Thursday, November 1, 2007
Call the Opt Out Line to get off the list.
The number is 1-888-5-OPT-OUT (1-888-567-8688)
There is also a website:
Friday, October 19, 2007
If you view the balance sheet as a two column worksheet, the assets would be in the left column while the liabilities and owners equity would be in the right column. The two columns must be equal.
You won't be able to determine the company's profitability from the balance sheet. What the balance sheet will show is the solvency of the company. Analysts will look at various ratios (i.e. current ratio: current assets / current liabilities) to determine the company's financial well being.
Future entries in my Accounting Basics series will describe each of the components of the balance sheet.
Wednesday, October 3, 2007
Understanding Pricing Issues on BNET
Friday, September 21, 2007
"With Lotus Symphony, you can import, edit and save a variety of file formats including Microsoft Office files. You can even export your documents to Adobe® Portable Document Format (PDF). The tools work with computers running both Microsoft Windows and Linux- environments, with support for Apple Macintosh planned for the future."The suite consists of three products:
- Lotus Symphony Documents (replacement for Word)
- Lotus Symphony Presentations (replacement for PowerPoint)
- Lotus Symphony Spreadsheets (replacement for Excel)
Here's the link to the page:
IBM Lotus Symphony
Thursday, September 6, 2007
MSN Careers - What's Wrecking Your Resume
Thursday, August 30, 2007
Personal Information Stolen From 146,000 People - CNN
Anyone holding such information on the internet should be required to have their systems independently tested on an annual basis. Many company's have audits of their financial records and internal controls. Why not audit the security controls of their network?
Friday, August 24, 2007
The private accounting field can be further divided into two sub-categories depending on how the information generated by the accountant is used.
As its name implies, Management (or Managerial) Accounting provides that information which is used by managers within the company. The information provided can be as broad as long range financial projections or as detailed as analyzing cost variances (ie budget overages). Wikipedia defines management accounting as being " concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions."
While management accounting concerns the internal use of information, Financial Accounting concerns the external use of accounting information. Of course financial accounting concepts are used in management accounting. Financial accounting involves providing information which is useful to external users such as prospective buyers and investors, creditors, government agencies, etc. Financial Statements are the most provided piece of information. These include the Balance Sheet and Income Statement (to be explained in a future post). Wikipedia defines financial accounting as "the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, government agencies, owners, and other stakeholders. Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company."
Thursday, August 23, 2007
Today's Debate: HIPAA, end it or mend it? on ZDNet
Should You Buy a Refurbished PC? on BNet
Wednesday, August 15, 2007
This link should get you to their article:
BNET Identifying Capital and Operating Leases
Monday, August 6, 2007
The old accounting text book defines public accounting as: offering accounting and related services for a fee to companies, other organizations and the general public. The other services can include auditing, tax services and consulting. The certification offered for this type of accountancy is a Certified Public Accountant. The exam is prepared and administered by the American Institute of Certified Public Accountants (AICPA).
Private (or industrial accounting) is the opposite. Instead of providing services to many clients, a private accountant provides services to a single business. In a business consisting of many accountants, the 'head accountant is typically called the controller. Private accountants may or may not be CPA's. The National Association of Accountants does offer a certificate for private accountants called a Certificate in Management Accounting (CMA). Private accountants are often much more specialized and have to adapt to the needs of their company (controlling costs, budgeting, accounting systems, etc.)
Thursday, July 26, 2007
Target to Sell Only Blu-ray DVD Players
Sony says Target will exclusively carry Blu-ray players "at least through the holiday season" and will also expand its inventory of Blu-ray discs.
NEW YORK (Reuters) - Target plans to carry only Blu-ray high definition DVD players through the holiday shopping season, a move that boosts the Sony-backed technology and may deal a blow to rival HD-DVD.
In a statement on Thursday, Sony Corp. said that Target will exclusively carry Blu-ray players "at least through the holiday season" and will also expand its inventory of Blu-ray discs.
The move begins in October with Target's sale and promotion of Sony's BDP-S300 unit, which sells for about $500.
It was the second major retailer in as many months to throw its weight behind Blu-ray in the industry wide standards war reminiscent of VHS and Betamax. Blockbuster, the largest U.S. provider of home movie entertainment, in June set plans to line its shelves with Blu-ray DVDs, saying that Blu-ray rentals are "significantly outpacing HD DVD rentals."
HD DVD is developed by Toshiba Corp. and backed by Microsoft Corp. and film studios including Warner Bros.. It competes with Sony's Blu-ray which is built into its PlayStation 3 game console, and supported by companies such as Samsung Electronics Co., Apple and Dell.
Earlier this month, the HD DVD camp said its stand-alone video players have outsold rival Blu-ray players by a three-to-one margin in Europe's main markets so far this year.
Mass market acceptance of high-definition video is still some way off, due in part to the high price of the devices, and the fact that some movies and programs are available on one platform and not the other.
(Reporting by Franklin Paul)
Friday, July 20, 2007
The 7 Interview Questions You Must Ask
by Brian LibbyThere are no magic bullets when it comes to job interview questions, but the way you structure your queries is important: It's the interviewer's job to create a framework for the discussion and prevent it from running off the rails. Every company's needs are different, but a good basic strategy is to ground the interview in questions about past job performance. Then throw in some situational questions to evaluate practical decision making, and learn a little bit about how the job fits in with a candidate's biography.
Question #1: "How about those Yankees?"
Purpose: Develop the rapport needed to get the interview off the ground.
Every interview should begin with an icebreaker. It helps nervous applicants calm down and builds a sense of trust. If you have a 45-minute interview, you should spend at least the first five minutes trying to connect on a neutral topic. Make the person feel at ease and you'll solicit better information—and much more honest responses.
Alternate Version 1: "Did you go to the industry conference last week?"
Alternate Version 2: "Were you affected by the heat wave/cold snap?"
Alternate Version 3: "Did you have a good holiday?"
Question #2: "Talk about a time when you had to overcome major obstacles."
Purpose: Get a clear picture of the candidate's past performance.
Variations on this question should actually comprise your next several questions. Don't hesitate to guide the candidate through the variety of tasks (both tangible and theoretical) necessary to perform the job, and listen carefully to how he or she has handled such challenges. Pay attention to intangibles: some people are better at performing in interviews than on the job. If your candidate continually plays the role of hero or victim, that's a red flag that you're probably not getting the whole story.
Alternate Version 1: "Tell me about a time when you wrote a report that was well received. Why do you think it was successful?"
Alternate Version 2: "Describe a time when you hired (or fired) the wrong person."
Alternate Version 3: "If you had to do that activity again, how would you do it differently?"
Question #3: "What interests you about this position?"
Purpose: Find out how the candidate feels about the job and the company.
People apply for jobs for plenty reasons besides the obvious ones. Asking a candidate why he or she wants the position gives insight into their motivation. The answer may be personal (such as a narrative about what spurred them to seek a new job), or it may connect the candidate to the company: her experience with the brand, the mission statement, or the organization's role in the community. Any of these answers (or some combination) are acceptable—a personal answer can communicate trust, and a connection to the business indicates loyalty and a sense of ownership.
Alternate Version 1: "Where does this job fit into your career path?"
Alternate Version 2: "If you had to convince a friend or colleague to apply for this job, what might you tell them?"
Alternate Version 3: "What motivated you to apply for this job?"
