Volume 27 Number 1, Winter 2006

• Smith Elliott Kearns & Company, LLC Announces Two New Members of the Firm
  
  
• New Year, New Financial Records
  
  
• The Better Way
  
  
• 2006 Standard Mileage Rates Set
  

Smith Elliott Kearns & Company, LLC Announces Two New Members of the Firm

The members of Smith Elliott Kearns & Company, LLC, Certified Public Accountants and Consultants, are pleased to announce that Terry T. Eisenhauer, CPA and Gregory P. Hall, CPA were admitted as members of the firm effective January 1, 2006.

Terry Eisenhauer joined the firm in 1986 after graduating from Shippensburg University. After spending five years as the CFO of a local manufacturing company, Terry rejoined the firm in 1998. He has a diverse background providing audit and tax services; however he has focused his professional development to providing retirement plan consulting, design, and third party administration. As a member in the Employee Benefits Department, located in the Chambersburg office, Terry assists with the management of the department to insure clients are provided quality service that exceeds expectations.

Terry is a member of both the AICPA and PICPA and is active in the communities he serves, currently holding leadership positions for the Rotary Club of Waynesboro and its Foundation, Waynesboro Area Industrial Heritage Trust, Washington County Arts Council, and is an alumnus of Leadership Hagerstown. He resides in Waynesboro with his wife, Debra and children, Nathan and Garrett.

Greg Hall has been with the firm since 1990, following his graduation from Shippensburg University, and is located in the Carlisle, Pennsylvania office. He is primarily responsible for providing accounting, consulting, auditing, and tax services to nonprofit, health care, real estate development and governmental clients. His experience with these clients include consulting on accounting and auditing issues, Medicare and Medical Assistance cost report preparation, consulting and expert witness testimony relating to real estate tax appeals based on the Commonwealth of Pennsylvania, Institutions of Purely Public Charity (Act 55) legislation, preparation of Form 990, consultation related to unrelated business income and maintaining compliance with low-income housing tax credit regulations.

Greg has participated as an instructor for the firm’s continuing education programs related to health care and nonprofit accounting and

auditing matters, and has presented similar seminars to the Pennsylvania Association of County Affiliated Homes and Healthcare. He has also served as an adjunct faculty member for Wilson College, teaching courses on government and non-profit accounting and auditing.

Greg is a member of the AICPA, PICPA, Pennsylvania Association of County Affiliated Homes and the Healthcare Financial Management Association. He is a member of the Knights of Columbus and serves as chairman of the Finance Council of Corpus Christi Church and board member and treasurer of Shippensburg Nonprofit Housing Corp. He also serves on the PICPA Healthcare Committee. He resides in Shippensburg with his wife Heather, and children Joseph and Elizabeth.

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New Year, New Financial Records

Personal financial records are a necessary part of our lives, but it's easy to get overwhelmed by the volume of papers that can accumulate. According to the Maryland Association of CPAs, the start of a new year is an excellent time to get your financial records in order.

Here is some advice to help you determine what you should keep and what you should purge from your files.

Permanent records. Personal papers you should safeguard for your family include birth certificates, Social Security cards, marriage certificates, divorce decrees, insurance policies, veteran's discharge papers, wills, living wills, powers of attorney, real estate deeds and mortgages, automobile titles and important contracts.

These and other permanent records that are difficult to replace should be kept indefinitely, preferably in a safe deposit box. You'll need them to reestablish your financial life in case of fire, theft or other disaster.

Tax records. What often determines the records you need to keep -- and for how long -- is whether they are related to your tax return. Save tax-related documents such as receipts that support your deductions, at least three years after you file your original return. Under normal circumstances, the IRS has three years from the date you file to audit you.

If you omit an amount in excess of 25% of the amount of gross income stated in your return, the statute of limitations extends to six years. There is no time limit if you failed to file a return or filed a fraudulent return.

Checking account and credit card statements. Once you have reconciled your checking account statement, you may discard it, unless it shows deductible expenses. If so, you should retain your statements and canceled checks for at least three years after you file. The same holds true for credit card statements.

You can discard bank deposit slips and ATM receipts after you verify the transactions on your statement.

Investment account statements. Monthly or quarterly investment statements can be shredded once you get your year-end statement and confirm that it accurately recaps your transactions for the year.

Keep trade confirmations, showing the purchase and sale of mutual funds and stocks. These records should be held for three years after you report the capital gain or loss on your tax return.

Retirement plan statements. Keep quarterly statements from retirement plans until you received your annual summary. Once you've compared the information, you can toss the quarterly statements. If you make nondeductible IRA contributions, keep the records to prove your cost basis when it comes to receiving distributions.

Pay stubs. Keep pay stubs until you've reconciled the totals with your W-2. If the amounts match, you can destroy them.

Utility bills. Unless you need them to support the home office deduction, you can generally dispose of utility, phone and cable bills once you have paid them.

Home improvement records. Even though most home sale gains may be tax-free, it's still a good idea to hold onto your original purchase contract and receipts for major home improvements. You could potentially face a tax bill should you need to sell a home you have lived in for less than two years, or if the sale of your home results in a gain of more than $500,000 for joint filers ($250,000 for single filers).

Receipts and warranties. Receipts for major purchases and warranties should be kept for as long as you own the items. Receipts can be useful in proving the value of property that is lost or damaged.

Check with your CPA. CPAs agree that you should review your financial records at least once a year and carefully discard what is no longer necessary. To avoid identity theft, the best advice is to invest in a paper shredder and use it to destroy all documents with personal identifying information.

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The Better Way

Hi Bracket was reviewing his monthly brokerage statement and, since it was prominently displayed, noticed how much money he could borrow against his investments. It was easy to get by just writing a check (no applications to fill out), the interest rate wasn't bad and it would be automatically repaid from his investment income. Hey, this would be a good way to pay for that cruise he had been thinking about.

The cruise was great but tax time rolled around. Hi was surprised to find out that even though the interest expense showed on his brokerage statement as "margin interest," it was not tax deductible since the money was used for a "consumer" purchase. That's NOT fun!

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2006 Standard Mileage Rates

The standard mileage rate for business use of autos during 2006 has decreased from 48.5 cents to 44.5 cents per mile. Taxpayers may base their deduction on either the standard mileage rate (plus business-associated parking fees, tolls, and, to the extent allowable, interest and taxes) or deduct their actual expenses incurred for business use of an auto.

Employers may use the standard mileage rate when computing payments for employees' auto expenses incurred under a reimbursement or expense allowance arrangement and thereby substantiate the amount of such expenses, if the accountable plan requirements are satisfied.

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