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Archive for April 2010

Old man winter is dead and buried!

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Today is April 26th and I have officially called an end to winter.  I know that may sound strange but in the snow belt of Northeast Ohio some very heavy snow storms have hit at the end of April over the past decade.  I couldn’t be happier to bury the bad old man.  The only problem is; he will spring to life in another 7 months just like a character from a bad horror movie. 

To celebrate his demise I thought I would jot down some of the things I can’t wait to do as summer approaches. 

  • Have a refreshing beverage on my patio after doing some relaxing yard work
  • Grilling hot dogs and hamburgers after work
  • Grilling a nice juicy steak on the weekend to pair with my favorite red wine
  • Having a hot dog at the ball park with that good stadium mustard – maybe a few nachos too for good measure!
  • Going for a casual evening walk after dinner with my sweetie
  • Stopping to smell the roses
  • Cutting the roses
  • Golfing, poorly
  • A 2 hour bike ride that leaves me with a warm, fuzzy, tired feeling
  • Going to the wine festival in August
  • Making a batch of sun tea
  • Eating homemade strawberry pie
  • Tending to my vegetable garden and eating beans, tomatoes, lettuce and peppers grown in my backyard
  • Getting that “look” for forgetting to put on sunscreen on that 2 hour bike ride
  • Listening to live music played outdoors at a concert
  • Playing corn-hole in the back yard with neighbors
  • Seeing my neighbors again after winter “hibernation”
  • Washing my salty car!

 What is on your list?  Let the summertime fun begin. 

Have a great week.

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Written by pacelinebiz

April 26, 2010 at 5:59 pm

The Economy asks; how do you like me now?

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 In November 2009 I had a poll that asked your opinion on the State of the Economy.  The results were as follows:

  • 62% said the Economy was off of the bottom but early in recovery.
  • 15% said we were scraping along the bottom
  • 8% said still going down hill
  • 8% said recovering now with robust growth in a few months
  • 8% said that unemployment would worsen until at least Q2 2010

 Now, almost 5 months later I ask again; how do you assess the economy?  Before, you answer let me give you a few facts.  Since November we have had a net gain of 117,000 jobs as listed below:

  •  November ’09    +64,000
  • December ’09   -109,000
  • January ’10        +14,000
  • February ’10       -14,000
  • March ’10        +162,000

 We also had Q3 2009 GDP growth of +2.2% and Q4 2009 GDP growth of +5.6%.  Estimates for Q1 2010 GDP growth are around 3%.  Unemployment stands at 9.7% and last months job gains were more than anticipated.  It will be interesting to see how April will turn out. 

 In November if I was asked if I would be happy with that type of turn around in the job picture, I believe I would say yes.  In reality the turn around was very rapid.  See the job losses by month totaling 3,663,000 starting in February 2009:

  •  February 2009      -681,000
  • March 2009          -652,000
  • April 2009            -519,000
  • May 2009             -303,000
  • June 2009             -504,000
  • July 2009              -344,000
  • August 2009         -211,000
  • September 2009   -225,000
  • October 2009       -224,000

 The amount of jobs lost in those months is staggering but I believe we are going to have a similar upside growth in jobs beginning very soon.  If we create 400,000 jobs in April which I believe we could, the recovery is full swing and it is off to the races from here!

 Have a great week.   Please vote in the poll below:

Written by pacelinebiz

April 19, 2010 at 9:18 pm

Video Games of the 70’s and 80’s – what a blast!

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It has been a while since we took a long walk down memory lane so this week let’s take that walk.  Follow me down the path to…

 Favorite video games from the 70’s and 80’s

Some that I can remember in no particular order:

  • Pong
  • Space Invaders
  • Missile Command
  • Moon Patrol
  • Battelzone
  • Tron
  • Defender
  • Asteroids
  • Tempest
  • Pac Man
  • Ms. Pac Man
  • Centipede
  • Frogger
  • Joust
  • Donkey Kong (I, II, III and Jr)
  • Mario Bros
  • Super Mario Bros
  • Galaga
  • Dragons’ Lair (using laser disc)

 In addition to the arcade and home video gaming systems I should also mention the primitive hand held football and baseball games that were a very popular time waster.  In the same category, I also remember air hockey, foosball and the foosball-like hockey game pitting the USA vs. the USSR.  Before video games became popular I remember playing pin ball machines before they developed electronic scoring.  I can’t remember any particular names but I spent a lot of loose change on those too!