Question #4: "Is there intelligent life in outer space?"
Purpose: Find out what kind of thinker the candidate is and how he deals with surprises.
This is your curveball, designed to make the candidate ad-lib instead of just reciting well-rehearsed answers. How much will he or she play along? As long as it's not too short or too long, virtually any response is a good one. But pay attention to attitude, the way the candidate approaches the problem, and the ease or difficulty they have in coming up with a response.
Alternate Version 1: "How many phone books are there in New York City?"
Alternate Version 2: "How do they get the cream filling inside a Twinkie?"
Alternate Version 3: "Why do people climb mountains?"
Question #5: "Imagine we've just hired you. What's the most important thing on your to-do list on the first day of work?"
Purpose: Learn about the candidate's judgment and decision-making skills.
This is an example of a situational question, which is like a behavioral question in that it's designed to assess judgment, but it's also like a curveball question because it illuminates the candidate's thought process. You want to see whether he demonstrates the competencies and priorities that are important to the job.
Alternate Version 1: "Say a coworker tells you that he submitted phony expense account receipts. Do you tell your boss?"
Alternate Version 2: "How would you handle an employee whose performance is fine but who you know has the potential to do better?"
Alternate Version 3: "What would you do if you got behind schedule with your part of a project?"
Question #6: "Why did you get into this line of work?"
Purpose: Measure the fit between the candidate's values and the culture of your company.It risks a long, drawn-out answer, but this type of question will help you select candidates that fit your company's culture. It's not about finding people like you, or people with similar backgrounds that led them to your company, but about getting a sense of their values and motivations. Concepts like values and culture can be subjective and difficult to define, but you should be looking for someone whose work ethic, motivations, and methods match the company's. This isn't a quantitative measurement so much as a qualitative one. Coke and Pepsi may seem the same to people outside the soft-drink industry, but each houses people with different approaches to making cola and running a business.
Alternate Version 1: "What do you like best about your current job?"
Alternate Version 2: "When did you realize this would be your career?"
Alternate Version 3: "What keeps you coming to work besides the paycheck?"
Question #7: "But enough about you. What about us?"
Purpose: Find out if the candidate has done his or her homework.It's a cliché to end an interview with the standard, 'So, any questions?' But the fact remains that you really do want to let the candidate ask a few things of you. Reversing roles communicates that the company seeks an open a dialogue, and it helps you ascertain just how curious and knowledgeable a candidate is about your company. If he doesn't ask any questions about the job or the business, it's a safe bet his heart isn't in it. Listen for insightful questions that demonstrate a sophisticated understanding of the circumstances of the job, the company, the competitive landscape, or the industry.
Alternate Version 1: "Where do you think the company should be in ten years?"
Alternate Version 2: "What's your opinion of our new product?"
Alternate Version 3: "Have you seen the company's new ad campaign?"
10 Mistakes Managers Make During Job Interviews
by BNET Staff
Hiring is one of the hardest parts of managing a team. A lot is riding on the initial meeting, and if you're nervous or ill-prepared—or both—it can make you do strange things. The following mistakes are all too common, but they're easy to avoid with some advance preparation.
1. You Talk Too Much
When giving company background, watch out for the tendency to prattle on about your own job, personal feelings about the company, or life story. At the end of the conversation, you'll be aflutter with self-satisfaction, and you'll see the candidate in a rosy light—but you still won't know anything about her ability to do the job.
2. You Gossip or Swap War Stories
Curb your desire to ask for dirt on the candidate's current employer or trash talk other people in the industry. Not only does it cast a bad light on you and your company, but it's a waste of time.
3. You're Afraid to Ask Tough Questions
Interviews are awkward for everyone, and it's easy to over-empathize with a nervous candidate. It's also common to throw softball questions at someone whom you like or who makes you feel comfortable. You're better off asking everyone the same set of challenging questions—you might be surprised what they reveal. Often a Nervous Nellie will spring to life when given the chance to solve a problem or elaborate on a past success.
4. You Fall Prey to the Halo Effect (or the Horns Effect)
If a candidate arrives dressed to kill, gives a firm handshake, and answers the first question perfectly, you might be tempted to check the imaginary "Hired!" box in your mind. But make sure you pay attention to all his answers, and don't be swayed by a first impression. Ditto for the reverse: the mumbler with the tattoos might have super powers that go undetected at first glance.
5. You Ask Leading Questions
Watch out for questions that telegraph to the applicant the answer you're looking for. You won't get honest responses from questions like, "You are familiar with Excel macros, aren't you?"
6. You Invade Their Privacy
First of all, it's illegal to delve too deeply into personal or lifestyle details. Secondly, it doesn't help you find the best person for the job. Nix all questions about home life ("Do you have children?" "Do you think you'd quit if you got married?"), gender bias or sexual preference ("Do you get along well with other men?"), ethnic background ("That's an unusual name, what nationality are you?"), age ("What year did you graduate from high school?"), and financials ("Do you own your home?")
7. You Stress the Candidate Out
Some interviewers use high-pressure techniques designed to trap or fluster the applicant. While you do want to know how a candidate performs in a pinch, it's almost impossible to recreate the same type of stressors that an employee will encounter in the workplace. Moreover, if you do hire the person, they may not trust you because you launched the relationship on a rocky foundation.
8. You Cut It Short
A series of interviews can eat up your whole day, so it's tempting to keep them brief. But a quick meeting just doesn't give you enough time to gauge a candidate's responses and behavior. Judging candidates is nuanced work, and it relies on tracking lots of subtle inputs. An interview that runs 45 minutes to an hour increases your chances of getting a meaningful sample.
9. You Gravitate Toward the Center
If everyone you talk to feels like a "maybe," that probably means you aren't getting enough useful information—or you're not assessing candidates honestly enough. Most "maybes" are really "no, thank yous." (Face it: He or she didn't knock your socks off.) Likewise, if you think the person might be good for some role at some point in the future, then they're really a "no."
10. You Rate Candidates Against Each Other
A mediocre candidate looks like a superstar when he follows a dud, but that doesn't mean he's the best person for the job. The person who comes in tomorrow may smoke both of them, but you won't be able to tell if you rated Mr. Mediocre too highly in your notes. Evaluate each applicant on your established criteria—don't grade on a curve.
Wednesday, July 18, 2007
Since this is a web based forum, lets look at Wikipedia's definition: the measurement, disclosure or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. The terms derive from the use of financial accounts. Accounting is the art of measuring, communicating and interpreting financial activity. Accounting is also widely referred to as the "language of business".
Any way you look at it, accounting is a process. It is a process of identifying economic events related to a business activity, recording these events, and subsequently reporting on this business activity with some means of financial representation (financial statements or other reports).
Accounting can be represented as a cycle:
- Observe events.
- Identify those events which are economic events.
- Measure the economic events.
- Record measurements.
- Classify measurements.
- Summarize measurements.
- Report business activity in financial statements or other reports.
- Interpret the contents of financial statements and other reports.
Friday, July 6, 2007
AP Online via NewsEdge Corporation :
NEW YORK_Holiday weeks and peak vacation periods can be a trying time for small business owners, especially if they haven't formulated a policy about employee time off.
This scenario will probably sound painfully familiar to many company owners: Several staffers all want the same day or week off, and when the boss says yes to some and no to others, there are hard feelings, complaints of favoritism, maybe even someone calling out sick in protest.
