June 2011




Jim Oliver & Associates, P.C.
FB Bancorp Building
17300 Henderson Pass
Suite 240
San Antonio, TX 78232

p:210.344.0205
f:210.344.4362

cpa@teamoliver.com
www.teamoliver.com

Financial Life Advisors
FB Bancorp Building
17300 Henderson Pass
Suite 290
San Antonio, TX 78232

p:210.918.8998
f:210.344.4362

advisor@teamoliver.com
www.fladvisors.com

This firm is not a CPA firm.
 
How to Pay Less for Your Summer Vacation

The summer travel season is almost upon us. While you look forward to lazing on the beach, visiting the theme parks, and enjoying ice cream cones, also consider ways to fit some business in to your trips.

The idea is to take advantage of tax deductions for which you become eligible when you devote part of your trip to business. As long as most of your travel days are for business purposes, you can deduct the cost of travel (airplanes, trains, cars, etc.) and for hotels, parking, taxi service, meals, and so on.

As defined by the IRS, travel expenses are the Ordinary and Necessary expenses of traveling away from home for your business, profession, or job. An Ordinary expense is one that is common and accepted in your field of trade, business, or profession. A Necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.

The key factor is that your trip must be primarily for business. Days of leisure can be added to a trip and still be considered primarily for business. The more days and time per day spent on business will help substantiate the trip. There are no set rules on how many days and how much time per day need to be spent on business for your trip to be considered business related.

Keep all the documentation for business-related travel, including confirmations of appointments, emails, phone records, registration to conferences, etc. The days spent traveling to and from a business trip are considered part of the trip. This includes the weekend if it is impractical to come home between weekday business meetings. Planning ahead can make this happen. Traveling with Your Spouse

If a spouse goes with you on a business trip or to a business convention, his or her travel expenses can only be deducted if your spouse
  1. is your employee,
  2. has a bona fide business purpose for the travel, and
  3. would otherwise be allowed to deduct the travel expenses.
To be an employee, your spouse must be on the payroll and payroll taxes must be paid. If your spouse is not an employee and travels with you on vacation, you can still deduct the cost of your room at the single-occupancy-per-day rate, rather than half the rate. Meals could also be deductible. If you are paying for lunch or dinner for a customer or business associate and that person's spouse, the full cost of the meals might qualify under the 50% meal deduction. Let us know if you're unclear on this deduction; we can give you the details.

Example: Bill drives to Boston on business and takes his wife, Joan, with him. Joan is not Bill's employee. Joan occasionally types notes, performs similar services, and accompanies Bill to luncheons and dinners. The performance of these services does not establish that her presence on the trip is necessary for Bill's business. Her expenses are not deductible.

Bill pays $199 a day for a double room. A single room costs $149 a day. He can deduct the total cost of driving his car to and from Boston, but only $149 a day for his hotel room. If he uses public transportation, he can deduct only his fare. Further, if Bill has dinner with a customer and spouse, the meal may be deducted under the 50% meal deduction.

With travel outside of the United States, the transportation for business trips of one week or less may be deducted. However, only a portion of transportation costs for longer trips is deductible.

Example: You live in New York. On May 4 you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you had not stopped in Dublin, you would have arrived home the evening of May 14. You did not meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are non-business days.

You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris.

You cannot deduct your expenses while in Dublin. You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin.

You paid $450 to fly from New York to Paris, $200 to fly from Paris to Dublin, and $500 to fly from Dublin back to New York. Round-trip airfare from New York to Dublin would have been $850.

You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($850 - 7/18 = $331) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($450 + $200 + $500 = $1,150). Your deductible air travel expense is $819 ($1,150 - $331).

What Expenses Are Deductible?
Here's what you can deduct when you travel away from home for business.

Transportation Expenses
You can deduct Transportation Expenses when you travel by airplane, train, bus, or car between your home and your business destination. If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. If you travel by ship, additional rules and limits apply.

Taxi, Commuter Bus, Subway, and Airport Limousine Fares
You can deduct the fares for these and other types of transportation that take you between
  • the airport or station and your hotel, and
  • the hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.
Baggage and Shipping Expenses
You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations.

Car Expenses
You can deduct the cost of operating and maintaining your car when traveling away from home on business. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses.

Lodging and Meals
You can deduct your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Meals include amounts spent for food, beverages, taxes, and related tips. Additional rules and limits may apply.

Cleaning Clothes
You can deduct the dry cleaning and laundry expenses you incur while away on business.

Telephone
All business calls while on your business trip are deductible. This includes business communication by fax machine or other communication devices.

