Due to the large number of tax law changes in recent years, there are now even more ways to save taxes and year end planning plays an important role. Thinking about taxes is never fun, but it’s also something you literally can no longer afford to put off.

Each year we encourage you to review your investment portfolio for capital gains and losses. The long term capital gains rate of 15% is currently scheduled to end on 12/31/2010 and increase to 20%. You may want to consider harvesting gains in 2009 and 2010 to take advantage of the 15% tax rate on long term gains. Additionally, consider harvesting losses to offset those gains and reduce or eliminate your capital gain tax liability. Harvesting losses can also limit the recognition of short term capital gains which are normally taxed at a higher rate.

Charitable planning is another year end planning strategy that can help reduce your tax liability while supporting philanthropic activities. Most donations are made in cash but you may want to consider donating appreciated marketable securities that you have held for more than one year. When you donate marketable securities to a charitable organization you receive a deduction for the market value of the security and since you are not selling it you do not have to recognize any gain. Another factor to consider is the tax rate of benefit for your charitable donations. You may want to consider donating more if you are receiving a higher tax benefit for your donation. Taxpayers' age 70 1/2 are allowed to distribute up to $100,000 from their IRA directly to a charitable organization for 2009. Donating using this method does not cause the taxpayer to have to recognize taxable income on their distribution from the IRA.

Required minimum distributions (RMD) from qualified retirement plans have been waived for 2009. If a taxpayer has already taken a RMD and does not need the distribution, the taxpayer has the later of 60 days from the payment date or November 30, 2009 to roll the distribution back into an eligible retirement plan.

All taxpayers regardless of AGI are allowed to convert a traditional IRA to a Roth IRA beginning in 2010. You may want to consider converting the full amount of an IRA or just a partial amount. The amount converted is considered taxable income. There are many factors that determine the optimal timing of a ROTH IRA conversion. One such item to consider is the proposals to increase income tax rates beginning in 2011 as discussed below.

President Obama's "Green Book" of tax proposals include:

• increasing the top ordinary income tax rate to 39.6% from 35%
• increasing the long term capital gain and qualified dividend rate to 20% from 15% for taxpayers with an AGI greater than $250,000, and
• capping the benefit of itemized deductions at 28% regardless of the taxpayer's tax bracket

Having knowledge of tax proposals can help determine whether to defer or accelerate income and deductions to help reduce your overall tax liability across several years. These are just a few of the ways our experienced team at DGC can help you to reduce your tax liability. Please contact your DGC representative for further information on year end planning.

DGC Named One of the Best Accounting Firms to Work for

For the second year in a row, DGC has been named one of the Best Accounting Firms to Work For by the Accountants Media Group, publishers of Accounting Today, Accounting Technology, CPA Wealth Provider, Practical Accountant and host of WebCPA.com and Best Companies Group. Best Firms to Work For identifies, recognizes and honors the best places of employment in the accounting industry, benefiting the nation's economy, workforce and businesses nationally.

A leading differentiator and driving force behind DGC receiving this prestigious award is the firm’s well-established Human Capital department that ensures employees are supported throughout their career at DGC.  By developing the technical, interpersonal and leadership skills of DGC employees and striving to create an environment that supports creative thinking and collaboration, the Human Capital department truly sets DCG apart from its competitors.  Additionally, at all levels, DGC employees are given generously funded education, leadership training, career coaching and mentoring programs.

Companies from across the country entered the two-part survey process to determine the Best Accounting Firms to Work for, consisting of an evaluation of each nominated company's workplace policies, practices, philosophy, systems and demographics, as well as employee surveys to measure the employee experience. The employee survey is where DGC shined with appreciative comments from employees noting the flexible work schedules, ability for professional growth, training opportunities, a comprehensive mentor program, career coaching, Red Sox outings, meals during the busy tax season and staff recognition to name a few.

CLICK HERE to view full article in Accounting Today.