Human resources consultants say there are ways to resolve this kind of crisis _ although as in many other situations small business owners must contend with, it's best to plan in advance and prevent such a predicament in the first place.
Rob Wilson, president of Employco, a Chicago-based human resources firm, said that if too many people want the same time off, an owner might consider negotiating with one or more, asking workers if they'd be willing to forgo the day or week in return for something else.
"Maybe you can throw in something extra ... let them come in late or take a half a day off, something that everyone in the office doesn't have to know about _ a thanks for helping me out," he said.
Leigh Branham, owner of Keeping The People Inc., an Overland Park, Kan., human resources consulting firm, suggests drawing employees into the problem-solving process.
"Have a meeting with them, and ask how is the work going to get done?" Branham said. "Create a sense of ownership among the employees. Each person has a responsibility."
He also suggested, where possible, hiring temporary workers to fill in. Or, if it's not entirely necessary for an employee to be physically present in the office, if one or more of the vacationing staffers will agree to be available by cell phone for help or consultations.
This kind of approach to the problem can help employees feel more valued, Branham said. "It's a chance to be more a part of the team."
But the bigger question is how to make sure vacation conflicts are kept to a minimum. HR consultants uniformly advocate creating a written vacation policy, one that ideally is part of a broader employee handbook. Policies and handbooks serve an important purpose _ the more that staffers understand what's expected of them, and what they can expect to do, the better off the workplace will be.
A vacation policy needs to spell out not only how many days an employee is entitled to take and at what point in the staffer's tenure they can be taken _ for example, how many days a new employee can expect to have in the first six months or year, and at what point is he or she entitled to a full week, two weeks, three weeks, etc.
It also needs to specify how far in advance time off needs to be scheduled and how conflicts will be resolved, whether by seniority or on a first-come, first-served basis, or a mixture of both. An owner also needs to consider whether time off includes sick days as well as vacation time and personal days.
Owners who need help in putting a policy together might talk to other business owners in the same industry or the same geographic area, to see what the norm is. Branham also suggested, "Get a good benefits person to give you some guidelines."
As they formulate a policy, owners need to remember that vacation and time off policies can help make companies more competitive in a tight labor market. Businesses that can't afford benefits like health insurance might want to consider more flexible time-off policies _ keeping in mind that increasingly, workers are looking for a better work-life balance. A good candidate for a job might be turned off by a vacation policy that's too stingy or too rigid.
Still, there are some businesses that have to hold the line on vacations _ for example, restaurants in popular beach or resort areas. In such cases, employees need to know even before they're hired that time off is likely to be limited at certain points in the year.
Wilson noted that his company found as it grew that the last week of the year was one of the busiest because of tax law changes that were taking effect Jan. 1. So Employco's vacation policy had to be adjusted to let workers know that no one could take time off that week.
Biotech Week via NewsEdge Corporation :
2007 JUL 11 - (NewsRx.com) -- Health insurance is confusing enough. And then we're expected to understand all of those acronyms. What's an FSA? An HRA? An HSA?
David Ewers, Boise district manager for PacificSource Health Plans, thinks it's important to talk to people in plain English. "How can you make good choices if you don't understand your options?" he asks.
Today, many employers are encouraging their employees to take a more active role in managing their own health care -- and their own health care costs. That trend has led to a whole new array of health care plan options, along with a new set of acronyms.
Such consumer-directed plans help employers control healthcare costs while giving employees more control over how their healthcare dollars are spent. Plans vary but all consumer-directed plans include a low cost, high deductible Preferred Provider Organization (PPO) plan plus a healthcare spending account.
Among these spending account options are Flexible Spending Accounts (FSAs). FSAs let employees make pre-tax contributions to pay for dependent health insurance premiums and such foreseeable out-of-pocket healthcare expenses as unreimbursed medical expenses, dental and vision care and prescriptions. These plans offer tax savings for both employees and for employers.
Health Reimbursement Arrangements (HRAs) are similar to FSAs but employer contributions to employee accounts are not taxable and funds may be rolled over from year to year.
Health Savings Accounts (HSAs) may be funded by either or both employers and employees and, again, there are tax advantages for both.
Ewers says it's worth wading through the sea of acronyms to get the most out of your health insurance. Don't be afraid to ask questions and you'll enjoy all the benefits your insurance plan has to offer.
Miami Herald via NewsEdge Corporation :
Certegy Check Services, a Fidelity unit which helps businesses clear checks, sued
"We don't anticipate losing any business as a result of this situation," Renz Nichols, president of Certegy, said on a conference call. "We have seen no evidence that any credit card or bank account information was used for anything other than marketing."
Banks, financial firms and retailers are focusing on data security after system breaches led to consumer lawsuits and losses. Retailer
Certegy also sued Sullivan, formerly a senior database administrator, for misappropriation of trade secrets, breach of fiduciary duty and breach of confidentiality agreements. The complaint didn't specify the amount of damages sought by the company.
Certegy fired Sullivan after it discovered that the information was sold,
Lawyers for the firm said they didn't have an address or telephone number for Sullivan, who couldn't be reached by Bloomberg News for comment through directory assistance or computer searches.
The stolen data included names, addresses, telephone numbers, birth dates, as well as bank account and credit card information, the company said. After receiving the information, the data broker sold names and addresses, but not customers' entire bank account numbers, to the marketing firms, Nichols said.
The Secret Service, a branch of the
"It's the responsibility of institutions like Fidelity to strictly limit access to data, to make sure the people handling the data are people we can trust," said
Certegy, which employs about 1,000 people, is notifying consumers about the data theft, and has alerted credit reporting agencies as well as the Visa and
Thursday, July 5, 2007
Anyways, read this article and comment...
Associated Press WorldStream via NewsEdge Corporation :
BEIJING_The next Made-in-China export bound for the United States: cars.
Chrysler Group signed a deal Wednesday with China's biggest automaker, Chery, to launch a low-cost production venture that could export the first Chinese-made cars to the United States.
The first cars will reach Latin America or Eastern Europe within a year and models should be exported to North America and Western Europe in 2 1/2 years, said Chrysler CEO Tom LaSorda.
"As part of the Chrysler Group's global transformation, we are finding new ways to bring vehicles to market faster, more efficiently and with less cost," LaSorda said at a signing ceremony.
The alliance offers 10-year-old Chery Automobile Co., based in the eastern Chinese city of Wuhu, an opportunity to realize its longtime ambition of entering the U.S. market.
Chinese automakers already export, mostly low-priced trucks and buses shipped to Africa and other developing markets. But analysts say they lack the technology to meet U.S. and European safety and pollution standards on their own.
Chery CEO and Chairman Yin Tongyao said the deal will help Chery improve its skills as it tries to expand foreign sales of its own models.
"Chery is still young, so we should learn from Chrysler and improve our own competitive edge in the near future," he said, calling LaSorda "my teacher in the automotive business."
The first Chrysler-Chery export will be based on Chery's A1 compact and sold under the Dodge brand, LaSorda said.
A 1.3-liter version of the A1 retails in China for 53,800-59,800 yuan (US$7,100-US$7,900; €5,200-5,800). Export prices have not been announced.