Tips
You may deduct the tips you pay for any expense listed above.

Other Expenses
You can deduct other similar ordinary and necessary expenses related to your business travel. These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, or Internet access fees.

Ask Us
If you have any questions about how to grab some tax deductions from your summer travels this year, just give us a call or send us an email.


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Is Long-Term Care Insurance a Good Idea? 

There is a good possibility that you or your spouse will eventually require some form of long-term care. According to the U.S. Department of Health and Human Services, about 40% of people aged 65 or older will enter a nursing home for some period of time during their lifetimes. 1

Whether you or your spouse will be among this group is impossible to predict. But it is wise to consider how you might pay for long-term care and whether long-term care insurance is a good idea for you.

Cost of Care

Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of current costs according to the U.S. Department of Health and Human Services National Clearinghouse for Long-Term Care.

Average costs in the United States (in 2009): 1
  • $198/day for a semi-private room in a nursing home
  • $219/day for a private room in a nursing home
  • $3,131/month for care in an assisted living facility (for a one-bedroom unit)
  • $21/hour for a home health aide
  • $19/hour for homemaker services
  • $67/day for care in an adult day health care center
With health care costs rising every year, these expenses can be expected to grow substantially over time. Furthermore, neither Medicare nor Medicare supplemental coverage, also known as Medigap insurance, typically cover long-term care. Medicaid will cover a large share of such services but only if you meet stringent financial and functional criteria. What's more, most employer-sponsored or private health insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own.

Cost of Insurance

Like life insurance, long-term care insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums. A 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home care and home care, with premiums adjusted for inflation. 2

Most long-term care policies sold today are federally tax-qualified, which means the premiums paid and out-of-pocket expenses for long-term care may be applied to the medical expense deduction of the federal tax code. (Typically, taxpayers may deduct the portion of medical and dental expenses that exceed 7.5% of adjusted gross income.) Additionally, long-term care benefits received are not taxed as income up to certain limits. Consult with a tax advisor to learn more about the tax implications of long-term care insurance.

Coverage

Long-term care policies are complex and vary widely. But in general, long-term care insurance typically covers the following:
  • Nursing home care
  • Adult day care
  • Visiting nurses
  • Assisted living
  • In-home assistance with daily activities 
LTC includes a range of nursing, social, and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. LTC insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing, or eating.

Other Considerations

Deciding whether to purchase long-term care insurance will depend on your personal situation. You may want to consider your family health history, your level of assets to potentially pay for long-term care, and your feelings about relying on family members for support. Probing these and other individual circumstance can help you make a well-informed decision.

1 U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care, 2009 (latest available).

2 AARP.org

© 2011 McGraw-Hill Financial Communications. All rights reserved.

May 2011 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Jim Oliver, a local member of FPA.


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The Role of Insurance in Your Financial Plan

Insurance is an important element of any sound financial plan. Different types of insurance protect you and your loved ones in different ways against the cost of accidents, illness, disability, and death.

What Are Your Insurance Needs?

The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, no one-size-fits-all policy. Life insurance, for example, is a virtual necessity if you have a spouse and children, but perhaps is less important for a single person. Disability insurance, which provides an income stream if you are unable to work, is important for everyone.

Following is a list of the forms of insurance most people require.

Auto Insurance

Auto insurance protects you from damage to the often considerable investment in a car and/or from liability for damage or injury caused by you or someone driving your vehicle. It can also help cover expenses you or anyone in your car may incur as a result of an accident with an uninsured motorist.

Auto liability coverage is necessary for anyone who owns a car. Many states require you to have liability insurance before a vehicle can be registered. However, state-required minimum coverage often does not provide adequate protection. Suggested minimums are $100,000 for medical expenses per injured person, $300,000 for the total per accident, and $50,000 for property damage. Collision, fire, and theft coverage is also advisable for a vehicle having more than minimal value. You can cut costs, however, by choosing a higher deductible -- the amount of loss that must be exceeded before you are compensated.

The cost of auto insurance varies greatly, depending on the company and agent offering it, your choice of coverage and deductible, where you live, the kind of vehicle, and the ages of drivers in the family. Substantial discounts are often available for safe drivers, nonsmokers, and those who commute to work via public transportation

Homeowner's Insurance

Homeowner's insurance should allow you to rebuild and refurnish your home after a catastrophe and insulate you from lawsuits if someone is injured on your property. Coverage of at least 80% of your home's replacement value, minus the value of land and foundation, is necessary for you to be covered for the cost of repairs. There are several grades of policies, ranging from HO-1 to HO-8, with increasingly comprehensive coverage and cost. Unless you increase coverage, most homeowner's policies cover the contents of the house for 50% to 75% of the amount for which the house is insured. The liability coverage in many homeowner's policies is $300,000.

