Living the Dream - Live “Annual Year End Tax Planning and Strategies- Must Know Information for 2009 & 2010” November 18, 2009 E-Seminar / Conference Call Host: Mat Sorensen, Attorney At Law Special Guests: Mark J. Kohler, CPA, Attorney- KKO Lawyers Brian K. Brown, CPA- Kohler and Eyre CPAs Dustyn Johnson, CPA- NumberWon Accountants Telephone Facsimile © KKO Lawyers, LLP Telephone Facsimile © Kohler & Eyre CPAs, LLC Telephone Facsimile © NumberWon Accountants, LLC 2009

Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler Ostermiller & Sorensen, LLP, Kohler & Eyre CPAs, LLP, NumberWon Accountants, and Inc It, Inc. is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs. Instructor Notes © Kyler Kohler Ostermiller & Sorensen, LLP 2009

1.Get Organized. 2.Get your QuickBooks files up to date and your checkbooks are reconciled. This will give you the opportunity to take advantage of many of the tax planning techniques discussed below. 3.Gather any credit card statements. 4.Print out reports to determine income and expenses for year-end. Understanding the Power of Book Keeping at Year End

S-Corporation Salary for Year End Salary/Dividend Splitting Sole- Proprietorship Limited Liability Company S-Corporation 100k Revenue 50k Expenses 50k Net Income Self Employment Tax 15.3% $7,500 (approx) Before regular income tax and itemized deductions 100k Revenue 50k Expenses 21,750k Net-Income from S-Corp No Self Employment tax on the S-Corp Flow Thru Income $3,327 SAVINGS!! (approx) Before regular income tax and itemized deductions 25k Salary 3,825k Employment taxes (approx) This is sample of what one taxpayer may choose to report as payroll. Each taxpayer should analyze their individual situation for the amount of payroll that is appropriate.

Maximize Your Retirement Plan Contribution Contribution / Deduction 09 & 10 IRA (Traditional/Roth): $5,000 - $6,000 if you are over 50 years old extra $1K. SIMPLE Plan: $11,500 - $14, (k), 403(b), 457 Plans: $16,500 with 25% match up to $49,000 SEP: Maximum $49,000 or 25% of compensation Other Defined Benefit Plans: From $50,000 to $300,000 Phase out limitations/Minimum Payroll amounts Single AGI Phase out: 55k – 65k Roth 105k – 120k Married AGI Phase out: 89k – 109k Roth 166k – 176k GONE IN 2010 for ROTH Equal to Salary amount, not to exceed $11,500, or $14,000 if using catch up provisions Catch up provision of $5,500 if over 55 by end of the year. Salary Calculations will be specific to each plan using the participant’s age and salary

Retirement Planning DEADLINES: Existing IRA (Traditional/Roth) contributions: 4/15/2010 Traditional to Roth conversions: 12/31/2009 Employee contributions to a 401(k): 12/31/2009 Employer contributions: By tax filing deadline, including extensions Note: In order for a self-employed individual or an employee to make a contribution in 2009 or take the accompanying deduction, the Plan must be adopted (or created) by 12/31/2009.

Maximizing Medical Expense Deductions - Insurance may be deductible on 1040 if self-employed Itemized Deductions Health Savings Account (HSA) Health Reimbursement Arrangement (HRA) - Everything else limited to 7.5% AGI - Must maintain high deductible insurance policy ($1,150/$2,300) - Must utilize 3 rd party admin - Fixed payments, balances carry forward. - $3,000 Individual - $5,950 Family - No insurance requirement - Self-administered - No limits - Reimbursement procedure THE HEALTHY HIGH EXPENSES

Paying spouse or children before Year End S-Corp or C-Corp Director fee Employee 15.3% FICA Family Sole Prop or SMLLC Pay Children- NO FICA Standard Deduction $5,700 – 2009 for earned income Service or management Fee Family LLC Over age 18Under age 18 Must be owned 100% by Mom and/or Dad Retirement Plan or Health Reimbursement Plan OPTION 1 OPTION 2 OPTION College Savings Plan