The companies will jointly develop future models, probably with Chrysler styling on a Chery platform, LaSorda and
LaSorda said he had "no concerns at all" about convincing U.S. consumers that Chinese-made cars are safe at a time of warnings about seafood, tires and other goods imported from China. Chrysler will work closely with Chery to ensure the cars meet U.S. and European safety and emissions standards, he said.
The agreement follows DaimlerChrysler AG's agreement in May to sell 80.1 percent of money-losing Chrysler to U.S. private equity group Cerberus Capital Management, freeing the parent company to focus on its truck and Mercedes luxury car lines.
Major automakers have been aggressively expanding production in China, which overtook Japan last year to become the world's No. 2 vehicle market after the United States. But until now, most has focused on meeting red-hot local demand, which has made China a bright spot for U.S. automakers amid lackluster sales at home.
Others also have announced plans to export Chinese-made cars to the United States but none has yet made it to market.
A Chinese automaker, Changfeng Motor Co., said in January it hoped to sell sport-utility vehicles in the United States within two years but has given no details. Chery had a deal with American entrepreneur Malcolm Bricklin to sell cars in the U.S. market but that fell through.
Japan's Honda Motor Co. has exported Chinese-built Jazz subcompacts to Europe since 2005.
Last year, Chery reported sales of about 310,000 cars, with 40,000 of those exported. Its target this year is 390,000 cars, including 70,000 units sold abroad.
The company assembles vehicles with partners in Iran, Malaysia, Russia, Ukraine, Brazil and Egypt. It announced plans in March to open a factory in Uruguay _ its first in Latin America _ with an Argentine partner.
Total Chinese passenger car sales rose 37 percent last year to 3.8 million, while total vehicle sales rose 25.1 percent to 7.2 million, according to the China Association of Automobile Manufacturers. LaSorda said Chrysler picked Chery after looking at potential partners in Europe and Asia.
"We researched the world and found they were the best," he said.
Asked whether Chrysler was worried that the alliance might help Chery develop into a competitor that might threaten its U.S. partner, LaSorda told The Associated Press, "No, we're not. With us or without us, they're going to grow. So the question is, 'Are you going to go with a winner?'"
The venture's production could reach several hundred thousand units a year, LaSorda said.
"This is the start of a very long relationship between Chrysler and Chery," he said.
On the 'Net:
Chery Automobile Co. (in Chinese): http://www.chery.com.cn
Chrysler Group: http://www.chrysler.com
Friday, June 22, 2007
Microsoft to unveil 30-inch touch screen computer - May. 30, 2007
Microsoft unveils coffee table 'surface computer'
Software maker will introduce a coffee-table-shaped computer that has a 30-inch display, allowing people to touch and move objects on the screen.
May 30 2007: 2:42 PM EDT
SEATTLE (Reuters) -- Microsoft Corp. will unveil a coffee-table-shaped "surface computer" Wednesday in a major step towards co-founder Bill Gates's view of a future where the mouse and keyboard are replaced by more natural interaction using voice, pen and touch.
Microsoft Surface, which has a 30-inch display under a hard-plastic tabletop, allows people to touch and move objects on screen for everything from digital finger painting and jigsaw puzzles to ordering off a virtual menu in a restaurant.
Microsoft's coffee-table-shaped "surface computer" hopes to one day replace the mouse and keyboard with voice recognition, pen and touch.
It also recognizes and interacts with devices placed on its surface, so cell phone users can easily buy ringtones or change payment plans by placing their handsets on in-store displays, or a group of people gathered round the table can check out the photos on a digital camera placed on top.
Microsoft (Charts, Fortune 500), the world's largest software maker, said it will manufacture the machine itself and sell it initially to corporate customers, deploying the first units in November in Sheraton hotels, Harrah's casinos, T-Mobile stores, and restaurants.
Microsoft's 150-lb computer: What's the point?
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Thursday, June 21, 2007
Bottom Line's Business Secrets
Dumb Mistakes that Kill Small Businesses And what you can do instead Ruth King BusinessTVChannel.com Published: July 1, 2007 Y ou have a strong work ethic, a solid business plan and a great reputation in your field. Your small business ought to be a success. Yet a single seemingly minor mistake might be all it takes to make a thriving young company go belly up. Fatal small business mistakes often can be avoided, but only by business owners who recognize the danger in time. Common errors that can doom small companies...
Mistake 1: Relying too much on one customer. New businesses sometimes start out with just one or two clients. When these clients provide all the work the business can handle, the customer list doesn’t expand. After all, why search for new clients when the dance card is already full? However, short client lists increase the odds of disaster. Small companies often collapse when a customer that accounts for 50% to 100% of their income decides to use another supplier... eliminate a product line... or handle a previously outsourced function in-house. What to do: Continue to search for additional customers even if one or two big clients already give you all the work your business can handle. If necessary, add an employee. Avoid letting any customer make up more than 25% of your revenue.
Mistake 2: Losing key employees to competitors. A small business might have only a few employees. It can be a crippling blow if one or two of the best quit to join a rival. Not only are the company’s most productive people now working for the other team, but the owner often must do the work that these former employees would have done. On top of that, he/she has to hire and train replacements, all of which can distract him from leading the company. The departed employees even might take some of the company’s best customers with them. Example: Several top-producing employees of a small Nevada mortgage brokerage company were hired away by a new rival that was attempting to enter the sector. The mortgage brokerage owner could not find adequate replacements and was forced to scale back his operations despite surging demand. What to do: To keep your employees loyal, do everything in your power to keep them happy. Remember to praise employees and thank them for their efforts. Keep the attitude of the office upbeat. An enjoyable working environment is at least as important for employee retention as hefty salaries.
Mistake 3: Trusting a bookkeeper too much. Even an honest-seeming bookkeeper could be an embezzler. Example: A Georgia contracting company hired a grandmotherly bookkeeper whom everyone loved -- until they learned that she had cooked the books and forged $100,000 in checks. What to do: Maintain personal control over your company’s money whenever possible. Do not give a bookkeeper check-signing privileges. Have bank statements sent to your home so you see them before your employees do. Each quarter, print out lists of receivables and payables and scan them for unusual entries. Divide any financial tasks that you can’t handle yourself among several employees so no one employee can steal without another noticing a problem.
Mistake 4: Turning a hobby into a business without understanding what’s involved. Coin collectors often dream of owning coin shops... skilled amateur photographers hope to open their own studios. Unfortunately, many people turn their hobbies into small businesses without first considering the time and money required, the risks and their lack of practical business skills. Example: A woman interested in Native American jewelry opened two jewelry stores -- one in Colorado, the other in Arizona. She had a great eye for jewelry, but she had no knowledge of the local markets... didn’t know how to write a business plan... and had never worked in retail. Both shops failed. What to do: Before launching your business, work for someone who has a comparable business so you can learn about the field. (This business either should be a few towns removed from where you intend to start your business or have a slightly different focus so that you won’t later be in direct competition.) Try to master mundane back-office tasks that are unfamiliar to you, such as balancing the books and negotiating with distributors and suppliers. To reduce your risk, try to launch your business part-time before leaving your current job. This means working very hard for a while, but it’s better than taking the leap without a safety net.
Mistake 5: Having a relationship with just one bank. Most small businesses depend on loans and lines of credit to get them off the ground and avoid cash-flow shortfalls. When a business builds a relationship with only one bank, that credit can dry up if the bank’s policies or management change. What to do: Try to do business with at least two local banks so they get to know you and believe in your company.