Expense Reduction Series - Healthcare Benefits
By Dawn Hagman, Human Resources Manager

Health insurance benefits are one of the most expensive benefits employers offer. On average, they represent 8.48% of payroll and 43.7% of total benefit cost. It’s clear that controlling these costs can have a significant impact on your organization. Cost saving opportunities fall into four general categories; preventing disease, shifting costs, purchasing the right coverage, and reducing health care consumption.

Cost Saving Opportunities

Preventing Disease - Experts agree prevention of illness or accidents is the most cost-effective action to reduce health care claims. There is a direct financial impact in promoting the good health of employees and other plan participants. Healthy living initiatives that are aimed at disease prevention of preventable diseases such as wellness programs can have a significant impact on insurance premiums.

Shifting Costs - Shifting some or more of the insurance premium cost to the participant is another way to help keep employer health insurance costs down. This can be accomplished using the following strategies:

• Increase employee reimbursement
• Adopt a section 125 cafeteria plan
• Increase the individual and family deductibles
• Increase co-insurance payment percentage
• Raise maximum out-of pocket limits
• Lower maximum lifetime benefits
• Lengthen the service requirement
• Establish (legally permissible) preexisting condition clauses
• Omit unnecessary coverage such as ambulance fees, chiropractic treatment, vision and dental coverage
• Limit certain benefits such as physical therapy, medical supplies and equipment, home health care, etc.
• Consider eliminating or modifying retiree health benefits
  

Purchasing the Right Coverage- Alternative health insurance sources other than the traditional indemnity plan are available. Some of these options may help cut costs and should be investigated for premium saving opportunities:

• Association Plan’s - Health insurance through trade associations may offer savings through group purchasing power.
• Health Insurance Cooperates – Well-established insurance cooperatives can offer members substantial savings.
• HMO vs. PPO - Evaluate the cost savings opportunities of switching to a new plan design.
• Consider Self Insurance - Self insurance combined with stop loss coverage may result in lower health insurance expenses, particularly if your employees are in good health.
• Consider a Consumer–Driven Health Plan (CDHP) - These plans transfer the control of healthcare costs to the employee, therefore making the employee an active and informed health care consumer.
• Health Savings Accounts (HSA) or Health Reimbursement Accounts (HRA) - Combined with high-deductible plans, these plans offer lower plan premiums and tax savings for the employee. These plans are gaining in popularity.
• Get Competitive Bids - Although it is not advisable to switch plans every year, when 15-30% increases are not uncommon, getting additional quotes may ensure you are getting a competitive rate.
• Complete the Health Insurance Application Accurately - The insurer’s underwriting department will use this application to assign the group to a category that determines the baseline premiums charged. Inaccurate information may result in higher premiums.
• Analyze Claim Loss Reports - These insurer reports that summarize the claims loss statement may help you identify persons no longer on the plan, persons listed on the plan in error or questionable treatments or charges. These reports will also help determine coverages that should be revised and information useful for renewals.
• Inquire Annually about Rate Reducing Actions - Before each renewal period, the company should ask the insurance agent if its group can adopt any practices that will lower the manual rates or make it more attractive to underwriters.

Reducing Health Care Consumption

Premiums will be less if less health care is used. By carefully designing a program that financially rewards employees for healthy living the company may be able to reduce health care consumption. You can also choose an insurer that offers or practice the following:

• Major Cases Management - These are programs that assign a case worker to all major cases to identify the best and most efficient health care options.
• Cost Containment Measures - These are used by insurers to reduce the amount of health care resources used
• Selectively Requires a Second Opinion - Second opinions are a control over medically unnecessary procedures.
• Uses a Utilization Review - This is a process where the insurer reviews the doctor’s or hospital’s treatments and discharge plans. The purpose to create a “check and balance” against the interests of the two parties.
• Have Hospital Bills Audited - Clerical and accounting errors occur in hospital billing systems. Finding and correcting these errors can save the ensurer and thus put them in a better position to restrain premiums.
• Restrict Weekend Admissions - Little actual treatment occurs on the weekends. Hospitalization stays generally can be shortened without affecting medical treatment if the patient enters on a Monday rather than a Friday. To restrain costs, the insurance plan should prohibit all but emergency admissions on weekends.
  

