• Section 179 Rules:
  Effective for the 2007 tax year, the new law increases the maximum amount that may be “expensed” (i.e., currently deducted) under Section 179 to $125,000. (It was scheduled to be $112,000 for 2007.) The new law also extends inflation indexing for the Section 179 limit and allows current write-offs for most off-the-shelf software through 2010. Finally, the phaseout threshold for the Section 179 deduction is generally increased from $450,000 to $500,000 for 2007 with indexing through 2010.



• S Corporations:
  The new law contains several provisions that benefit S corporations and their owners, including tax breaks for qualified subchapter S subsidiaries (Q-Subs) and electing S business trusts (ESBTs) for tax years beginning after 2006. Also, gains from certain security sales will no longer be treated as passive investment income effective for tax years beginning after May 25, 2007.



• Work Opportunity Tax Credit:
  The new law extends the Work Opportunity Tax Credit (WOTC), which is available for hiring workers from certain disadvantaged groups, through August 31, 2011. It also expands the list of workers eligible for the WOTC, including disabled veterans.



• Family Business Simplification:
  The tax filing requirements are eased for certain husband-and-wife teams operating an unincorporated business. This provision reducing paperwork applies to tax years beginning after 2006.



• Employer Tip Credit:
  An employer can receive a tax credit for the portion of FICA (Federal Insurance Contributions Act) tax paid on tips in excess of the minimum wage. Despite the minimum wage increase over the next two years, the credit will still be based on the current minimum wage.

On the downside, the new law also includes the following provisions:

• Kiddie Tax:
  The kiddie tax applies to the unearned income above an annual threshold ($1,700 for 2007) that is received by certain children. The excess is taxed at the parents’ top tax rate. In 2006, the age threshold was raised from age 14 to age 18. Now it’s been raised again for 2008 to age 19 or age 24 for full-time students. This higher limit applies if the child’s earned income does not exceed half of his or her annual support.



• Suspended Interest:
  The IRS now has 36 months before it must stop charging interest and filing related penalties if it fails to notify you about a tax deficiency. The previous limit was 18 months.



• Due Process Hearings:
  The new law eliminates the requirement that the IRS must hold a collection due process hearing before issuing a levy on delinquent employment taxes. However, post-levy hearings are still an option.



• Bad Checks:
  Previously, the minimum fee for bouncing a check to the IRS was $15 for checks totaling $750 or less. That fee has been raised to $25 for checks totaling $1,250 or less.

A tax break for Roth IRA conversions is looming on the horizon. However, if you are not careful, you could end up paying “extra” tax when you convert from a traditional IRA to a Roth IRA. This result may be avoided or minimized with advance planning.

Background: The annual contribution limits for traditional IRAs and Roth IRAs are the same. For the 2007 tax year, you can contribute up to $4,000 to either type of IRA (or a combination of both). The contribution limit is $5,000 if you are age 50 or older. Contributions to a traditional IRA may be deductible if you do not actively participate in an employer’s retirement plan and your adjusted gross income (AGI) does not exceed a specified level. Roth IRA contributions are never deductible.

The primary attraction of the Roth IRA is that qualified distributions are completely exempt from income tax. This includes distributions from an account in existence for five years that are made after age 59-1/2, on account of death or disability or to pay first-time home-buyer expenses (up to a lifetime limit of $10,000).

In contrast, distributions from a traditional IRA may be taxed at ordinary income rates. Thus, there is a tax incentive to convert a traditional IRA to a Roth IRA, even though you must pay tax on the conversion.

Tax Complications: Under current law, you can convert to a Roth IRA only in a year in which your AGI is less than $100,000. However, a recent tax law change removed the $100,000 AGI barrier, beginning after 2009. Furthermore, you can spread out the resulting tax over the following two years for a conversion taking place in 2010. In light of this pending tax break, some individuals have chosen to set up a nondeductible IRA. Reason: With a nondeductible IRA, only the earnings are taxable when distributions are made. This will enable you to shift more funds to a Roth IRA after 2009.

Caution: Be aware that you cannot simply take distributions from your nondeductible IRA if you have other IRAs. Any distribution is treated as coming on a pro rata basis from each IRA. This means that you might have to pay more tax than you think when you convert to a Roth IRA.

One possible solution is to roll over funds from traditional IRAs to your company retirement plan, such as a 401(k) plan (assuming the plan permits it). If it is handled properly, there is no current tax on the rollover. When you are ready to convert to a Roth IRA in 2010, you will be left with only a nondeductible IRA.

Similarly, you might have your spouse establish a nondeductible IRA if he or she does not have traditional IRAs funded with tax-deductible contributions. Of course, you still must pay tax on your 401(k) contributions after you retire, but you will have some flexibility over the distributions. Generally, distributions are required to begin by the year after the year in which you turn age 70-1/2. Also, it is likely you will be in a lower tax bracket in retirement than you are while working full time.

1. Pair Up Items On Your Shelves.
   When it comes to product placement, “togetherness” can be a valuable commodity. Try to package products that seem to go together naturally. For instance, a retailer that sells pants and belts might try to sell them in tandem. These combination items should be visible in high-traffic areas to further encourage sales. Make sure sales staff is educated about the pairings. In a similar vein, another type of business may attempt to cross-sell goods or services to customers or clients who have made similar purchases.



2. Eliminate Straight Aisle Runs.
   In some stores, the layout enables a customer to enter the premises, walk up one aisle and then turn down another aisle straight to the checkout or door. This may encourage an “I’m just looking” mentality. You might redesign the floor to avoid the possibility for such quick exits. For example, the layout might require customers to weave in and out of aisles, giving them increased opportunities to view your wares.

3. Improve Checkout Sales.
   The store checkout is often a focal point for increasing the IAT. Don’t make the common mistake of cluttering the checkout area with so many trinkets and other small items that the customer is overwhelmed. Instead, select one or two special items or product pairings. Focus on those categories that are prime candidates for more sales. Another idea: Stock the shelves by the checkout with “impulse buys” that can grab the eye of a customer.



4. Offer Convenience To Shoppers.
   Some of the elements that can support your basic items are gift-wrapping services, assembled gift bags, alterations (where appropriate), etc. By adding these conveniences at a small price, you can improve the IAT while you reduce the time for your customers. Make sure employees are aware of the sales pitch that is needed.