Mistake 6: Thinking you’ll never get sick. A long-term health problem, even if it is not life-threatening, could mean the demise of your business, particularly if it is a sole proprietorship. Example: A Georgia hairdresser broke his arm in a motorcycle accident and could not cut hair for more than a month. He contracted with another hairdresser to cut his clients’ hair for the time his arm was in a cast. Had his customers gone elsewhere, his business might not have recovered. What to do: Do not work yourself so hard that your health deteriorates. Quit any risky hobbies. Consider signing an agreement with a friendly, respected competitor to look after each other’s businesses in the event of extended health problems. Make sure this agreement includes a promise not to poach customers. If you can afford it, buy disability insurance.
Mistake 7: Failing to share the workload with employees or partners. Some small business owners find it psychologically difficult to give anyone but themselves important assignments. Their unwillingness to accept assistance limits their companies’ growth, and eventually they burn out. What to do: If your current employees can’t handle the work, hire or train employees who can.
Mistake 8: Working with unstable suppliers or distributors. When a small business’s supplier or distributor has problems, the small business itself has problems. Example: A California writer lost her stream of income and her entire inventory of books when her book distributor went bankrupt. What to do: Work with multiple suppliers and distributors whenever possible. Watch for signs of financial problems in these companies, such as bounced checks or slow-to-arrive payments. Ask your lawyer to look over your contracts with distributors to make sure that you will still own your products if the distributor goes bankrupt. For more information about protecting your small business: www.smallbusinessadvocate.com... www.sbresources.com... www.startupnation.com.
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Bottom Line/Health Secrets
Health Secrets... the best in non-biased health information,
from Bottom Line/Health.
The Amazing Healing Power of Coffee
Fight heart disease, diabetes, memory loss and more... with coffee
Joe Vinson, PhD
University of Scranton
Published: June 1, 2007
W hen most people think of a healthful diet, fresh fruits and vegetables typically top the list.
Surprising: An eight-ounce cup of caffeinated or decaffeinated coffee contains more disease-fighting antioxidants than a typical serving of fresh blueberries or oranges.
Although coffee does not contain some of the other nutrients found in healthful foods, it is the main source of antioxidants in the American diet (followed by tea and chocolate, respectively). Of course, the stimulating effects of coffee’s caffeine are not always desirable -- some people experience nervousness, insomnia or even spikes in blood pressure.
But most people who drink moderate amounts of coffee (typically defined as one to three cups daily) seem to have a lower risk for a number of chronic conditions, including heart disease, diabetes and age-related cognitive declines.
WHAT’S IN A CUP?
The amount of caffeine that is found in coffee varies, depending on how the coffee is prepared.
Examples: One ounce of espresso contains about 50 mg... an eight-ounce cup of instant coffee has 95 mg... and eight ounces of plain, brewed coffee has 150 mg.
A serving of espresso, instant or brewed coffee each contains roughly the same amount of antioxidants. In fact, coffee contains hundreds of antioxidants, particularly polyphenols -- plant compounds that can inhibit cell damage or inflammation, two of the main causes of many chronic diseases. The addition of milk and/or sugar does not appear to affect the antioxidant levels.
Important: Most of the research linking coffee to reduced disease rates is based on epidemiological studies, in which scientists have analyzed the past dietary habits of large groups of people.
This type of research helps to develop hypotheses that deserve further study, but definitive answers won’t be possible until scientists conduct more large-scale clinical studies, in which factors such as coffee consumption are tightly controlled (rather than merely self-reported by test subjects).
What the newest research on coffee consumption tells us...
GOOD FOR THE ARTERIES
New finding: In a study published in the American Journal of Clinical Nutrition in May 2006, Norwegian researchers found that postmenopausal women who drink one to three cups of coffee daily are 24% less likely to develop cardiovascular disease than non-coffee drinkers.
Theory: The antioxidants in coffee -- like those in fruits and vegetables -- are thought to inhibit the damaging effects of free radicals on cells lining the arteries.
Result: A decrease in inflammation, now thought to be the underlying cause of heart disease.
Caution: Because of the stimulating effects of caffeine, blood pressure rises temporarily (for about one hour) when regular coffee is consumed. People who drink several cups in a row may keep their blood pressure elevated, thus increasing the risk for heart disease or a heart attack.
Helpful: Space out coffee consumption. For example, have one cup in the morning and another at lunch or in the afternoon. Or switch to decaf, which doesn’t cause the blood-pressure spikes of regular coffee -- but offers the same health benefits, except for those that improve cognitive function.
BLOOD PRESSURE STABILIZER
New finding: An analysis published in the American Journal of Clinical Nutrition in February 2007 found that older adults (age 65 and over) who have four or more daily servings of caffeine -- in the form of coffee, soft drinks, etc. -- have less than half the risk of dying of heart disease than those who consume smaller amounts.
Theory: Older adults are prone to occasional hypotension (low blood pressure). They are especially vulnerable to drops in blood pressure after meals, which can increase the risk for heart attack. Caffeine, by quickly raising blood pressure, appears to reduce the risk for such coronary events.
Caution: The oils found in steeped coffee, such as that made in a French press (a glass beaker to which hot water and ground coffee are added... then a plunger is depressed, filtering out all the grounds and sediment), can significantly raise cholesterol and increase the risk for elevated blood pressure.
Better for health: Coffee that is drip brewed (water is poured over ground coffee and seeps through a filter into a pot). The filter traps most of the oils.
New finding: Research published in the June 26, 2006, Archives of Internal Medicine found that among 28,812 postmenopausal women studied, those who drank four to five cups of coffee (especially decaffeinated) per day were 16% less likely to develop type 2 diabetes than women who didn’t drink any coffee.
Theory: The antioxidants in coffee may protect the pancreas’s insulin-producing beta cells from oxidative damage.
BETTER BRAIN HEALTH
New finding: Coffee appears to slow the rate of cognitive decline in elderly adults. In a study published in the European Journal of Clinical Nutrition in August 2006, researchers gave memory tests to 676 healthy men in Finland, Italy and the Netherlands, then repeated the tests 10 years later. Non-coffee drinkers had four times more cognitive decline than men who drank three cups of coffee a day.
Theory: The antioxidants in coffee reduce age-related damage to brain cells (neurons) and/or cause beneficial changes in the hormones/neurotransmitters that are involved in cognitive function.
Scientific studies also suggest that moderate consumption of coffee reduces the risk for Parkinson’s disease as well as Alzheimer’s disease. Researchers have yet to explain why coffee reduces risk for these two diseases, but the mechanism is thought to be similar to that associated with reduced cognitive decline.
A HEALTHIER LIVER
New finding: According to research published in the June 12, 2006, Archives of Internal Medicine, coffee may reduce the risk for cirrhosis (irreversible liver scarring that, in severe cases, can be life-threatening without a transplant), especially in alcoholics. This link may be due to the anti-inflammatory effects of the antioxidants in coffee.
In addition, coffee may help protect against gallstones. Specifically, data from the ongoing Harvard Nurses’ Health Study found that women who drank four or more cups of coffee daily required fewer operations for gallstones than women who didn’t drink coffee.
Theory: Caffeine stimulates gallbladder contractions, which cause the gallbladder to empty more often and may reduce the risk for gallstone formation.
