Archive for April, 2009

Business tax planning should be year-round process (AP)

Wednesday, April 8th, 2009 | Finance News

NEW YORK – It can be tempting for small business owners, once their income tax returns are filed, to put the whole issue of taxes behind them.

Resist that urge.

Owners who don't grasp the idea that a company's tax planning — in reality, overall business and financial planning — is a year-round process may be setting their businesses up for an even tougher time in this difficult economy. They might also miss out on some tax law changes that are designed to help small businesses get through the recession.

"They've got to keep their eyes open relative to what's happening on the budget level," Barbara Weltman, a tax attorney in Millwood, N.Y., and author of "J.K. Lasser's Small Business Taxes," said of business owners.

It's hard to run a business and keep up with tax law or economic stimulus legislation. That's a good reason to stay in touch with a tax or financial adviser whose job is to know what changes are coming down. And it's not just the federal government that's making adjustments; states are also passing laws, and some including California need to raise taxes to close budget deficits.

Some changes in federal tax law for this year are already known. The IRS Web site, http://www.irs.gov, has a section devoted to the provisions on its home page. Click on "Update on Recovery Tax Provisions for Individuals and Businesses." Or, you can go straight to changes aimed at small businesses by clicking on http://www.irs.gov/newsroom/article/0,,id205330,00.html.

Among the small business provisions:

• Companies that incur net operating losses can carry them back five years instead of the usual two, applying those losses against taxes paid in the past and obtaining refunds.

• When making estimated tax payments, businesses are required to pay only 90 percent of their previous year's taxes, down from the usual 110 percent.

Weltman noted that this change may be a big help to companies. "What this does is improve cash flow," she said.

• The sharply higher deductions for new equipment purchases enacted for 2008 are being extended into 2009. One of these provisions is the Section 179 deduction, which allows small businesses to deduct upfront the cost of equipment such as computers, furniture, manufacturing machines and vehicles, up to $250,000. The second is the bonus depreciation measure that increases the portion of a purchase price that can be deducted for the first year.

There is also a break for people who invest in small businesses — if they hold their investments for five years, 75 percent of their capital gains will be exempt from taxes.

Some of these provisions are straightforward, especially the carryback and estimated tax changes. But the others are more complex because they depend on strategic business decisions that are made throughout the year — and that probably should be made in consultation with a financial professional such as an accountant or tax attorney whose expertise goes beyond the Internal Revenue Code.

Weltman said owners should be sure the professionals they hire are "more than just tax advisers, that they're business advisers. ... Maybe you're not doing things right with your inventory, maybe you should be warehousing differently. Whatever the issue is, you need someone who can help you."

Owners need to take advantage of that help on a continual basis. That means not just calling for advice about big purchases or other strategic decisions, but also scheduling semiannual or, even better, quarterly meetings with their accountants or advisers.

Some owners go further, giving their accountants financial data each month.

You can argue that working closely with an adviser is a good business practice in the best of times. Given the flux in the economy and therefore the evolution in laws that affect small companies, right now it can be critical. It not only keeps your company operating better, it frees you to focus on your customers and employees and preparing your business to benefit from an economic recovery.

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Bed Bath & Beyond stock up after 4Q results posted (AP)

Wednesday, April 8th, 2009 | Finance News

CHICAGO – Shares of Bed Bath & Beyond Inc. soared to an eight-month high in Wednesday trading, a day after the home decor chain posted better-than-expected sales and profits prompting at least one analyst to upgrade the retailer's stock.

JP Morgan raised its rating on the Union, N.J.-based company's stock to neutral from underweight after the retailer released fourth-quarter results after trading ended Tuesday.

Bed Bath & Beyond said it earned $141.4 million, or 55 cents per share for the three months ending Feb. 28. That's 18 percent less than the company's $172.9 million, or 66 cents per share, profit during the same period last year. Sales for the period sank less than 1 percent to $1.92 billion.

Analysts surveyed by Thomson Reuters predicted the Union, N.J.-based retailer would earn 44 cents per share on revenue of $1.92 billion.

