Read and follow the notice. It will tell you which year’s tax return the IRS is questioning and the items that are being examined. The audit notice also will give you a time frame for responding, generally 30 days. If you don’t respond, the IRS can take action, such as readjusting your tax liability and assessing interest and a possible additional tax penalty.

Contact your tax professional. If your return was professionally prepared, you should contact your preparer for assistance in handling the audit process. If you prepared your own return, you may want to consult a tax professional.

Review and organize your records. The information in the notice should help you determine which documents you need to support the information reported on your return. Replace or reconstruct any missing records. If you can’t produce supporting documents, a questioned deduction may be denied. Also, don’t give the IRS your original documents to keep. Send copies instead.

Be brief. If you’re called for an in-person audit, always take your tax professional with you and answer as many questions as you can with a simple “yes” or “no.” That way, you’ll avoid inadvertently furnishing any information that could prompt the auditor to expand the audit.

Don’t be too quick to pay up. It may seem easier to simply respond to an IRS notice by sending a check to the IRS for the assessed additional liability. But the IRS has been known to be wrong, and you shouldn’t pay tax you may not actually owe. Even if the IRS is correct, you may be able to negotiate a lower payment than the amount specified in the audit notice.

Contact
Ken W. Seidel – kwseidel@herbein.com
Mark R. Shellenberger – mrshellenberger@herbein.com

Transportation and Lodging Costs
For a person making a bona fide business trip alone to a U.S. location, the round-trip transportation costs are fully deductible — as long as the primary reason for the trip is business (as opposed to vacation/recreation). Lodging costs for the business portion of the trip are also fully deductible. When a spouse or other family member without a bona fide business purpose accompanies the business traveler, the amount deductible as a business expense is limited to the single rate cost of transportation and lodging.

Example. Ed has a four-day trade show next month in Washington, D.C. and wants to bring along his wife and son to visit the nation’s capital. The discounted airfare for all three is $500; lodging is $500 for the four nights of the trade show. If Ed makes the trip alone, the cost of a single airline ticket will be $200 and lodging for a single occupant, $400. How much is Ed’s allowable business deduction for airfare and lodging for the family trip? $600 — the single rate cost. Note: If, instead of flying on their trip to Washington, D.C., Ed and his family drive an automobile on the most direct round-trip route, the expense will be fully deductible, since that will presumably be the single-rate transportation cost.

Primary Business Purpose
Although the tax laws contain no specific rule or definition of what constitutes a trip that is primarily for business purposes, the regulations and case law generally look to the relationship between the number of business-versus-personal days to make the determination. A day in which the traveler conducts bona fide business constitutes a workday, even if less than the entire day is devoted to business. Therefore, if a morning business engagement ends by noon, the traveler need not schedule afternoon business activities to preserve the day as business related.

A rule of thumb used by many business travelers is that the trip should have twice as many business-related days as vacation-related days to ensure its primary business nature. If, on a particular trip, the business purpose rule is not met, none of the round-trip transportation cost is deductible. However, for the business-related days of the trip, the single-rate lodging is deductible, as well as 50% of the business meals.

Example. If Ed and his family extended their trip by one day, Ed’s transportation and lodging deduction would not change. However, extending the trip by three days could jeopardize the primary business purpose of the trip, thus making Ed’s round-trip transportation costs nondeductible.

Before planning a business trip that includes vacation time or accompanying family members, carefully consider the tax ramifications. Call us if we may be of assistance.

Contact
Barry D. Groebel – bdgroebel@herbein.com
Thomas L. Bakaitus, Jr. – tlbakaitus@herbein.com

Herbein Joins 2012 Relay for Life of Berks County

Herbein is proud to announce our participation in the 2012 Relay for Life of Central Berks in memory of John J. Liptock. This year the Central Berks Relay will be held on May 18, 2012, 6:00PM at Schuylkill Valley High School.

In 2011, our partner and friend John J. Liptock’s courageous battle against cancer ended. The strength showed by John, his wife Justine and their sons David and Joe was truly inspiring. We’ll never forget John’s smile and positive attitude, his storytelling, his love of fishing, his compassion towards others, and his love for his family. The Liptocks will always be part of the Herbein family.

We have formed John Liptock’s Herbein All-Stars to make a difference by teaming up to participate in the American Cancer Society’s Relay For Life. The team name is a little bit goofy and definitely tongue-in-cheek – just like John would have liked.

At the event, our team will camp out overnight and take turns walking around the track to raise money and awareness for the American Cancer Society. Nobody will be walking alone, though.

Saving lives from cancer starts one team, one participant, and one dollar at a time. Our team is doing our part to make sure that cancer never steals another year of anyone’s life.

