Cyber Monday (2006-11-27)

Cyber Monday

(2006-11-27) by David John Marotta

Today has been tagged 'Cyber Monday' by the retail industry. Like the term 'Black Friday' which refers to the Friday after Thanksgiving, Cyber Monday refers to the Monday three days later. Just as Black Friday is considered the biggest traditional shopping day, Cyber Monday is supposed to see a significant spike in online sales.

The term 'Black Friday' has been around a long time and was named to mark the day that retailers become profitable, moving from the red to the black.

The term Cyber Monday was made up only last year by the National Retail Federation's Shop.org division in order to generate media coverage for their online retailers. The idea worked. The mainstream media picked up the story and reported Cyber Monday as if the term had been around for years. Retailers are often trying to create the next big thing by generating media hype and by exaggerating existing trends.

Not that the trend isn't there. Last year, the first Cyber Monday showed a 35 percent spike in traffic according to Akamai, a site that tracks over 200 retail Web sites. Visitors averaged 1.6 million per minute and peaked in the mid-afternoon Eastern Time with over 3 million people clicking away.

But last year, Internet retailers found that the busiest online shopping day was actually December 12th, two weeks after 'Cyber Monday'. In fact, Cyber Monday was only the 12th biggest day of online shopping. The busiest online shopping days occurred between December 5th and 15th.

Cyber Monday was a brilliant idea to promote online shopping and jumpstart the online shopping season by a couple weeks from its actual peak. Having found that a longer holiday season translates into bigger profits, retailers like to extend every holiday season. The holiday season is now a four-month blast of marketing genius. Thanksgivoween and Hanukwansmas extend clear through the entire month of Septoctnocember.

This year, the busiest day will likely be two weeks from today, landing on Monday, December 11th. December 11th marks the start of the last week that procrastinators can still give online retailers enough time to ship the items. Shoppers keep pushing the day back as they have grown more confident that their shipment will arrive before Christmas. So, at least for a few more days, you can hit the snooze button on your Christmas shopping.

Although most of us joke about the Monday blues, Mondays have historically proven to be the best shopping day of the week for Internet retailers. Peak Internet sales usually spike on Mondays as many Americans only have a high speed Internet connection at work. The Monday shopping frenzy is thought to be a wave of pent-up demand from the weekend.

Total holiday retail sales are expected to be $457.4 billion, up 5% from last year. Last year sales grew 6.1 percent to $435.6 billion. Online shopping has been increasing its shares of that expanding pie each year.

Toys and video games show the most increase in online purchases during the holiday season, followed by consumer electronics, computer hardware and software, jewelry, gourmet food, furniture and home décor.

According to Nielsen/NetRatings, the top online site last year was eBay with 9.5 million unique visitors. Rounding out the top six were Amazon (4.6 million), Wal-Mart (3.4 million), Target (2.9 million), Best Buy (2.1 million), and Circuit City (1.8 million).

You might think these Internet retailers would have provided a good order for which stocks would make the best investments. But the exact opposite is the case. Between the end of October of last year and the end of October this year, the price of eBay dropped 18.9%. Amazon was the second worst, down 5.8%. Continuing the order of these companies Wal-Mart was up 5.6%, Target up 7.1%, Best Buy up 25.7%, and Circuit City up 52.3%.

The best way you can achieve your financial goals is by moderating you're spending this holiday season and staying on track with your savings. Don't let the holiday season jeopardize the progress you've made toward reaching your financial goals.

from http://www.emarotta.com/article.php?ID=206

Tax Planning for Small Business Owners (2006-11-20)

Tax Planning for Small Business Owners

(2006-11-20) by David John Marotta

Attention, small business owners. It's time to take advantage of tax-saving moves before year-end. Whether your business employs one employee or one hundred employees, last-minute tax moves can save you money, if you act now.

Although small business owners shoulder much of the tax burden, they also enjoy more flexibility when it comes to tax maneuvering. That's why tax planning is especially important for small businesses. Once January 1st rolls around, there's little else to do but pay-up.