"Bed Bath reported a solid (fourth-quarter) earnings beat, which will likely lead to short covering and a healthy move in the stock, in our view," Thomas Weisel Partners LLC analyst Matt Nemer wrote in a research note Wednesday.

Nemer said sales at comparable stores are improving, which indicates "recent strength in the home category."

Meanwhile, Deutsche Bank analyst Mike Baker said Bed Bath & Beyond's results showed how the company was benefiting from the liquidation of its biggest rival, Linens N Things, and can negotiate better deals with vendors.

"In other words, the quarter shows signs that (Bed Bath & Beyond) is benefiting from the shakeout thesis," he wrote in a research note.

Bed Bath & Beyond shares climbed $5.74, or 22.5 percent, to $31.24 in midday trading Wednesday.

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Treasury says some insurers qualify for TARP (Reuters)

Wednesday, April 8th, 2009 | Finance News

WASHINGTON (Reuters) –
The U.S. Treasury said on Wednesday some life insurers have met requirements for government capital investments under an existing rescue plan, clarifying that it is not launching a new bailout for the sector.

"There are a number of life insurers that have met requirements for the Capital Purchase Program because of their bank holding company status," said Treasury spokesman Andrew Williams. "These are among the hundreds of financial institutions in the CPP pipeline that will be reviewed and funded as appropriate on a rolling basis."

The statement was made in response to a Wall Street Journal story published late on Tuesday saying the Treasury would extend its $700 billion financial bailout program to certain life insurers and would make an announcement in coming days.

Williams said any capital investments in insurers that have bank holding company status would not constitute a new rescue program for the insurance sector.

STOCKS PARE GAINS

The Treasury clarification caused stocks to pare gains, particularly the major insurers which were viewed as the likely benefactors of a widening of the Treasury's financial bailouts. Prudential Financial Inc shares had climbed more than 12 percent at one point in early trade, but by midday were up 7 percent at $23.65, while MetLife's earlier 10 percent gain was chopped back to about 3.3 percent at $24.96.

In recent months, some insurance companies have received approval to acquire banks, paving the way for them to participate in the Capital Purchase Program, which the Treasury has estimated will top out at $218 billion.

As of Tuesday, the program had $198.5 billion invested, leaving $19.5 billion in available funds, according to Treasury documents. A Treasury official said only a small number of life insurers have met the qualifications for the program.

The Treasury estimates it has around $134.5 billion left in the overall bailout fund, but it faces heavy funding demands from additional automaker aid requests and the launch of toxic asset purchase funds and a new program to provide additional capital if necessary to the largest 19 banks following the completion of stress tests at the end of April.

The American Council of Life Insurers, an industry lobbying group, said it expects the Treasury to communicate decisions on capital investments directly to companies that have applied.

"As we have argued all along, allowing life insurers to participate in the CPP would be consistent with the stated goals of the program to increase the flow of financing to U.S. businesses and stabilize the credit markets," said Frank Keating, chief executive of the group.

PRESSURE RELIEF

With $5.1 trillion in assets at the end of 2007, life insurers are major investors in corporate bonds. But as markets have fallen, so have the value of life insurance policies used by many Americans as a key savings vehicle. Large numbers of policy redemptions could lead to a cash crunch for some companies.

Funds from the Treasury's Troubled Asset Relief Program could help alleviate some of these pressures, said Bret Howlett, an insurance analyst at Standard & Poor's Equity Research in New York.

"We caution that TARP funds will not completely solve the insurers' capital issues and note that some prior recipients of TARP funds have continued to struggle after receiving federal money," he added.

Reuters reported in February that the Treasury was actively considering applications for capital injections from about a dozen insurance companies.

In addition to Met Life and Prudential, other insurers that now have bank holding company status include the Hartford Financial Services Group Inc and Lincoln Financial.

(Additional reporting by Patrick Rucker and Karey Wutkowski in Washington and Elinor Comlay and Lilla Zuill in New York; Editing by James Dalgleish)

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