The Shermanator - Accounting Las Vegas, NV

The Shermanator
Issue 9
Spring 2012
A Newsletter from Mark Sherman, Certified Public Accountant
Ending
Financial
Stress
Hello,
Part of playing any game is knowing the rules. But when it comes to
finances, those rules can get pretty
complicated. The federal Internal Revenue Code alone comes in at some
71,000 pages. Then there are all the
rules and regulations affecting opening and running a business, hiring,
firing, buying and selling goods or
property and every other aspect of life
from cradle to grave and beyond.
But knowing and following the
rules is not enough to win at a game.
You also need to formulate a strategy
and continually adjust your game plan
as conditions change.
When it comes to finances, we can
help you with both. Not only can we
help you comply with the tax code, but
more importantly we have the experience in helping businesses grow and
prosper, and individuals achieve financial security. Whether you want to
get out of debt, expand your business
or plan for your retirement, we can
provide the guidance you need.
Mark Sherman, CPA
Nearly three years have passed since the official end of
the recession, but full economic recovery still appears to be
years away. The Dow is at its highest level since 2008, but
the national unemployment rate is still over 8%. In Nevada
it hasn’t been below 12% in over three years. Both these
figures would be much higher if it weren't that millions of
people in this country have stopped looking for work and
so no longer show up in the statistics. In Clark County, the
property values are no longer plummeting, but they don’t
have far to go, having fallen 2/3 from their 2006 highs.
Of course, knowing whether the economy as a whole
is going up or down doesn’t make things any better when
you are worried about making payroll, are staring at a
stack of overdue bills or have received a foreclosure notice
on your home. Tight credit, long-term unemployment, loss
of asset value and general economic uncertainty all contribute to financial stress. There are numerous options
available for reducing or eliminating your debt, the question is how to do so without ruining your credit and future
financial prospects. Here are some of the main options and
their advantages and disadvantages.
Loan Modification - Rather than foreclosing on a house,
some lenders will agree to permanently change one or more
of the terms of a loan, resulting in a payment the mortgagor
(Continued on page 2)
Keep more of what
you’ve earned
through proper
planning.
Ending Financial Stress
(Continued from page 1)
can afford. This can involve lowering
the loan principal, lowering the interest rate or extending the payback period. In February, the Nevada Attorney
General announced an agreement with
five mortgage companies which includes $1.3 billion in benefits including loan term modifications.
Repayment Plan - If you have
fallen behind on payments, but generally have enough cash flow to meet the
current payments, the lender can allow
you to spread the past-due amount
over a period of time, without modifying the original terms of the loan.
Forbearance - Forbearance is
when the creditor offers to reduce or
suspend payments for a period of
time, such as when recovering from
an illness or accident or in the event
of a job loss. This doesn’t eliminate
any part of the debt, but just lengthens the time to pay it off.
Refinancing - Taking out a new
property loan with lower monthly
payments or at a lower interest rate.
Foreclosure - Some homeowners decide to let their home go into
foreclosure, rather than continuing to
make payments on an underwater
property. This does damage credit
scores, but done right can wipe out
hundreds of thousands of dollars in
debt. In addition, the lien holder can
also gain a court judgment against
your other assets if the house sells
for less than the loan amount.
Debt Settlement - This is where
a creditor writes off all or part of the
amount of money owed because they
consider it uncollectable. The strategy is to stop paying all your creditors, completely ruin your credit, and
then negotiate a settlement. Companies advertising debt negotiation
services often charge a substantial
upfront fee, whether or not they ever
save you any money. The IRS will
consider any debt forgiven to be taxable income. The taxes and fees may
be more than the money saved and
you will also have ruined your credit
for many years.
Debt Consolidation - This
method involves taking out a single
large loan to pay off a lot of smaller
bills. Even if it results in a lower
monthly payment, it may wind up
costing you more in the long run if
the new loan is at a higher interest
rate or payments are spread out over
a longer period of time. If you take
out a loan to pay off credit cards, but
don’t also bring your spending under
control, it is easy to wind up with
both a monthly loan payment and a
stack of monthly bills for newly
maxed out credit cards.
Bankruptcy - This is typically
the option of last resort, but depending on the circumstances may be the
best option. In bankruptcy, it is possible to eliminate any second mortgage or home equity line of credit,
while still keeping your principal
mortgage and retaining ownership of
your home.
There is More to Life
than Paying Bills
You can’t decide which method is
best for you by looking at one of the
options in isolation. The desired end
result is not simply to get rid of the
debt, but to live the lifestyle you want
without losing sleep over your bills.
Making the right choice, therefore, requires looking at four factors:
your income, your expenses, your
debts, and most importantly, your
goals. If, for example, your goals include expanding your business or buying a house, you certainly don’t want
to take steps that will ruin your ability
to get credit for the next seven years.