To help you take full advantage of tax saving opportunities, you should meet with your tax professional well before year's end. In fact, year-end tax planning should be a regular part of your business strategy. Here are some tax-saving tips to consider before the new year.

Defer Income

Reducing your taxes may be as simple as deferring some of your income into next year. A cash basis taxpayer may want to delay client billing until early January, and pay your expenses before year end. Of course, the knife cuts both ways. By pushing income into next year, you may dramatically increase next year's taxable income, so beware.

If you expect to be more profitable next year, you may be able to eke out some tax savings by doing just the opposite—accelerating income into this year and deferring deductions until next.

Take a Section 179 deduction

Best of all, small business owners should take advantage of the Section 179 deduction which allows you to deduct up to $108,000 for qualifying business equipment purchases in 2006.

Qualifying equipment for this deduction includes office furniture, computers, computer software, and office supplies for your business. However, to take the deduction, the equipment must be operating before year's end. So, if your office needs a copier, just be sure to have it delivered by December 31st. Plug it in. Make a copy. You can then qualify for the deduction.

Buy Now, Pay Later

Want to buy qualifying equipment but don't have the money in this year's budget? Use this time-tested tax tip: charge tax deductible items in December and pay for them in January. You can charge items on your credit card in this year and pay for them next year. However, note that your charges must be on credit cards, not on revolving store credit.

Another way for cash basis taxpayers to benefit from the 'buy now, pay later' tactic is to write your checks at the end of December so that they won't be cashed until next year. Be sure to send your checks by certified mail so you can prove to Uncle Sam they were sent before year's end. Doing so will allow you to qualify for the deduction this year and pay next year.

Setup a retirement plan

You can secure other tax savings by implementing a retirement plan. Contributions to a profit sharing plan, SEP IRA, or Keogh are tax-deductible for the employer. (Sorry, but unless your SIMPLE IRA was in place by October 1st, contributions won't qualify this year).

If you are the sole employee of your small business, stashing cash in a retirement fund is an excellent way to reduce your tax liability. Solo 401ks permit you to contribute to the plan both as the "employer" and as the "employee." As the employer you can contribute either 20% of self employment income or 25% of compensation income, depending on the structure of your business. Plus, as the employee, you can contribute another $15,000 ($20,000 if age 50 or over).

Additionally, setting up an employee retirement plan may qualify your business for a tax credit to offset some of the expenses associated with setting up a new pension plan. A tax credit of up to $500 is offered to employers (with 100 employees or fewer) to help defer set-up costs for the retirement plan in its first three years. A retirement plan, other than a SEP IRA, must be established prior to December 31st to reduce 2006 taxes.

Attend the free NAPFA Consumer Education Foundation presentation

For more information about year-end tax planning, you are invited to attend this month's NAPFA Consumer Education Foundation presentation. John G. Bowen, CPA, CFP®, AIF®, of Bowen Financial Services, LLC, will be speaking on "Year-end Tax Planning" on December 9, 2006.

The NCEF presentation will be held in the Northside Library meeting room in the Albemarle Square Shopping Center from 12:00 p.m. to 1:30 p.m. All presentations are free and open to the public. You are encouraged to attend and to bring your financial questions.

Tax planning is complex and time consuming. So, make an appointment with your tax professional before the real tax season hits.

from http://www.emarotta.com/article.php?ID=205

How much do you need to save this month? (2006-11-13)

How much do you need to save this month?

(2006-11-13) by David John Marotta

There are only a few critical financial planning questions you need to be able to answer. Probably the most important is, "How much money do I need to save this month to meet my goals?" Many people don't know the answer to this question and avoid it to the detriment of their long-term financial well-being.

Most Americans spend more time planning their vacation than their retirement. At least with a vacation, most of us pick a date and actually plan to go. Planning for retirement should be every bit as planned and anticipated as your vacation. Assuming you'll work in your seventies and eighties is not a retirement plan. Neither is dying young.