How Much Coverage Do You Need?
 Suggested minimum amounts are:

Homeowner
80%-100% of the full replacement value of your home and its contents in Property Insurance; $300,000 in Liability

Renter
$4,000 in Property Insurance to protect against loss or damage; $100,000 in Liability

Liability Insurance

Often called umbrella liability coverage, this takes effect when the personal liability and lawsuit coverage in other policies is exhausted. The cost for $1 million worth of protection -- especially necessary for high-income individuals and those with considerable assets -- may be only a few hundred dollars a year.

Life Insurance

Life insurance, payable when you die, can provide a surviving spouse, children, and other dependents with the funds necessary to maintain their standards of living, can help repay debt, and can fund education tuition costs. The amount you need depends on your situation. If you make $100,000 a year, have a sizable mortgage, and have two kids headed to an expensive college, you could need $1 million in coverage.

Talk with an insurance agent who offers policies from companies whose financial strength is ranked high by rating agencies. And remember that you can shop around.

Disability Income Insurance

A long-term disability policy is activated, replacing a portion of your lost income, when you are unable to work for an extended period. Some, but certainly not all, employers cover their employees with some form of company-paid disability income insurance. Typically, such coverage is only partial and/or short-term in nature. Thus, many people seek to purchase an individual disability income insurance policy. If you're buying, try to get a noncancelable policy with benefits for life, or at least to age 65, and as much salary coverage as you can afford. However, keep in mind that the duration of coverage may be limited because of your occupation.

Insurers will usually cover up to 65% of your salary. Generally, you should have total coverage equal to two thirds of your current pretax income.

If your company provides disability insurance, check to see whether it's enough for your needs. Group disability insurance policies may be capped at six months and provide benefits that won't cover your expenses.

Health Insurance

Most people enjoy medical insurance as an employee benefit, often with their employers paying whole or part of the premiums. Many employers offer a choice between HMOs (health maintenance organizations) and traditional fee-for-service care. Rates for HMOs are usually cheaper but have more constraints. Privately purchased health insurance is much more expensive -- often by several hundred dollars a month -- depending on such things as deductibles, coverage choices, and location.

Long-Term Care Insurance

With an aging population and uncertainty about the future of Social Security, insurance to cover the high cost of nursing home or at-home health care is becoming more widespread. Medicare pays very little of the cost of long-term care in the United States. Medicaid will pay for the care, but only for patients whose assets are almost completely depleted. 1

With Congress always debating the future funding of these programs, financial planning for long-term care is more crucial than ever.

Medigap insurance can help pay medical expenses of the elderly not covered by Medicare. However, it doesn't cover custodial nursing home costs. In fact, about half of all nursing home residents pay for the care with personal savings. 1

Contact a qualified insurance professional or AARP for more information on long-term care insurance.

Points to Remember
  1. Your insurance needs will vary based on your family, age, and economic situation.
  2. Anyone who owns a car should have auto liability insurance. Collision, fire, and theft coverage can protect your investment in a valuable car.
  3. Homeowner's insurance should provide coverage up to 80% of the cost of replacing your home, minus land and foundation. Homeowners should also have liability coverage, and those with considerable assets may want to purchase liability up to $1 million.
  4. Life insurance is important for those who have families to cover living and other expenses in the event of death. 
  5. Long-term care insurance can be expensive and complex, but may be a necessity for older people as the long-term coverage of Medicare is often inadequate.
1Source: www.Medicare.gov.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

May 2011 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Jim Oliver, a local member of FPA.


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Six Tips for Paying Estimated Taxes

Estimated tax is a method used to pay tax on income that is not subject to withholding. Depending on what you do for a living and what type of income you receive, you may need to pay estimated taxes during the year.

These six tips from the IRS will provide you with a quick look at estimated taxes and how to pay them...
  1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, or awards, then you may have to pay estimated tax.
  2. As a general rule, you must pay estimated taxes in 2011 if both of these statements apply: 1) you expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) you expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers, and certain higher-income taxpayers.
  3. For sole proprietors, partners, and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
  4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions, and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals, which we can send you. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
  5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15, and Jan. 15.
  6. Form 1040ES, Estimated Tax for Individuals, provides all you'll need to pay estimated taxes. This includes instructions, worksheets, schedules, and payment vouchers. The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
Take our advice and don't ignore your estimated tax payments. And please call us with any questions.

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