Caution: Caffeine interacts with certain medications, causing some to become more potent or increasing the amount of time caffeine remains in the body. These drugs include certain selective serotonin reuptake inhibitors (SSRIs), such as fluvoxamine (Luvox)... anti-arrhythmics, such as mexiletine (Mexitil)... and bronchodilators, such as theophylline (Theovert). Caffeine also may interact with the herbal dietary supplement ephedra. In addition, consumption of more than five cups of coffee daily has been linked to higher risk for bone fractures in postmenopausal women.
Special from Bottom Line/Health
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The company I work for has a potential sale coming up with a customer in California (we're in New York). We'd like the vendor we are purchasing the equipment from to drop-ship into CA for us (to avoid having the equipment cross the country twice). The vendor has nexus in CA and wants a resale certificate or must charge CA sales tax.
I found on the CA sales tax website form BOE-400-SPA which is the Application for Sellers Permit. This form allows you to apply for a permit as a temporary seller. The way the form is worded, though, it is generally for vendors selling at a trade show or event. Another concern about the form is that the instructions say that you may be required to put up a security deposit.
I decided to call the CA Out-of-State District office (916-227-6602) to ask a couple questions. By the way, I found their number in Publication 77: Out of State Sellers (worthwhile to read through). After explaining the situation to her that this is a one time sale to an individual customer she said that I should fax in form BOE-400-SPA as a temporary vendor (fax #916-227-6641) and in the section titled 'Temporary Permit Event Information' simply enter the address of your customer (so that the county can get its share of tax collected).
On that note, you will be responsible for filing a CA sales tax return and you will have to collect CA sales tax from your customer unless they provide you with an exemption certificate.
I was told that after you fax in the application, it will take 2-3 days for you to get the identification number to provide to your vendor on a resale certificate (also available on the CA website). A bit of work for just one sale, so it would have to be worthwhile.
On my website I have links to all the states tax or department of revenue websites. Find them here: AccountingHelpDesk Sales Tax Sites.
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Profit as We Know It Could Be Lost With New Accounting Statements - WSJ.com
In coming months, accounting-rule makers are planning to unveil a draft plan to rework financial statements, the bedrock data that millions of investors use every day when deciding whether to buy or sell stocks, bonds and other financial instruments. One possible result: the elimination of what today is known as net income or net profit, the bottom-line figure showing what is left after expenses have been met and taxes paid.
It is the item many investors look to as a key gauge of corporate performance and one measure used to determine executive compensation. In its place, investors might find a number of profit figures that correspond to different corporate activities such as business operations, financing and investing.
Another possible radical change in the works: assets and liabilities may no longer be separate categories on the balance sheet, or fall to the left and right side in the classic format taught in introductory accounting classes.What's this mean for accountants...
Well that falls in the wait and see category. What they are talking about could mean substantial changes in the way financial statements are presented. If the expected changes do go through, there is going to have to be a lot of re-education needed...
The article states that this move is in part due to a change in who uses financial statements...originally created for bankers and lenders but now looking for better measures for investors. Will replacing net income with several different numbers reflecting profit from various activities be helpful or will this just create more confusion? I don't think we'll see quite the widespread changes noted in this article, but we will probably see additional financial indicators on the face of the financial statements sometime soon.
- textbooks re-written
- accounting systems modified
- bookkeepers and accountants re-trained to compile data needed
- executives and investors will need to learn to use the new data
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Wednesday, June 20, 2007
Here's an article on CNN: Blockbuster Back Blu-ray
Friday, June 15, 2007
If you have money to save in an IRA, should you do so using a Roth IRA or a traditional IRA? Here are factors to consider to arrive at the best decision. You'll see that a Roth IRA is likely to be the best deal for a great many -- but not in every case...
they start out equal
A traditional IRA provides a deduction on contributions, but distributions from it are taxable as ordinary income.
A Roth IRA provides no deduction on contributions, but distributions after retirement age can be totally tax free.
In a hypothetical world, when "all other things are equal," these two arrangements are exactly equivalent, giving the same after-tax value to retirement savings in the end.
Example: A person in the 25% tax bracket today earns $100 that he uses to fund an IRA contribution. It earns a 7% return for 20 years, and then it and the compound earnings on it are distributed while the individual is still in the 25% tax bracket. With a...
Traditional IRA, the full $100 is contributed to the IRA (unreduced because of its deductibility), then grows over 20 years to $387 -- which, after 25% tax on distribution, leaves $290.
Roth IRA, the initial $100 is reduced by 25% tax, leaving $75 to put in the IRA, which grows over 20 years to $290 tax free.
So with all other things equal, the traditional and Roth IRA give the same result. But in reality, it's very unlikely that all other things will be equal.
Expected changes in your future tax bracket can make either kind of IRA more attractive than the other. With a...
Traditional IRA, if one is in a higher tax bracket when deductible contributions are made than when taxable withdrawals are taken, one saves tax-wise. But if one is in a higher bracket when withdrawals are taken, one loses tax-wise.
Roth IRA, it's the reverse -- the advantage accrues to one who is in a lower tax bracket when contributions are made than when withdrawals are taken.
Thus, Roth IRAs are generally advantageous for children and persons in their low-tax-bracket, early earnings years, who expect to be in a higher tax bracket later in life.
Example: A young person in a 15% tax bracket who funds a Roth IRA can withdraw funds later in life (after age 59½) tax free, even when he/she may be in a much higher tax bracket.
Traditional IRA planning: Most people in their high earnings years may expect to be in a lower tax bracket after retirement -- an argument for the traditional IRA. But...
Not everyone expects to be in a lower bracket after retirement, even under current law.
Today's tax brackets are at historic lows, especially for higher earners. With massive budget deficits projected in the future due to Medicare and Social Security costs, tax bracket rates may well go up in the future, to the detriment of holders of traditional IRAs.
Other differences that favor Roth IRAs...
Contribution rules. These are more liberal for Roth IRAs.
A person who is a participant in an employer's qualified retirement plan can make a deductible maximum contribution to a traditional IRA only if modified adjusted gross income (MAGI) is less than $50,000 on a single return or $75,000 on a joint return for 2006 (with the deduction completely phased out as MAGI rises to $60,000 and $85,000, respectively). But the "covered by an employer plan" limitation doesn't apply to Roth IRAs, and anyone with MAGI as large as $150,000 (there is a phaseout at $160,000) can make a maximum Roth contribution.
For persons not covered by an employer plan, there are no income limits for traditional IRAs, but the Roth limits continue to apply.
Minimum annual distributions. With a traditional IRA, after reaching age 70½, annual distributions become mandatory, with the amounts based on life expectancy. If you don't really need the money to live on, this forces taxation on unwanted distributions at top rates.
No minimum distribution requirement applies to Roth IRAs. Thus, you can leave funds in them as long as you desire to receive additional tax-free compound investment returns.
Bequest possibilities. Because of the lack of any lifetime minimum required distributions, one can plan to leave a Roth IRA to children or grandchildren who then may receive totally tax-free income from it at any age over their entire lives. Even a small amount left in such a Roth to compound over such a long time -- perhaps several decades -- may provide huge total returns to the children.
In contrast, predeath mandatory annual required distributions from traditional IRAs reduce amounts that can be left to children through them -- and if a traditional IRA is left to heirs, it will pay distributions that are taxable to them at top ordinary rates.