Maximize Vehicle Expenses Business 2009 – 55 cents Medical/Moving 2009 – 24 cents Charitable 2009 – 14 cents - Fuel, repairs, maintenance, etc.. - Depreciation - Be aware of Depreciation limits * If 6000lb+ vehicle then deduct up to $25,000 - If Truck with 6ft bed or greater then deduct up to $250,000 * Recent changes ALTERNATIVE FUEL CREDITS 1. Fuel Cell 2. Lean Burn 3. Hybrid 4. Alternative Fuels * $ Savings + Credits + Environment!! -Business % of Interest on Auto Loan - Business % of Interest on Auto Loan, parking, business use % of property tax. *Always keep mileage records if there is personal use MILEAGE SUV/TRUCK DEDUCTION

Utilizing Cost Segregation and Depreciation With Cost Segregation Without Cost Segregation Assumption- $260,000 residential rental purchased in 2009, with a Land value of $65,000 (25%), $20,000 in 5-year property, and $24,000 in 15-year property. Remaining $151,000- Building. Beware of Depreciation Recapture at Ordinary Rates! Depreciation Expense- $29,862 *Potential Tax Savings - $9,320 Depreciation Expense w/ §179 -$37,862 Depreciation Expense- $6,795 * Assuming 25% Federal Rate and 5% State.

Gulf Opportunity Zone GO Zone - Properties purchased in certain Louisiana parishes or Mississippi counties - 50% bonus depreciation - Senate Bills 1761 and 1861 to extend through 12/31/10 - Small Rental Assistance Program (SRAP) – – 5 year forgivable loan up to $40,000 – – Must meet certain holding requirements – – Low income (capped rents)

First Time Home Buyer Credit (American Recovery & Reinvestment Act Amendment) – Up to $8,000 – Calculate by 10% of value of home up to $8K. – Only effective until April 30, 2010 (must close by June 30 th ) – Phase out $125K single and $225K married. These WENT UP! – First time home buyer is someone who has not owned a home in the last three years. – NO REPAYMENT REQUIREMENT, unless you don’t stay for 3 years. – Claim Credit on 2009 or 2010 Tax Return. – You don’t have to be a new home buyer. There is an additional separate $6,500 credit for buyers who have owned a principal residence for at least 5 years.

Understanding Acceleration or Deferral of Income/Expenses Generally, you should defer income if at all possible. But in certain instances it may pay to accelerate income, for example: Too many deductions: If your itemized deductions exceed your taxable income, you should accelerate as much income as possible to fully utilize them. Change in income level: Anticipated changes in employment or gains from the sale of assets, etc. next year that could bump you into a higher bracket, making the tax on the accelerated income lower this year. Change in filing status: An upcoming marriage or divorce that will put you in a higher tax bracket may warrant the acceleration of income this year.

Understanding Acceleration or Deferral of Income/Expenses Here are a couple examples of how to do it: Year end bonus: Negotiate with your employer the timing of the bonus. Collect receivables: The timing of your collection may be critical. Payment of expenses: Prepay or defer. Timing, timing, timing. Incentive Stock Options: Exercise the option and dispose of the stock (it has to make sense). IRA or Plan Withdrawals: In the event that you are over 59 ½, you might consider making withdrawals. Installment Notes: The sale you made in a previous year can be undone if you need the income this year rather than in the future. (Early pay-off; Use the note as collateral for a loan; or Sell the note to a third party) Any of these will trigger the otherwise deferred gain. Dividends: Timing, timing, timing.

Thank You!! For more information, please contact us at one of the following: Telephone Facsimile © KKO Lawyers, LLP Telephone Facsimile © Kohler & Eyre CPAs, LLC Telephone Facsimile © NumberWon Accountants, LLC 2009