential rental property is quite long — 27.5 years.  And, if a home is worth less than its adjusted tax basis (typically, the home’s cost plus improvements) when the rental period begins, the annual depreciation deduction is based on the lower market value.

Even if a rental property is “paying for itself,” it may show a tax loss for the year because of depreciation.  When there is a loss, the tax law’s “passive activity” rules come into play.  Under those rules, a loss of up to $25,000 may be claimed against non-passive income (such as wages) if the owner actively participates in running the home-rental business.  The $25,000 loss allowance phases out with adjusted gross income between $100,000 and $150,000.*

Tax Treatment When the Property Is Sold

Homeowners generally don’t pay taxes on capital gains of up to $250,000 ($500,000 on a joint return) if they’ve owned and used their home as a principal residence for at least two of the five years before the sale.  But this tax break isn’t available for the sale of a residence that has been converted into a rental property unless the rental activity was temporary ad the sale takes place while the owner still meets the ownership and use tests.  Even then, gain is taxable to the extent of all depreciation that was (or could have been) claimed on the property.

What happens if the property is sold at a loss?  For the loss to be deductible, the owner must be able to establish that the property’s conversion into a rental property was meant to be permanent — not merely a temporary measure util it could be sold.

* The loss of allowance for a maried taxpayer filing separately is $12,500.  This allowance phases out with the adjusted gross income between $50,000 and $75,000.

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611