Please consider supporting John Liptock’s Herbein All-Stars. The impact we can make together is much greater than what any of us could do alone! We’re doing it for John!

Everyone’s life has been touched by cancer, and Herbein + Company wants to help the American Cancer Society create a world with less cancer and more birthdays.

Follow us as we work together to reach our goal. Click the links below for additional information. Questions? Contact our team captain Roxanne N. McMurtry at rnmcmurtry@herbein.com or 610.823.9069.

John Liptock’s Herbein All-Stars Team Page

Relay for Life of Central Berks – May 18th General Information

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline.

Between the IRS extension and the added Leap Year day, this has truly been one of the longest tax seasons ever!

April 2012
Herbein Energy Advisor: Candidates on Energy
A summary of where they stand

The cost and availability of energy resources are controversial issues in the United States today; which makes energy a hot topic during the 2012 election. The Commonwealth of Pennsylvania presidential primary occurs on April 24, 2012. Candidates agree that increasing energy independence is critical to national security; however they disagree on other related issues including environmental and regulatory policy.

The following article will summarize where each candidate stands on energy related issues:

Presidential Race
72 delegates are up for grabs when The Commonwealth of Pennsylvania presidential primary occurs on April 24th. Energy is a key issue for voters in Pennsylvania this year and the following is a summary on where each candidate stands on energy related issues:

President Obama
President Obama’s plan encourages the use of alternate fuels and more green technology. His proposal aims to stop oil and gas subsidies and put aside $1 billion to expand tax incentives on electric cars and alternate-fuels trucks and to fund research into battery technology.

His administration deferred approval of the Keystone XL Pipeline until an alternative route could be proposed (bypassing an environmentally sensitive area in Nebraska).

Mitt Romney
Romney’s energy plan centers on “significant regulatory reform” – a streamlined approach to regulation designed to increase domestic production of oil and natural gas and further investment in nuclear power. Along with supporting an increase in the production of shale gas, Romney also advocates partnering with Canada and Mexico and working to develop shale gas in Europe.

He’s a supporter of the Keystone XL Pipeline and drilling in the Arctic National Wildlife Refuge (ANWR).

Rick Santorum
Part of former Senator Rick Santorum’s “Made in America” plan is an energy platform that includes support of the Keystone XL Pipeline and the elimination of all energy subsidates within four years.

His plan involves free market production, including drilling in ANWR and support for domestic shale gas production using hydraulic fracturing.

Newt Gingrich
Gingrich presents a six-point energy plan calling for the removal of bureaucratic obstacles to oil and natural gas development, financing clean energy research with oil and gas royalties, eliminating the Environmental Protection Agency (EPA), removing the ban on shale oil development in the west and supporting subsidies for all forms of energy production.

He believes that by approving the Keystone XL Pipeline, domestic gas prices will drop to $2.50 per gallon.

Ron Paul
Paul’s energy policy is focused on free market energy solutions. He would repeal laws and regulations that impede energy production and lower taxes on energy production. Elimination of the EPA is part of his plan. He also wants to eliminate the federal tax on gas, saving American’s about 18 cents a gallon.

While he opposes energy subsidies, he does support energy tax credits.

Senate Race

Pennsylvanians voting in the April 24th primary will also be selecting candidates for the United States Senate. Democrat Bob Casey is the incumbent candidate and faces opposition from an Allegheny County Democrat in the primary. Should he win the primary, he will then face one of the Republican candidates listed below in the November general election.

Bob Casey
In March 2012, Senator Casey crossed party lines and voted in favor of the Keystone XL Pipeline. This contradicted Casey’s earlier stance on the project.

He remains opposed to both drilling in ANWR and oil and gas subsidies. Instead, he supports tax credits for alternative energy projects.

Joe Vodvarka
Vodvarka is a retired spring manufacturer from Allegheny County and the only Democratic challenger to Bob Casey in the April primary. He supports oil & gas drilling for sale in the United States only.

David Christian
Christian is a Vietnam veteran from Bucks County who spent 26 years with the U.S. Department of Labor. He supports job creation through the Keystone XL Pipeline and would like to see an end to the EPA.

Sam Rohrer
Rohrer is a Republican candidate from Berks County. He opposes EPA restrictions on oil and gas producers and private property owners and wants to speed up state agency approval times for drilling permits.

Marc Scaringi
Born and raised in Pittsburgh, Scaringi is a Republican candidate who supports tax incentives for oil and gas companies and incentives for shale gas extraction in Pennsylvania.

Tom Smith
Smith is a retired coal executive from Armstrong County who favors the Keystone XL Pipeline and continued development of Marcellus Shale, American oil and clean coal.