Without an adequate retirement plan, you will outlive your money. If your financial investments are not sufficient to keep pace with inflation, you will eventually lose your lifestyle and your independence.

Imagine you are driving 120 miles from Charlottesville to Williamsburg. For the first 60 miles of the trip you average 30 miles an hour. How fast do you have to drive the second half of the trip in order to average 60 miles an hour for the entire trip? If you quickly answered 90 miles an hour, you got the wrong answer.

You really can't know if you are on track to retire without some complex mathematical projections. It is a difficult projection to eyeball and get right.

If a couple is approaching retirement with only $250,000 saved and a lifestyle of $50,000 per year, it's not hard to tell they are headed for financial hardship. They only have enough savings to last for about five years. Their problem is worse if all of their savings are in tax-deferred retirement plans such as an IRA or a 401(k). That couple's entire savings will be taxed at ordinary income tax rates when it is taken out, and therefore, it will be used at a faster rate.

Similarly, if that same couple living off $50,000 per year has a $1 million portfolio they probably have enough funds to retire. If you think a $1 million dollar portfolio is overkill, you haven't really run the numbers and factored in the erosion of buying power that comes with 50 years of inflation (Thank you, Federal Reserve.).

When my grandmother was first starting a family, five dollars would feed her entire household for a week. She died a couple of years ago at age 99 1/2. If you had told her she would need hundreds of thousands of dollars to have a comfortable retirement, she would have thought you were crazy. Many Baby Boomers are approaching retirement in a similar state of denial.

Going back to our example, the couple with a $1million dollar portfolio probably has only twenty years of spending at $50,000. If their investments don't earn a significant amount over inflation they could retire at 65 years old and be broke at 85. This lack of retirement planning is more likely to hurt the wife's lifestyle and independence since she is more likely to outlive the family's assets.

While young clients need to be able to answer the question "How much money do I need to save this month?" retired families must be able to answer the question, "How much money can I spend this month and still be financially secure for the rest of my life?"

If a family spends too much of their portfolio too early in retirement, they will not be able to recover. On the other hand, living on a shoe-string budget during retirement in fear of running out of money isn't much better. In order to find the right spending balance you need to do regular retirement projections during retirement.

Just as excessive spending early in retirement can jeopardize your retirement, so also failure to save enough early in your career can jeopardize retiring on time.

In our driving example above, driving 30 miles per hour for the first half of the trip makes it impossible to average 60 miles per hour, no matter how fast you drive the last half of the trip. Driving 30 miles per hour means that the first half of the trip takes two hours - the amount of time that the entire trip would have to be completed in order to average 60 miles an hour. You would need to drive 90 miles an hour for 180 miles - three times as far - in order to average 60 miles per hour for the entire trip. Put another way, a family who fails to start their savings quickly enough will also need to save longer to reach their retirement goals as well.

Find out today how much you should be saving and investing this month!

from http://www.emarotta.com/article.php?ID=204

Conservation Easements (2006-11-06)

Conservation Easements

(2006-11-06) by David John Marotta

Recent amendments to our tax laws provide conservationists with additional incentives to protect the natural beauty of their land. Landowners who relinquish their land development rights by donating a conservation easement can ensure that the natural beauty of their land is preserved in perpetuity. Currently, donors also receive tax breaks at the federal and state levels. For those who have already achieved their financial goals, donating their land development rights can bring additional the tax benefits.

On August 17, 2006, President Bush signed into law H.R. 4, a bill that significantly expanded the federal tax incentives for landowners who voluntarily give up the development rights to their property by placing their land under a conservation easement.

A conservation easement is a legal agreement between a landowner and a conservation organization that protects the natural, historic, scenic, and agricultural values of a property by placing permanent limits on the future development of the property. Giving these rights to a non-profit organization is similar to making other gifts to charity. As with gifting to a non-profit organization, taxpayers reap not only the benefit of donating to worthy cause but they also gain some tax relief.