Once you have your goals clearly in view, you can look at each of
the other three factors to see what
opportunities you have for increasing your income, controlling your
expenses and eliminating your debt.
An attorney can explain the
bankruptcy laws to you. A broker
can talk to you about refinancing.
Only your accountant can review
your entire financial picture, helping
you improve the profitibility of your
business, work out a budget and put
you on the right plan for eliminating
debt. Remember, there is more to
life than paying bills and we are here
Don’t Forget the Tax Implications
Two recent federal reports give
insight into what we can expect on
the tax front over the next few
years.
On January 31, the Congressional Budget Office issued The Budget
and Economic Outlook: Fiscal Years
2012 to 2022. The CBO projected a
$1.1 trillion deficit for this year, if
current laws remain unchanged.
This is lower than the 2011 deficit,
but as a percentage of the nation’s
Gross Domestic Product (GDP), it is
“still higher than any deficit
between 1947 and 2008.” While the
deficit is projected to decline over
the next few years, “much of the
projected decline in the deficit
occurs because, under current law,
revenues are projected to shoot up
by almost $800 billion, or more than
30 percent, between 2012 and
2014…”
Earlier that month, the National
Taxpayer Advocate, Nina Olsen, sent
her annual report to Congress. As
detailed in the report, the IRS was
experiencing a sharp increase in
workload due to factors such as “the
increasing complexity of the tax code
and the code’s frequent changes” (an
average of more than one change
per day from 2001 through 2010)
and “the IRS’s increasing responsibility for administering economic and
social policies.” The increase of
refundable credits to promote home
buying, adoption and other activities
had “helped to spawn an increase in
illegal activity that seeks to profit off
the tax system by filing bogus refund
claims and often by stealing and
using another taxpayer’s identity.”
The expanding workload was leading
to “inadequate taxpayer service,
erosion of taxpayer rights, and
reduced tax compliance.”
So what does this mean for
you? To begin with, because of the
increased federal spending and
demand for more revenue, the IRS
is cracking down on high-earners,
independent contractors and those
“… under current law,
[federal tax] revenues are
projected to shoot up by
almost $800 billion, or
more than 30 percent,
between 2012 and 2014…”
Congressional Budget Office
with foreign bank accounts. It is not
that these people are necessarily
more prone to commit fraud than
lower earners, but they are dealing
with more-complex aspects of the
tax code, there is a greater chance
for error or ambiguity, and there is
also a much greater chance to
collect more money than going after
people with lower income.
Second, the constantly changing
tax laws mean that you need to
reassess your financial strategies
more frequently. As the CBO stated,
current laws call for 30% increase in
revenue. At the end of 2012 alone,
changes include eliminating the bonus
depreciation
for
equipment
purchases, higher personal income tax
rates, higher estate taxes, higher
capital gains taxes and 26 million
more people having to pay the
Alternative Minimum Tax. In 2013,
major provisions of the Affordable
Care Act (Obamacare) go into effect.
Of course, any of these laws may
change at any time, so you need to be
fully prepared to take the right actions
to minimize your taxes whenever the
laws change.
Third, with the tax code
increasingly
being
used
for
“administering economic and social
policies” more and more of your
business and personal activities have
tax implications. Many of these tax
laws are not geared to raising
revenue, but to influencing your
decisions as to who you hire, how
you earn a living, the type of car you
buy, the number of children you
Get your debts
under control!
Call our office now for a
Free Initial Consultation
702-645-6318
What Our Clients are Saying
Devin Devasquez is a model,
actress and author. Ronn Moss is
a singer and musician for the
rock band Player, and has portrayed the character of Ridge
Forrester on CBS’s The Bold and
the Beautiful since 1987.
We have used various accountants over the years, but
were never quite satisfied with
the services we were receiving.
Then a neighbor of ours recommended that we use Mark Sherman and we decided to give him
a try.
Two years later we can say
that he definitely is exceptional.
Not only is he very knowledgeable
about all the latest changes to the
tax laws, but he is very personable and does a great job of explaining financial matters to us.
Mark now handles all our personal and corporate financial matters. He has helped us out with the
IRS, straightened out some corporate issues and has given us sound
advice on retirement planning avenues we can take to secure our
future. He was able to do all this
by phone and email since we live
and work in the L.A. area.
One bit of advice he gave
was particularly useful. Since we
own and manage several properties, Mark showed us how we
could significantly cut our taxes
and make money by Devin be-
Mark Sherman, CPA
601 S. Rancho Drive, D-32
Las Vegas, NV 89106
702-645-6318
Visit our new website
www.shermancpas.com
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© 2012 Joe Zwers. All rights reserved.
Devin Devasquez and Ronn Moss
coming a real estate professional.
We were really very lucky to
have found Mark. Whenever a
situation arises, he is right on top
of it. He is a great person to work
with and we highly recommend
him to anyone.