Long-term capital gains and dividends. In a taxable account, long-term capital gains and qualified stock dividends are taxed at a top rate of 15%.
In contrast, if you hold stocks for long-term gains and dividends in a...
Traditional IRA, it will increase the tax rate paid on capital gains and dividends to top ordinary rates.
Roth IRA, it will reduce the tax rate due on them to 0%.
Early withdrawals. Distributions taken out of a traditional IRA funded with deductible contributions are subject not only to income tax, but also to a 10% penalty if withdrawn before age 59½.
But contributions made to a Roth IRA can be withdrawn at any time tax free and without penalty -- only earnings on contributions are subject to penalty if withdrawn prematurely.
Moreover, withdrawals from Roth IRAs are deemed to be made up of contributions first, until all are withdrawn.
Result: A Roth IRA can serve as a tax-free source of funds at any time before retirement if necessary.
Note: When a traditional IRA is converted to a Roth IRA, the converted amount can be withdrawn without penalty after five years.
Joanne Lichten, PhD
You can pack everything needed for a 10-day vacation into a single 22"-x-9"-x-14" bag that complies with today’s strict airline carry-on rules. Of course, you won’t be able to wear a different outfit every day or get really dressed up for dinner, but frequent travelers find the convenience worth it. What to pack...
In addition to the clothes you wear, you need pack only a core wardrobe of two outfits if you do the following...
Pick one color scheme. Select a neutral color -- black, navy, brown or olive -- and pack only clothing in this color or that goes well with this color. This makes it easy to create new outfits by mixing and matching pants, skirts, shirts, etc. Avoid lighter neutrals, such as tan and white, which are more likely to show dirt.
Buy wrinkle-resistant clothes. Garments made from high-tech fabrics that resist wrinkles can be worn several times during a trip without looking messy. A wrinkle-resistant T-shirt is particularly versatile for men and women -- it looks great with jeans or under a sport coat.
You may want to bring a microfiber T-shirt and a pair of shorts as workout clothes. Microfiber is breathable and fast-drying. You can wash it and wear it again the next day. A large microfiber T-shirt works as a nightshirt and a bathing suit topper. You also may want to bring microfiber socks and underwear (enough for each day of the trip).
Wear a pair of sneakers or walking shoes, and pack one pair of dressier, but still comfortable, shoes in your carry-on bag.
If you must bring a coat, make it a compact, wrinkle-resistant, all-weather raincoat. With a sweater underneath, it’s good even in 20-degree weather if you’re not outside too long. Examples: TravelSmith’s Men’s Packable Classic Raincoat ($169 to $179) or Women’s Packable Microfiber Classic Raincoat ($149) provides lightweight wrinkle-resistant warmth.
If you need a suit or sport coat, check for wrinkle resistance. Roll or knot the suit sleeve. If it still looks good when it’s straightened out, it should work well during your trip.
Buy travel-size bottles for toiletries, if you’re not staying in a hotel that supplies them. The Container Store sells plastic bottles perfect for small supplies of shampoo, conditioner, body lotion and aftershave. Cost: 79 cents and up, depending on size (888-266-8246, www.containerstore.
com). Small bottles comply with new US air travel rules, which ban bottles that hold more than three ounces of fluid from carry-on luggage.
Helpful: Magellan’s sells compact brushes, curling irons, toothbrushes, etc., that save additional room.
Bring paperbacks or magazines -- reading material that you can throw away when you’re done.
Wear a watch with an alarm if you don’t want to rely on a hotel alarm clock. Or use a cell-phone alarm.
Albert Ellentuck, Esq., CPA
King & Nordlinger, LLP
Business owners may find themselves short of cash while the company has ample liquid reserves. If that’s the case, it might be tempting to borrow money from the business.
Such tactics may make sense, especially if the alternatives are taking a bank loan or running a credit card balance. But proceed cautiously to avoid tax traps and other dangers...
DEFEND AGAINST DIVIDENDS
Avoid simply transferring funds from the company’s bank account to your own, making a mental note that this is a loan.
Trap: If the IRS examines your personal or business records, the transfer might be considered a dividend.
Result: The entire amount could be taxable income to you. A $50,000 “loan,” for example, could add $50,000 to your income for the year.
Moreover, dividends are not deductible for the company. If you run your business as a regular C corporation, the amount of the transfer could be subject to both personal and corporate income tax.
Strategy: Any loan between a company and an employee (especially if the employee is a shareholder) should be formalized.
The loan document should state an interest rate, repayment terms, and procedures to be followed in case of default. If you’re the borrower, adhere to the terms of the loan.
Added protection: To defend against a possible future charge that the transfer was a dividend, record the loan in your corporate minutes. Make a note to the effect that a loan is being made to a corporate executive to relieve personal financial pressures and thus facilitate performance of business-related responsibilities.
A loan will look more realistic if some interest is charged, even at a below-market rate, and if that interest is paid on schedule.
LACK OF INTEREST
As mentioned, a company-to-shareholder loan will be on safest ground if interest is charged and paid. For the best tax outcomes, such interest will be at a market rate -- it will be treated as a loan rather than a taxable gift or dividend.
However, you might prefer to pay a below-market rate of interest, or no interest at all.
Tax treatment: With few exceptions, interest in such cases will be imputed by the IRS on loans between employers and employees.
Example: Walt Smith is the 100% owner of ABC, Inc. He borrows $50,000 from the company, interest free. At the time of the transaction, the applicable federal rate (AFR) published by the IRS is 4%.
Result: Imputed interest of $2,000 (4% of $50,000) will be included in Walt’s income each year.
Walt might be able to take an offsetting $2,000 deduction... but he might not. If he uses the loan proceeds for personal purposes, other than acquisition of a residence, no interest deduction will be allowed. If he uses the money for investing, interest deductions will be allowed only if Walt has taxable investment income to offset.
Below-market loans: Instead of an interest-free loan, Walt might have agreed to pay, say, 2% interest to his company. In that case, the loan is two percentage points below the AFR and the annual imputed interest would be $1,000 (2% of the $50,000 loan amount).
Suppose that Walt uses the proceeds for personal expenses. He will owe tax on $2,000 worth of “income” from imputed interest and get no tax deduction. Even so, such a transaction might be advisable.
Reason: Assuming an effective 40% tax rate (federal, state, local), Walt would owe $800 per year in tax on the $2,000 of imputed income.
If Walt borrowed the same $50,000 from a bank, in today’s interest rate environment, he might have had to pay 8% interest, or $4,000 per year.
Even worse: Putting $50,000 worth of debt on credit cards would probably have cost much more interest.
Bottom line: Using a no-interest or low-interest loan from your company might be the best way to get your hands on needed cash.
Try to start repaying the loan as soon as possible. If no repayment has been made after several years, the transaction may start to look like a dividend, with the undesirable tax treatment described above applied retroactively.
EMPLOYING THE EXCEPTIONS
In some situations, no-interest or below-market loans between employers and employees are exempt from the imputed interest tax rules.
Exception 1: Loans that total no more than $10,000 won’t trigger imputed interest.
Exception 2: Relocation loans also may be exempt from these rules.
Example: XYZ Corp. moves its headquarters from Wyoming to Arizona. Beth Jones, the sole shareholder of XYZ, also moves to a new home in Arizona.
XYZ makes Beth an interest-free loan to help her buy her new home. No interest will be imputed.