"While people donate easements because of their love of the land and their desire to see it protected in perpetuity, there are also significant tax incentives associated with a donation. For many easement donors, this translates into substantial savings on their federal, state, estate, and local property tax bills," writes the Piedmont Environmental Council, one of the Commonwealth's most active organizations working with landowners who desire to ensure the beauty of their land remains for generations to come. In fact, the organization has been instrumental in placing 250,000 acres under easement in the Commonwealth.

The tax benefits for giving up development rights in some cases are significant both at the federal and at the state level. But the new provisions apply to easements donated only in 2006 and 2007. However, the PEC is working actively to see that these benefits are extended or made permanent.

The PEC outlines the benefits as follows:

"Income Tax Deductions -The gift of a conservation easement that meets federal tax code requirements is considered a charitable deduction, and the value of the easement can be deducted, within certain limits, from the donor's income. A qualified appraiser will calculate the value of the easement by assessing the value of the donor's land before the easement is given, then subtracting the value of the land after the easement is donated. As a result of new legislation, easements donated in 2006 and 2007 can be deducted at the rate of 50% of the donor's adjusted gross income per year and the unused portion of the gift may be carried forward for an additional fifteen years or until value of the donation is fully expended. This expansion on the rate of deduction is particularly helpful to those landowners who do not have a large taxable income. Farmers who receive more than 50% of their income from agricultural activities can deduct up to 100% of their income.

"State Income Tax Credit - When a landowner permanently preserves their property, he or she may also be eligible to receive a Virginia income tax credit of 50% of the value of the restriction. The landowner may use the credit to offset taxes owed and sell any unused portions of the credit to other Virginia taxpayers for 6 years or until credits are fully expended. Because the tax credit can be sold to other Virginia taxpayers, this benefit is particularly useful for people who do not have large taxable incomes.

"For easement donations made after January 1, 2007, the Virginia income tax credit is only 40% of the value of the donated interest, but the credit can be claimed in the year of the donation and carried forward for an additional 10 years.

"Estate Tax Benefits - Estate taxes can make it difficult for landowners to pass land on to their children. Heirs may be forced to sell all or part of their land in order to meet their tax obligations. This is because estate taxes owed can represent a significant percentage of the value of the property.

"An easement can significantly lower estate taxes in two ways: (1) since the easement reduces the value of the property, the estate taxes will be lower; and (2) under the American Farm and Ranch Protection Act, if a landowner donates an easement, his or her heirs can exclude up to 40% (capped at $500,000) of the remaining value of the land from the estate taxes owed."

The new federal rules allow modest income donors to utilize more of the deduction resulting from their donations. As an example, imagine that a landowner earning $50,000 a year donates a $1 million conservation easement. Under federal law they can deduct $25,000 in the year of the donation and carry forward the balance for an additional 15 years, bringing the total to $400,000 in deductions. If the landowner qualifies as a farmer or rancher they could deduct their entire $50,000 income, pay no tax for 16 years, and take a maximum of $800,000 in deductions for his million dollar gift. Donors with greater incomes can use the full $1 million gift in fewer years.

Before executing a conservation easement donation, you should be certain that you never want the property developed. You should also be certain that you do not need the full market value of the developed property in order to meet your financial goals, including your retirement lifestyle or the inheritance value you wish to leave to your heirs.

The rules and tax laws regarding conservation easements are complex and dependent on details specific to an individual donor and their property. Getting advice from your attorney, accountant, and investment advisor is essential to determining if an easement donation will help you meet your life goals.

Potential easement donors should know that the donation of a permanent conservation easement is a permanent and rewarding commitment. For more information on conservation easements, visit the Piedmont Environmental Council at www.pecva.org. To find a fee-only financial planner in your area please visit www.napfa.org.

* Portions of PEC materials used with permission.

from http://www.emarotta.com/article.php?ID=203