Hood&Strong LLP, Certified Public Accountants

Social security tax rates will not increase in 2006, but the wage base on which the taxes are calculated will be increased to $94,200. The 1.45% tax that finances Medicare will be levied on earnings without limit. Taxes paid by self-employed individuals will also increase due to the increased earnings limit of $94,200. The 2.90% Medicare rate will be calculated on earnings without limit. The FUTA tax remains unchanged from the 2005 rate. The SDI tax is .08% on the first $79,418. The 2006 rates and maximum amounts of wages are summarized in the table shown below.

California EDD Announces Conformity to IRS on Employee Donations of Leave Credits to Victims of Hurricane Katrina
Under these leave-based donation programs, employees donate their vacation, sick or personal leave in exchange for employer cash payments made to qualified tax-exempt organizations providing relief for the victims of Hurricane Katrina. Employees will not be able to deduct the donated leave, however, they do not have to include it in income.

Independent Sector Publishes a Checklist For Accountability
As part of its continuing commitment to improving the practice and self-regulation of charitable organizations, Indpendent Sector has released a list of steps organizations can take to help improve and demonstrate their accountability.

President Signs Energy Bill Into Law
The bill provides a credit of up to $3,500 toward the purchase of a hybrid or clean-diesel vehicle, a 30 percent credit capped at $2,000 for the home installation of solar electricity or heating equipment, and a 10 percent credit for energy-efficient furnaces, circulating fans, and boilers. The bill would also give consumers a tax break on energy-efficient windows, up to $100 for an energy-efficient dishwasher, up to $200 for a clothes washer, and up to $175 for a refrigerator.

New Form 4868 Provides Six-Month Filing Extension
The Internal Revenue Service released a draft of the revised IRS Form 4868, which if approved will give individual taxpayers a six-month extension without the need to file an intervening form.

Panel on the Nonprofit Sector Releases Final Report
The Panel has released its comprehensive series of recommendations intended to strengthen the ability of the nation’s 1.3 million charities and foundations to serve as responsible stewards of the public’s generosity.

Americans remain confused over who actually has to pay the tax and most aren’t aware that buying life insurance can reduce their tax burden

The Commission released a statement on issues that arose during the first year of experience with the implementation of Section 404 of the Sarbanes-Oxley Act of 2002.

The Public Company Accounting Oversight Board published additional guidance to auditors on how to implement the PCAOB’s Auditing Standard No. 2, "An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.”

President Bush on Wednesday signed legislation rewriting the nation’s bankruptcy law. The new law, opposed by consumer rights groups, makes it harder for debt-ridden consumers to wipe that debt out by declaring bankruptcy.

Extension of Compliance Dates for non-accelerated filers and foreign private issuers regarding internal control over financial reporting requirements

The Internal Revenue Service is targeting wealthy executives and entrepreneurs to ferret out would-be tax dodgers.

Should married couples file separately or jointly? George Paulsen talks about the importance of communication between spouses when it comes to taxes and other financial matters.

PCAOB proposes limits on the tax services that auditors may provide to clients in an effort to stop conflicts such as those that led to the marketing of abusive corporate tax shelters.
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As the deadline approaches, for public companies to comply with Sarbanes-Oxley 404 requirements, many still face implementation questions. Our consultants can help.
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New Corporate Tax Law

Beleaguered manufacturers may receive some tax relief with new law.
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Working Family Tax Relief Act Passes

On October 4, 2004, President George W. Bush signed the Working Families Tax Relief Act of 2004 into law. The Act extends numerous expiring individual and business-related provisions. It also contains some new provisions and technical corrections.
Summary of provisions

Social security tax rates will not increase in 2005, but the wage base on which the taxes are calculated will be increased to $90,000. The 1.45% tax that finances Medicare will be levied on earnings without limit. Taxes paid by self-employed individuals will also increase due to the increased earnings limit of $90,000. The 2.90% Medicare rate will be calculated on earnings without limit. The FUTA tax remains unchanged from the 2004 rate. The SDI tax is 1.08% on the first $79,418. The 2005 rates and maximum amounts of wages are summarized in the table shown below.

Hood & Strong LLP is pleased to offer a new and convenient way for our clients to electronically submit their annual Tax Organizers to us.

Note: You will need to mail to us your underlying documents, such as Form W-2, Forms 1099, Schedule K-1, etc. If you have any questions about this process, please feel free to contact your Hood & Strong LLP tax advisor.

Holding onto unnecessary business records will quickly use up all available storage space in most businesses. A formal records retention program should be carefully developed by management and take into consideration special circumstances, legal requirements, industry standards, pending investigations, and potential litigation. The following retention periods are intended as general guidelines only. Before destroying any business records, it is advisable to seek legal counsel.

Capital stock and bond records: ledgers, transfer registers, stubs showing issues, record of interest coupons, options, etc.
Permanently

Checks (canceled checks for important payments, special contracts, purchase of assets, payment of taxes, etc. Checks should be filed with the papers pertaining to the underlying transaction.)
Permanently

Insurance records, current accident reports, claims, policies, etc
Permanently

IRA and Keogh plan contributions, rollovers, transfers and distributions
Permanently

Property records, including costs, depreciation reserves, year-end trial balances, depreciation schedules, blueprints, and plans
Permanently

Tax returns, revenue agents' reports, and other documents relating to determination of income tax liability
Permanently

Vouchers for payments to vendors, employees, etc (includes allowances and reimbursement of employees, officers, etc, for travel and entertainment expenses)
7 years

The AICPA Auditing Standards Board has released a proposed Statement on Auditing Standard (SAS), Audit Documentation, which would supersede SAS No. 96 of the same name. This proposed Standard would not apply to audits of public companies because audit documentation requirements for those audits are contained in Auditing Standard No. 3 of the Public Company Accounting Oversight Board.

The proposed SAS provides enhanced guidance concerning matters that should be documented and the retention of documentation. Specifically, the proposed Statement requires:

The proposed SAS would also amend SAS No. 1, Codification of Auditing Standards and Procedures, “Dating of the Independent Auditor’s Report,” to require that the auditor’s report not be dated earlier than the date on which the auditor has obtained sufficient competent audit evidence to support the opinion on the financial statements, and SAS No. 95, Generally Accepted Auditing Standards, to require the documentation of a justification for a departure from Statements on Auditing Standards.

2006 Payroll Tax Table

2005 Payroll Tax Table