Harvey G. Beringer, CPA

1. Children earning limited amount while students.
   • One can make a limited contribution to an individual retirement account. That amount, however, is limited to 100 percent of earned income or $4,000. Since earned income is not taxed at the “Kiddie Tax” rates, it would make more sense for such a contribution to be made to a Roth IRA instead of the traditional IRA.
2. Students working before going to grad school.
   • The college grads could contribute to a traditional IRA while working. This would entitle them to the contribution deduction which could be converted to a Roth IRA.
3. Employers matching 401 (k) contributions.
   • The employee should maximize, at least to the extent that an employer matches them under the plan. The incremental value of the 401 (k) account balance will be quite rewarding if their contributions, employer matching and the tax deferred earnings are compounded every year.
4. Resist opportunity to withdraw.
   • Once money is withdrawn, it cannot be re-contributed back into the account (except in certain instances when re-contribution is within 60 days or within the same taxable year).
5. Use regular savings.
   • Employees 55 and over may be able to make an additional contribution. The maximum contributions have also increased. The amount for the additional contribution in 2007 is $15,500, and $5,000 for the maximum.

Letter Ruling 200521003 issued by the IRS allowed the parents of two learning disabled children to claim a medical deduction for the school tuition paid for the children. Since regular school is not designed to deal with learning disabilities, regular school education is not medical care.

This ruling dealt specifically with children who were diagnosed with learning disabilities, including dyslexia. The intention of the program was to eventually allow them to assimilate into a regular public school. The parents felt that they were allowed to deduct the full tuition as a medical expense. The fact that the school was designated as a “special school” was not the controlling faction in allowing the deduction. The deduction depends on the curriculum of the school for the children with special needs. The determining questions are, “Is the special education designed to alleviate the disorder ?” and “Why is the student attending that school?”

The dependent care credit is also available for a special needs child. The costs eligible for the credit if the dependent is physically or mentally unable to care for him/herself. Cloverdale education savings accounts (ESA) are also available to parents with children having special needs.

You may be the owner of a small/medium size business and ask yourself, What does SOX (Sarbanes-Oxley Act) have to do with my business? Since SOX was designed to protect investors and creditors of public companies, that does not mean that some provisions of the act cannot help your business. Section 404, specifically, requires management to report on the effectiveness of their internal financial controls.

Being aware of how such controls can impact a business can make the difference between a successful operation and a losing one. The main reasons that a small business may want to create strong internal controls are:

1). The focus of strong internal controls is on getting the financial statements right. This can address and help prevent future or potential problems.

2). An outside party such as a banker or accountant recommends it.

3). It can solve present business problems and/or help prevent fraud.

4). The potential to go public.

5). A Sox-compliant customer may require it.