These are just some of the ways you can begin to reduce your health care insurance expense.
For more innovative ways to reduce your expenses, contact your DGC representative.

IRS Issues 2010 Optional Standard Mileage Rate
The Internal Revenue Service recently issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

CLICK HERE for more details regarding the standard mileage rates.

Philanthropy: ’Tis the Giving Season
By Beth Milkovits, CFP, The Boston Foundation

Although people do give year-round, many charities receive the majority of their contributions during the holiday season. One reason is tax purposes. In consulting with your professional advisors about your tax planning, you may find that it would be beneficial for you to make a contribution in order to get an income tax deduction. But there are other reasons to give as well.

Why Give?
People practice philanthropy for various reasons. You may want to teach your children or other family members about giving back. Many people use this time of year to work together and give as a family. Another reason for giving is because it feels good. This may seem cliché, but studies show that giving makes us happier. Ultimately, we feel better about using our money to buy dinner for friends or giving to a charity than we do about purchasing a new car. There are as many answers to the question “Why should we give?” as there are people who give.

How to Give
Many people have the desire to give, but aren’t sure how to do so. One way is to give directly to a charity. You may have a certain organization that you volunteer with regularly, or a specific area of interest. However, if you have a number of interest areas that may change over time and over generations, there are some flexible giving vehicles that can help. This is by no means an exhaustive list of ways to give, but it’s a good start:

Donor Advised Fund
A Donor Advised Fund is a charitable giving vehicle administered by a third party and created for the purpose of managing charitable donations on your behalf. You can make a contribution to your fund, receive a tax deduction for that year, and take your time in making distributions.

Private Foundation
A Private Foundation is a legal entity set up by an individual or a family for philanthropic purposes. Private Foundations allow for more control over the investments and administration of the Foundation; however, it is important to be aware that Private Foundations are subject to excise tax and other regulations by the IRS. You can consult with your professional advisors about which vehicle may be best for you and your family.

Planned Giving
Another way to give that incorporates all that we’ve discussed thus far is Planned Giving. You may not feel ready or able to give outright at this time, but there are ways for you and your family to enjoy what you have now, and then give to charity later. Planned giving integrates philanthropy with financial, tax, and estate planning strategies over time.

What to Give
People usually give cash or appreciated securities to charitable organizations or to their giving vehicle. The benefit of giving appreciated securities that have been held for longer than one year is that in addition to receiving a tax deduction, you will not have to pay capital gains tax on the asset. This goes for all types of appreciated assets, not just securities. In some cases it makes sense to give securities or other types of property (such as a residence, restricted stock, thinly traded bonds, or shares of a partnership) to a charitable vehicle, regardless of whether or not the property is appreciated. (Please note that there are different deductibility limitations depending on the type of entity the property is given to.)

For many people, adopting a philanthropic strategy allows them to marry their altruistic goals with their financial goals. That is why we recommend consulting with your professional advisors when making philanthropic decisions. It may also help you identify opportunities for giving all year long, not just at the holidays.

Beth Milkovits, CFP, is Director of Development for The Boston Foundation. The Boston Foundation manages funds which have been established by donors for the general benefit of the community or for special purposes. The learn more, visit www.thebostonfoundation.org. Beth can be reached at 617-338-1218 or beth.milkovits@tbf.org.

Dec. 16 – Boston Estate Planning Council Holiday Reception (Sponsored by DGC)
Dec. 17 – ACG DealMaker’s Breakfast
Jan. 6 – SMPS – An Inside Look: Boston College, Brown University and MIT
Jan. 14 – CFA New England – Post-Holiday Party
Jan. 22 – Greater Boston Chamber - Pinnacle Awards

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