Required: To avoid imputed interest, the loan must be secured by Beth’s new residence. The note will say that the house will be sold in order to pay off the loan, if necessary.
The relocation must involve a move of at least 50 miles. The loan must not be transferable (the company can’t sell the note to another party) and must oblige the borrower to perform future services (the borrower promises to work for the company).
In addition, the rules state that the borrower must certify to the employer that he/she expects to itemize deductions each year the loan is outstanding (see Reg. Sec. 1.7872-5T[c]).
Exception 3: In some cases, the imputed interest rules can be avoided on bridge loans that are used to buy a new home while an existing residence is on the market.
Required: All the above conditions for relocation loans must be met. In addition, the loan agreement must state that the loan will be repaid in full within 15 days after the sale of the old home.
The amount of the loan can’t be more than the borrower’s reasonable estimate of the equity in the old home. Moreover, the old home must be sold rather than converted to business or rental property.
Strategy: For a relocation or bridge loan, the borrower should open a separate bank account for handling the borrowed funds. Then the loan proceeds can be traced to the purchase of a new residence, strengthening the case for exemption from the imputed interest rules.
Madeline Noveck, CFP
Suppose life throws you a curve ball and you need money fast. Where can you get the cash? Options -- and traps to watch out for...
LOW OR NO COST
1. Ask your employer for an advance. The terms may be informal or written as a promissory note. This option works best when the need for immediate cash is very small and the boss is approachable.
2. Borrow from your relatives. This quick fix comes with emotional potholes. If you don’t repay the money, there may be resentment from the lender, as well as from other relatives who may feel slighted or jealous.
What to do: Use a formal promissory note stating the interest rate and repayment terms.
Trap: Without such a written note, the IRS may bar the lender from writing off a bad loan on grounds that it was a gift.
Caution: Such a loan doesn’t have to bear interest. But if it does, the lender must report that interest as income. If the loan exceeds $10,000, and the interest is below the applicable federal rate (AFR) -- currently just under 5% -- the lender must report not only the actual interest, if any, but also the “imputed interest,” which is the difference between the actual interest and the AFR.
More information: At the IRS Web site, www.irs.gov, type “applicable federal rate” into the search box.
3. Borrow from your 401(k). If your plan allows it, under federal law, you can borrow up to 50% of your vested account balance or $50,000, whichever is less. You usually have up to five years to repay the loan.
Advantages: You can’t be rejected for the loan -- you may only need to make a phone call to the plan administrator or complete a short loan form... the interest rate, set by the plan, will be relatively low -- usually a couple of points above the prime rate, currently 8.25% (this is low compared with credit card rates, which can be up to 25%). The interest you pay goes back into the account.
Disadvantages: The money borrowed diminishes what could be saved for retirement... if you leave the company before repaying the loan, you must pay it back -- any outstanding balance will otherwise be treated as a taxable distribution (and subject to a 10% penalty if you’re under age 59½).
4. Tap your IRA. Pledging an IRA as collateral for a loan or “borrowing” from it is treated as a taxable distribution (subject to a 10% penalty if you’re under age 59½). But you can use money from your IRA for 60 days, tax and penalty free.
Big danger: You must replace (redeposit) the money in any of your IRA accounts within 60 days, or pay tax on it. Whatever isn’t put back becomes taxable as ordinary income.
Caution: You can make only one such withdrawal/redeposit, called a rollover, within a one-year period.
5. Borrow against your life insurance policy. If you have a cash-value life insurance policy (whole or universal life), you can borrow against the amount accumulated in your account. Just call your insurance agent or insurance company to receive a check within 48 hours to two weeks.
Borrowing limit: The cash value in the policy.
In today’s market, the annual interest rate on such a loan is about 7%, but many companies will reduce the dividends they credit to your account for as long as you have the loan -- in effect, upping the interest rate. Usually, you can repay funds when and to the extent you choose, but if payments don’t at least cover interest, the cash value of your policy continues to be further depleted because the interest not paid is subtracted from the cash value.
6. Use a margin account. Margin borrowing allows you to leverage securities you hold at a brokerage firm to access a convenient line of credit -- using checks issued by the firm to access your line or by receiving a broker’s check (often the same day you ask for it). You can even have the funds wired to your bank account. All you need to do for this kind of borrowing is sign a margin account agreement.
Limit: 50% of the current market value of a stock... 90% for Treasury and agency bonds... 70% for corporate bonds... and 60% for municipal bonds. Some securities (e.g., equities trading below $3 a share) are excluded.
Interest rates, which are based on the broker call rate (the broker’s cost of money), vary and the more you borrow, the lower the interest rate.
Example: Fidelity’s rate for borrowing less than $10,000 is currently 11.075%, but borrowing $500,000 or more has a 6% rate.
Note: Interest on margin accounts may be tax deductible as investment interest by those who itemize deductions. You must use the money to buy or carry investments, and you must have investment income at least equal to the investment interest. You must also not be borrowing against tax-exempt securities.
Caution: If the value of the securities falls below a certain level while your loan is outstanding, you’ll get a margin call -- a demand from a broker to provide money or securities to bring the value of the account back to the required level. You’ll have to sell some of your holdings to cover the shortfall if you don’t find other money to pay down the margin debt.
7. Get a home-equity line of credit (HELOC). Your bank will approve you for a specific amount of credit. Many lenders set the limit on a HELOC by taking a percentage of a home’s appraised value and subtracting the balance on the existing mortgage, if any. The process can take a week or more to arrange, but once the line is in place, you can write checks against it.
HELOCs typically use variable interest rates based on the prime rate (current HELOC rates are around 7.5%). Look for a lender that will waive all costs of establishing the loan, such as an application fee, an appraisal fee and closing costs.
8. Take a cash advance from a credit card. Drawbacks: Very high interest rates -- rates for advances typically range from 20% to 25%, in contrast to the average rate on credit card purchases of around 16% to 17%. In addition, cash advances usually carry an up-front fee of 2% to 4% of the amount advanced.
9. Borrow from a pawnshop. Pawnshops are in the business of making short-term, small-money loans, with personal items used as collateral. A pawnbroker will appraise your jewelry, small appliances, musical instruments or other items and typically lend 50% of the retail value. Interest rates and fees for these loans are state regulated, but the term of the loan is usually 30 days to several months and the fees are generally high.
Example: New York pawnbrokers have a collateral loan period of four months, and the interest rate is 4% a month, which means an annual percentage rate (APR) of 48%. There may also be a service charge -- the maximum charge for loans between $50 and $100 is $3 (loans above $100 are $5). If you don’t pay back on time, your collateral can be sold.
10. Take a “payday” loan. If your employer won’t give you a wage advance, consider a payday or “fast cash” loan.
These loans (offered at payday loan stores and at such sites as www.wegivecash.com, www.ordercashnow.com and www.credit.com) are popular because they’re easy and quick to arrange -- you can get funds in as little as one hour.
These loans don’t require a credit check -- they’re based on just a few criteria, such as the applicant’s monthly wages (usually a minimum of $1,000). The maximum loan amount is between $500 and $1,500, and the loans are for short periods, usually one to four weeks.
These loans are pricey -- finance costs (fees) run from $25 to $45, regardless of the size of the loan. Sounds reasonable? It’s not. Charging $45 for a two-week loan is the equivalent of $1,170 for a year. If you borrowed $300, that’s an APR of 390%!