Steve Welch
A native of Chester County, Republican candidate Welch approves the Keystone XL pipeline and wants to see more investment in wind and solar energy. He applauds the recent passage of the Marcellus Shale natural gas regulations because he wants to keep oversight of the industry at the state level.

The standard mileage rate may be simpler but is not always better. Instead of deducting actual expenses, you may have the option of using an IRS-provided standard mileage rate to figure your deduction for the business use of an automobile. Given the choice, you may favor the standard mileage rate because it’s simpler — there’s no need to keep gas receipts and other detailed expense records.* But the standard mileage rate doesn’t necessarily result in the biggest deduction.

How Deductions Are Calculated
Currently, the standard mileage rate is 55.5¢ per mile — unchanged from the second half of 2011. The standard mileage rate covers not just gas, but also other expenses of operating a car, such as oil, insurance, repairs, and maintenance. The deduction is figured by multiplying the number of business miles you’ve driven by the standard mileage rate. (Parking and tolls represent additional deductions.)

With the actual expense method, deductible expenses include gas, oil, repairs, tires, insurance, and license and registration fees. You also may deduct depreciation (or lease payments). If you use your auto for both personal and business purposes, only the portion related to business use is deductible. (This is figured by multiplying the year’s actual expenses by the ratio of business mileage to total mileage.)

Do a Comparison
Unfortunately, there’s no quick rule of thumb for selecting the most favorable method. Factors that can make a difference include the vehicle’s gas mileage; how much you spend on repairs, maintenance, and insurance; and the number of business and personal miles driven.

You’ll have to rule out using the standard mileage rate in certain situations. For example, it’s not available if you’ve previously claimed a Section 179 expensing deduction or an accelerated depreciation deduction for the car. But, if you are eligible, consider keeping the receipts and records that will be needed to calculate the deduction both ways.

* The IRS requires that taxpayers using either the standard mileage rate or the actual expense method maintain a detailed log (or other record) that contains certain information. Ask us for details.

Once you’ve filed your income-tax return, you may be ready to put some distance between you and the IRS and turn your attention to other things. If you’re employed, you probably can take a breather, since your employer will handle ongoing income-tax payments for you through the wage withholding process. But it’s a different story if you receive other forms of taxable income — from self-employment, rental property, or investments, for example. When that’s the case, you’ll typically be required to make estimated tax payments during the year.

Generally, you must pay estimated tax for 2012 if you expect to owe at least $1,000 in tax for 2012, after subtracting withholding and refundable tax credits.

When Are Estimated Taxes Due?
Estimated taxes generally should be paid in four equal quarterly installments. The due dates for the four 2012 estimated tax payments are April 17, June 15, and September 17, 2012, and January 15, 2013. If you receive income unevenly during the year, your required estimated tax payments may not be the same for each period under the IRS’s “annualized income installment method.”

How Much Is Enough?
The IRS can charge an underpayment penalty if you don’t pay enough estimated tax for the year or if you don’t make your payments on time or in the required amount. The IRS generally requires payments of 2012 estimated tax to total at least (1) 90% of your 2012 tax liability or (2) 100% of your 2011 tax liability, whichever amount is smaller. However, if your 2011 adjusted gross income was more than $150,000 ($75,000 if your filing status was married-separate), your 2012 payments should be at least (1) 90% of your 2012 tax liability or (2) 110% of your 2011 tax liability, whichever amount is smaller.

If you or your spouse is employed, it may be possible to avoid the need to make estimated tax payments by having more tax withheld from your wages. To adjust your withholding, file a new Form W-4 with your employer. Taxpayers who had no tax liability for the 2011 tax year (the full 12-month period) and were U.S. citizens or residents for the whole year don’t have to make 2012 estimated payments.

It’s a situation no one wants to think about: A husband and wife, or parent and child, die in a common disaster. The emotional impact on a family is tremendous. Financial and legal complications can cause added hardship for loved ones left behind. Creating an estate strategy to address this devastating possibility can help prevent unintended asset distribution consequences, tax setbacks and potential legal challenges later on.

Unless you’ve made provisions in your will to address the possibility of you and your spouse or other primary beneficiary dying simultaneously, your property may not be distributed as you would like it to be and could be subject to unnecessary estate settlement expenses and delays.

One strategy
Make sure your attorney includes a “common disaster” clause in your will. Common disaster clauses are designed to address situations where the order of death can’t be readily determined. Their purpose is to prevent assets from passing into the estate of the other deceased individual, only to be immediately distributed from that person’s estate. These clauses may vary somewhat from state to state, based on local law.