 It might have been a waste of time, but playing those games burned off a little boredom and maybe helped studying – once you actually got down to it.

Next week back to business after our video game break.

Written by pacelinebiz

April 12, 2010 at 7:47 pm

Health Care Reform – a closer look at tax credits for small business

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Despite the controversy surrounding the passage of the new Health Care Reform Legislation, it is now the law of the land. There is a provision for a Small Business Health Care Tax Credit which is available to small businesses that provide health insurance to their employees. It is in effect for 2010 tax returns. To keep things as simple as possible, I will include an IRS example (from Question #5 of the Q & A provided) of how this will work below.

The facts: (rules effective for years 2010-2013)

• 9 full time equivalent employees (FTE’s) in a for profit company
• Average wage per employee is less than $25,000
• Employer paid premiums = $72,000 (an 80%-20% split is assumed with no Sec 125 deduction)
• 35% = maximum amount of employer expenses that count towards the credit
• Calculation of credit: (35% X $72,000) = $25,200

That may sound like a good deal but to qualify for the credit there are some strings attached:

1. The credit is phased out as total employees exceed 10 and is not available for firms with 25 or more employees.

2. In addition, if average wages per employee exceed $25,000 a phase out begins and if average employee wages are greater than $50,000 the company is not eligible.

3. The phase out for employee total and average wages work together so a company with 12 employees and average wages of $30,000 would have a reduced credit as calculated below:

Phase out range for employee total is between 10 and 25 employees (range = 15) and the company is over by 2 employees. Calculation is 2/15 X $25,200 = $3,360 reduction for employee total > 10

Phase out range for average wage is between $25,000 and $50,000 (range = 25,000) and the average wage is $30,000 – greater by $5,000. Calculation is 5,000/25,000 X $25,200 = $3,150

Recap:
• Total maximum original credit    25,200
• Reduction for 12 employees          (3,360)
• Reduction for average wages         (3,150)

• Allowable credit                                  18,690

Another problem:

Section 125 cafeteria plans count against the employer portion of the expenses paid. I assume Congress did not want to allow a “double dip” benefit of the reduction for the Section 125 cafeteria plan AND allowing that as part of the qualifying employer expenses.

The biggest problem with qualifying for the credit is:

 An employer must pay at least 50% of the medical premiums – which sounds reasonable.   However, the portion that the employee deducts using a Section 125 cafeteria plan counts against the employer’s portion of medical premiums paid.  This means if a company has a Section 125 cafeteria plan for the employee portion of  medical premiums this will greatly reduce the ability for firms to take advantage of the credit due to the “50% employer paid rule”.

Suppose an employer pays 74.5% of the premium and the employees pay 25.5% of the premium the employer will not qualify for the tax credit – if the 25.5% employee portion is deducted using a “premium only” Section 125 cafeteria plan. The company will not qualify because they do not meet the 50% employer paid rule.

See below for a numerical example that may better illustrate the problem:

• Employee pays                                25.5%
• Cafeteria plan deduction             25.5%
• Total                                                     51.0% – Employer pays only 49% and is NOT eligible for credit

In summary, it will be very difficult for many firms, especially ones that are already taking advantage of cafeteria plans, to take advantage of this new tax credit. Perhaps, based on the massive deficit we are operating under that is a good thing. We do not need to add to national our debt.

To read more about this I have included several useful links to the IRS web site below.

Click below to read an IRS news release on the tax credit:
http://www.irs.gov/newsroom/article/0,,id=220848,00.html?portlet=7

Click below for a 22 point Q & A on the tax credit:
http://www.irs.gov/newsroom/article/0,,id=220839,00.html

Click below for a simple way (according to the IRS) to determine if your firm qualifies for the credit:
http://www.irs.gov/pub/irs-utl/3_simple_steps.pdf