What's a lame duck, and what does it have to do with Congress?

We'll have some political lame ducks this year, and Congress will convene a lame duck session after the November election. A quick reminder about lame ducks: A member of Congress who lost his or her bid for reelection in November 2012 will still be in Congress until January 2013. Because the individual will not be in the new 2013 Congress, he or she is considered a lame duck lawmaker (with less influence than those who will sit in the new Congress).

A lame duck session of Congress occurs in even-numbered years following the midterm elections held in November. Congress is reconvened after the election to complete whatever unfinished business remains for the year. Because some of the members failed in their reelection bids and will be out of Congress in January, they are lame ducks and the session is called a lame duck session.

Analyze your customers for a better business

If your business is like most, you put a lot of effort into attracting new customers. After all, that's an essential part of growing the business. But sometimes it's more productive to step back and review your existing customers, and perhaps even get rid of a few.

You might be surprised at what you find if you take the time to analyze your customers. Start by listing customers in order of sales. Then make your best estimate about the cost of those sales. For example, you might give volume price breaks to your biggest customers that make them less profitable than smaller customers. But don't just look at the cost of sales. Ask your sales staff, your customer service staff, and your accounting staff to assign a simple grade to your customers (e.g., A, B, C, D, or F). This will give you a relative measure of how much time and effort each customer requires.

Once you have profitability and customer care information, you can begin to rank your customers in groups from best to worst. The "best" are easy. They're the customers you should make a special effort to appreciate and retain.

You have several options for the "worst" group. With some customers, you might want to change your pricing structure to charge them for the excessive costs and attention they require. With others, you might want to sit down and address specific problem areas. Sometimes just making customers aware of problems can produce positive joint solutions.

In some cases, the only solution is to part ways. Do this gracefully, without creating unnecessary ill will that can come back to haunt you. If possible, find a plausible business reason to support your action. But if necessary, be blunt and tell the customer that you're cutting back to provide better service to your top customers. Suggest alternative suppliers they might contact to fill their needs.

Eliminating customers may be counter-intuitive, but it can work wonders for your bottom line and your staff's morale. Call us if you'd like assistance with the financial analysis of your customers.

Beware of tax scams

It's likely to be a daily occurrence: Your e-mail inbox contains at least one message touting a too-good-to-be-true offer. You probably shake your head and delete the pleas from mysterious mock millionaires who need your help recovering imaginary inheritances.

But what do you do when the e-mail has the Internal Revenue Service web address in the FROM box and a subject line that claims you're about to be audited by the Criminal Investigation Division?

*Step 1. Stop and think. You've never given the IRS your e-mail address in relation to your tax return. Even if you had, the government does not request personal information such as your bank account, credit card, or social security numbers via e-mail.

*Step 2. Without clicking on any links or responding to the e-mail, forward the entire message to the IRS (phishing@irs.gov). The IRS established this e-mail box in 2006 to investigate and shut down online fraud.

Note: You will not get a response, either online or off, from the IRS when you report scams.

*Step 3. Delete the e-mail.

Besides the audit subterfuge, other common e-mail tax schemes to know and avoid include a promise of additional money due, bogus government grants, and requests for you to check the status of your refund.

Tax scams never die, and they can be taxing. Before you react to any communication from -- or purporting to be from -- the Internal Revenue Service, contact us. We're here to help you resolve tax issues.

Decide when to pay tax on U.S. savings bonds

When you own Series EE or Series I savings bonds, you have a tax decision to make. Both types of bonds earn interest monthly. Usually, you’ll choose to defer paying any taxes on the interest until the bond reaches final maturity or you redeem it, whichever comes first. At that time, you would report and pay taxes on the total interest earned over the life of the bond. (If you meet certain requirements, you might avoid paying any taxes by using the bond proceeds to pay for higher education expenses.)

The alternative method is to report the interest earned each year as part of your taxable income. Most people choose the first method because it lets you delay paying taxes for as long as possible. But sometimes the annual method makes sense -- for example, if a young child has been given a savings bond in his or her own name.

The tax rate on investment earnings of a child under age 19 (under age 24 for full-time students) is the parent’s marginal rate when the "kiddie tax" applies. The kiddie tax is intended to stop parents from shifting income to their children. But even under the kiddie tax rules, the first $950 of a child’s investment income in 2012 is tax-free and the next $950 is taxed at your child's lower tax rates. So if your child expects to earn less than $1,900 from savings bonds and other investments, reporting the interest as income each year could make good tax sense.

For further details on this and other tax-saving strategies, please give us a call.

Identify shares you're selling

You can often manage the size of your gain or loss when you decide to sell some, but not all, of a particular stock or mutual fund. To do this, you must have kept good records of the date and the price for each share purchase. By selling the highest cost shares first, you'll minimize your taxable gain or maximize your loss. You must specify the particular shares you are selling at the time you sell.

Don't be tripped up by the wash sale rules

If you sell a security before the end of 2012 to take advantage of a capital loss, be aware of the wash sale rules. To make sure the loss is deductible, refrain from buying the same security or a substantially identical security during the 61-day period that begins 30 days before you sell and ends 30 days after.

Basis reporting requirement delayed

A law passed in 2008 requires brokers to report an investor's basis in stocks and mutual fund shares when these investments are sold. The final step in these new reporting requirements was to become effective for debt instruments and options on January 1, 2013.

The IRS has announced a delay in the effective date, moving it to January 1, 2014. This one-year delay is in response to complaints that the earlier deadline did not give brokers and other financial institutions time to build and test systems to handle the complicated basis reporting requirements.