Very generally, a common disaster clause provides that your spouse or other primary beneficiary will inherit your property only if he or she outlives you for a specified period (usually 30 to 90 days). Otherwise, your assets will pass based on the assumption your spouse or other primary beneficiary died before you. Your estate planning attorney can review your will with you and determine whether a common disaster clause could help achieve your goals for your estate.

Potential complications
A common disaster that claims the lives of both spouses at once also can create life insurance complications — for example, when one spouse is insured under a life insurance policy and the other is the beneficiary. If the policy’s primary beneficiary is considered to have outlived the insured, the beneficiary receives the insurance proceeds, and they become part of his or her estate.

When the order of death can’t be determined, most states with laws based on the Uniform Simultaneous Death Act dictate that the benefits be paid out as if the primary beneficiary died first. If the insured person hasn’t named a contingent beneficiary, the insurance proceeds will be paid to and included in the insured’s estate.

Naming both primary and secondary beneficiaries for any life insurance policies you own can help eliminate complications. So can having a common disaster clause in your policy. Many insurance companies will insert a common disaster provision upon request. Talk with your financial professional about options that will work well for you.

We are proud to report that collectively with the efforts from our clients, staff and our friends, we exceeded our goal and raised over $2,600 (and counting) for the 2012 YMCA Marsh Madness Plunge for Kids Saturday, March 17, 2012. Thank you for your support – we couldn’t have done it without you!

The St. Patty´s Day Marsh Madness is a polar bear plunge into Blue Marsh Lake in Berks County, Pennsylvania

Similar to last year, we set up target goal levels for Herbein’s team. Every dollar contributed helped us get to the next level, and at every new level, an additional Herbein plunger jumped. For the second year in a row we were able to send our entire team in the lake!

All proceeds will help to provide financial assistance to children and families who need the YMCA and its programs the most.

Visit our first giving fundraising page: Herbein Marsh Madness First Giving
To view pictures from the event visit our facebook page: Herbein Facebook

Herbein’s 2012 Marsh Madness Team
$250 Level – Pawel Kolenda and Aaron Phillips, Staff takes the plunge
$500 Level – Pawel, Aaron, and Cory Eisenhofer, Advanced Staff take the plunge
$750 Level – Pawel, Aaron, Cory and Derek Rabold, Supervisor take the plunge
$1,000 Level – Pawel, Aaron, Cory, Derek, and Amy Klatt, Marketing Coordinator AND Justine Fronheiser, Advanced Staff take the plunge
$1,250 Level – Pawel, Aaron, Cory, Derek, Amy, Justine and Wayne Gehris, Manager take the plunge
$1,500 Level – Pawel, Aaron, Cory, Derek, Amy, Justine, Wayne and Keith Hoffman, Sr. Manager take the plunge
$1,750 and above – Pawel, Cory, Derek, Amy, Justine, Wayne, Keith and Jim Michalak, Partner take the plunge!!!!

Recently, the Pennsylvania Department of Labor and Industry mailed 2012 Unemployment Contribution (UC) Rate Notices to employers. The Department of Labor and Industry has indicated that a significant number of these new UC rate notices contain an erroneous 3% delinquency rate. This error is mostly due to problems with the conversion from the E-Tides electronic filing system to the UCMS (Unemployment Compensation Management System) electronic filing system.

The Department of Labor and Industry is aware of and has acknowledged these errors on its website. The Department has indicated that it will attempt to self-correct many of these erroneous rates.

In addition, the Department has suggested the following actions to correct the error:

• If you believe you received a delinquency rate in error, please contact the Employer Helpline at 866-403-6163. Staff will review the account and address the problem. A revised rate notice will be mailed within a few days of the resolution.

• If you do not receive a revised rate notice by March 30, 2012, please contact the Employer Helpline at 866-403-6163.

Alternatively, a Contribution Rate Appeal may be filed within 90 days of the date of the employer’s notice. The last date for appeal is listed on each contribution rate notice. The written appeal is simply a letter stating the request to appeal the UC Delinquency rate and should be mailed to the following address:

UC Tax Review Office
Suite 1113, Labor & Industry Building
651 Boas Street
Harrisburg, PA 17121 

When the appeal is received the Department of Labor and Industry will review the account and issue a revised rate notice for 2012.

Please note that is important to timely correct an erroneous rate. The Department of Labor and Industry is advising employers that until a revised rate notice is issued, the employer must file at the rate indicated on the original 2012 Contribution Rate Notice (even if this is an incorrect rate). If an appeal is not filed timely, the employer will be required to use the erroneous rate for the entire calendar year.

Please contact us if you have questions regarding this update or need assistance appealing an incorrect UC contribution rate.

Reading: 610.378.1175
Pittsburgh: 412.392.2345
Greensburg: 724.834.7053