Volume 10 Number 2

From The Corner Office By Mitchell Freedman, CPA/PFS

The elections are over and the voters have spoken. While those who are disappointed with the results complain that President Bush does not have a mandate to achieve his ends, those who are happy with the results and the increased representation of Republicans in The Senate and House say that a solid majority ruled the election. Regardless of your political leanings and your feelings about the re-election of our sitting president, we as citizens must all join together to support efforts to solve the problems in our nation.

There are certainly a boat-load of important issues that have to be addressed - now. Among them: the Iraq War, national security from terrorists, an enormous deficit between tax revenues collected and government expenditures, the runaway costs of healthcare and medications, the need for a cure for the beleaguered Social Security system, and the double edged sword of the decreasing value of the U.S. Dollar. These problems must be thoughtfully and fairly solved with bi-partisan effort.

Oh sure, there will always be political rhetoric, infighting, and posturing. Nevertheless, such behavior by our elected leaders must be secondary to accomplishing the resolution of our concerns and ills - as the people have spoken.

I urge all citizens to be involved in the process. Inform your elected officials about the matters that most concern you. Give them your opinion of pending legislation. With the advances that have been made to telecommunications and technology it is easy to communicate your views to your elected leaders. It is not only your right to do so, it is your obligation.

Tips and Alerts Check 21 (No More Float Time on Checks) By Niko D'Oyen

On October 28, 2004, a new Federal law called the Check Clearing for the 21st Century Act, (Check 21), went into effect. This law mandates that banks accept an electronic image of a check, rather than the original, which facilitates the processing and payment in minutes instead of days. This electronic image is referred to as a substitute check, which is considered to be a legal copy of your check.

How will this affect you and/or your business:

The way you or your business issues or writes checks will not change.

If you do not already have overdraft protection on your account, you should consider it.

Banks can still hold your deposits for several days before crediting your account. In order to avoid overdrafts, you should consider how this expedited clearing may affect your cash management procedures.

Since the substitute check is a legal document, it can be used as proof of payment and must be accepted by any bank, business, government agency or person - the same as the original check.

You cannot "opt-out" o f this new law and it will apply to all financial institutions and their clients.

Considering the parameters of Check 21, it might be a good time to consider paying bills online. Many banks offer online banking as a free service and you will optimize your available cash by paying bills on the day they are due.

Tax Notes Are We Being Over-Taxed? By Karen Cho, CPA

It has become increasingly easy to order products over the telephone and Internet. One of the factors that may appeal to you is that you may not be charged sales tax, which you think can be a significant savings. Think again!

If you live in a state that imposes a sales tax and avoid payment by buying from an out-of-state merchant or over the Internet, you are still required to pay the tax, called a compensating use tax, to your resident state. This is your state's "backup plan" to ensure that the state and local governments receive the revenue due them.

Many states (including California) have added a line to the personal income tax form to make it easy for taxpayers to report the use tax they owe. It also makes it harder to plead ignorance if the state comes after you.

As a resident you must comply with the use tax regulations by paying it. Remember, you are signing your state income tax return under penalty of perjury. From a practical point of view there will be no acceptable excuse for failure to pay the compensating use tax in the event of an audit. The penalty is generally 10%, however for fraud or tax evasion a 25% penalty can be assessed. And, don't forget that they'll add interest too.

Do You Have the Credit Card Blues? By Eva Meza

Today's complex world gives us a tempting array of charge cards and credit cards to choose from. It seems as if every financial institution issues its own pieces of plastic. Many of these cards come with a menu of "rewards" programs and travel bonuses to encourage you to use them. However, if you don't want to end up in "financial hell" you will want to do your homework and educate yourself on the do's and don'ts of managing your credit. Remember, even though card offers might seem alike, every card is different with its own set of "rules and regulations."

Making wise choices now will help ensure that you have a better and more secure financial future. Research the offer and consider the bank issuing it. Is it a nationally respected bank? Is the card accepted at places where you are likely to shop? Know the interest rate you will be charged. Will it be fixed or variable? Does the fine print say that upon short (sometimes as little as 15 days) notice the fixed annual percentage rate (APR) can change? How long of a grace period do you have? Be aware that some cards have no annual fee while others range anywhere from $25 to $395 depending on the company and the type of card. If you don't understand something don't be afraid to ask questions . If you are applying for a card offering a 0% APR, be aware that there is always a time-limit so monitor the time if you take advantage of such an offer. To find out more about credit cards and how to make wise decisions about them, go to: http://www.federalreserve.gov/pubs/shop/default.htm

Once your decision is made and you find the card that best suits you, keep in mind that when you are offered credit it is a privilege and properly managing the credit requires a great deal of discipline. To help you manage the credit prepare a budget! Monitor your spending compared to the budget. This can be useful, especially for your children. If this is their first credit card it might seem tedious, but by simply calculating the difference between net monthly income and fixed monthly expenses, you can better understand exactly how much money you can afford to spend on variable and non-essential expenditures. Do not pull out the plastic unless you know that you will be able to pay the bill in full every month. If you choose to be careless and misuse your privilege, you are setting yourself up for a financial disaster! Once you start falling behind by not paying your bills in full, it can be extremely difficult to get back on track.

If you don't pay your balance in full or on time the consequences are fees, consisting of interest, late fees, over-credit limit fees, penalty fees and heaven forbid, bounced check fees. The late, over-limit and check fees can range between $25 to $39 every month. Interest and penalty fees are based upon your APR (which can reach as high as 34.99% - ouch!).

An additional painful consequence of managing your credit poorly is that your credit reports and scores will be adversely effected, which can make it difficult to purchase large items such as cars, on credit. Poor credit reports and scores can also make it difficult or perhaps impossible to purchase a home or condominium or to refinance one you already own.

If you like the rewards but do not want to manage credit cards you can utilize a debit card. With such a card the money is immediately withdrawn from your checking account at the time of the transaction. You can then reserve your credit facilities for emergencies. Take time to understand the convenience of credit cards and how to make them work more effectively for you. Being educated and cautious will help you achieve greater financial stability. So, stay on track with good credit management habits. Your credit rating will be a key factor in helping you to achieve many of your goals in life.

Heard in the Hall

Mitch Freedman attended a CalCPA Leadership Forum on July 15, 2004 followed by the Semi Annual CalCPA Council Meeting on July 16th and 17th in Las Vegas, NV. On August 11th he presided over a California Jump$tart Coalition Board of Directors meeting. On August 17th Mitch gave a presentation on ElderCare/PrimePlus Services to the Central Coast Chapter of CalCPA in Shell Beach, CA. On August 19th a film crew from BBC3 videotaped an interview with Mitch for an upcoming episode of their show, Liquid Assets. On August 26th Mitch gave a presentation to the AICPA PFS Credential Committee regarding the integration of ElderCare/PrimePlus Services with the CPA/PFS credential. On September 7th Mitch gave a presentation about utilizing public relations opportunities and he introduced a videotape of the CalCPA publications accomplishments to the Orange County/Long Beach Chapter.