In what may seem questionable logic to some, the Equal Employment Opportunity Commission has recently reaffirmed its position that it is illegal to use a prospective employee’s criminal conviction

record – even felony convictions – as an “absolute measure” of whether they should be hired.

This is because its use could result in discrimination against minorities, who have higher arrest and conviction rates. In 2008, African Americans were about six times more likely to be incarcerated than whites. The incarcera-tion rate for Latinos was 2.3 times higher than for whites.

The only exception is when there is a clear, demon-strable business reason not to hire based on criminal history, according to the EEOC.

More employers are beginning to use criminal back-ground checks in hiring. About 73 percent of major employers report that they check applicants’ criminal records, according to a 2010 survey by the Society for Human Resource Management.

Employers see the checks as one way to weed out

undesirable candidates, keep a safe work environment, reduce fraud and prevent negligent hiring claims.

“Past behavior is the best predictor of future behavior” is an old dictum in the field of psychology. But the EEOC says the practice is snowballing because of the ease of doing searches quickly and efficiently using new technology.

And the adverse impact is increasing because of the already tight job market. Minorities with criminal records are having an especially hard time finding employment.

For these reasons, employment experts are warning employers to expect closer scrutiny from the EEOC and to exercise caution when basing hiring decisions on criminal histories. Doing so may lead to liability for discrimination under Title VII and/or state anti- discrimination laws on either a disparate treatment or disparate impact basis.

There is a distinction between arrest records and conviction records. According to the EEOC, prior convic-tions may be considered in hiring if they are job-related, based on the following three factors:

◆ The nature and gravity of the offense◆ How long ago the conviction occurred (for example,

last year versus 20 years ago)◆ How the job relates to the type of crime committed

(e.g., a convicted embezzler seeking an accounting position)

However, according to the EEOC’s policy guidance, employers who consider arrest records in hiring, must not only evaluate those three business necessity factors, they must also evaluate whether the applicant

actually engaged in the alleged misconduct. A blanket exclusion of people with arrest records “will almost never withstand scrutiny,” according to the EEOC.

Regardless of how you feel about the EEOC’s logic in this matter, it might be wise business practice to heed the experts’ advice. ❚

Winter 2011

© 2011 CPAmerica International

S E E

I N S I D E

Good option for unemployed: Go back to school

Manufacturing deduction highest ever in 2010

Six tips for starting a new business

ofItems Interest

Not hiring based on criminal history can be discriminatory

Criminal background

checks

The only exception is when there is a clear, demonstrable business reason not to hire based on criminal history

Remember rules for mortgage interest deductionsWith mortgage interest rates at generational lows, you

may be inclined to purchase a new home, take out a loan to make improvements on your existing home or take out a second mortgage to pay down high-interest credit card debt.

The IRS has issued a reminder that interest deductions on home mortgages are limited, including limitations for home acquisition and home equity indebtedness.

➥ There is one limit for loans used to buy, build or substantially improve a residence – called home acquisi-tion debt.

➥ There is another limit for loans secured by a quali-fied residence but used for other purposes – called home equity debt.

The tax law allows a deduction for interest on indebted-ness secured by your residence. Acquisition indebtedness cannot exceed $1 million. Home equity indebtedness cannot exceed $100,000.

Small businesses beware: IRS audit rates rising

Is your business ready for a visit from the IRS?

In the last five years, the number of hours the IRS spent auditing small businesses with assets of $10 million or less increased by 30 percent, according to a recent study by Syracuse University’s Transactional Records Access Clearinghouse.

In the same time period, the time the IRS spent auditing companies with $250 million or more in assets dropped by 33 percent.

The average number of hours spent on each audit of large corporations also went down, from 973 in 2005 to 830 in 2009.

By contrast, the average number of hours spent on a small or mid-sized business audit remained substantially the same.

Client

3330 W. Esplanade Avenue Suite 100

Metairie, Louisiana 70002

AdvisorAdvisor

CERTIFIED PUBLIC ACCOUNTANTS

3330 W. Esplanade AvenueSuite 100

Metairie, Louisiana 70002

CERTIFIED PUBLIC ACCOUNTANTS

Every business in the manufacturing sector, whether small or large, should consider the domestic production activities deduction, sometimes referred to as the IRC §199 deduction.

For 2010, the deduction has reached its maximum rate of 9 percent – three times the amount available initially. The deduction was first available in 2005 at a rate of 3 percent of “qualified production activity income.”

As a result, more businesses may find it worthwhile to calculate and substantiate the deduction than in previous years, when the percentage was lower.

The rules are complex, and the calculations can be difficult, so you need to weigh the benefit of the deduction against the cost of calculating and supporting it.

You must be willing to undertake the effort to properly identify and substantiate qualifying activities and to allocate income and expenses.

The deduction is available for a wide range of production activities performed in the United States, including manufac-turing; mining; oil extraction; farming; production of software, recordings and films; and construction of real property and related architectural and engineering services.

Preparation of food and beverages for retail sale is not eligible for the deduction. Activities that are purely services – except in the fields of construction, engineering and architecture – also do not qualify.

The domestic manufacturing deduction can be quite valu-able. A 9 percent deduction is equivalent to lowering your marginal tax rate by approximately 3 percentage points.

Most companies that qualify for the deduction will need the services of an experienced tax adviser to assist them with the required calculations. ❚

If you or someone close to you is temporarily out of work in these difficult economic times, you should be aware of some of the tax law provisions that could benefit you.

If you itemize your deductions, you may be able to deduct job-hunting expenses, as long as you are seeking a job in the same line of business. The expenses are nondeductible if you are seeking your first job or employment in a new line of business or if you have experienced a long period of unemployment.

While you are unemployed, or if you have additional time on your hands because of a temporary layoff or reduced work hours, consider the possibility of improving your marketability through education or training. The tax law provides a number of valuable benefits. And best of all, most of these benefits are available for any field of study, not just your current field.

American Opportunity Tax Credit – Formerly known as the Hope credit, the maximum American Opportunity Tax Credit is $2,500. The credit amount is 100 percent of the first $2,000 of qualifying expenses, plus 25 percent of the next $2,000.

The credit is available for four years of a full- or part-time degree or certificate program. Qualifying expenses include tuition and fees, but not room and board.

The credit is phased out for a single taxpayer with modified adjusted gross income over $80,000 or for joint filers with over $160,000. The credit is allowed against both the regular and alternative minimum tax (AMT), and up to 40 percent of it may be refundable. The credit is set to expire after 2010.

Lifetime Learning Credit – The maximum credit is $2,000 per year for a postsecondary eligible education institution. Moreover, the credit is available for courses taken to acquire or improve your job skills.

The credit amount is 20 percent of the first $10,000 in qualifying expenses.

Work-related expenses – An employee can deduct work-related expenses, job-hunting expenses, plus other miscellaneous expenses, as a miscellaneous deduction, but only for amounts that exceed 2 percent of adjusted gross income. If you are self-employed, you can deduct the expenses directly from self-employment income.

To the extent education expenses qualify for a credit and/or an itemized deduction, you can’t double-count the same expenditure. You should determine which characterization is the more beneficial to you.

Finally, if you have been unemployed for more than 60 days, be sure to tell prospective employers that hiring you could qualify them for tax credits under the Hiring Incentives to Restore Employment Act. ❚

Only 54 percent of cell phone owners are satisfied with their service, according to a recent annual survey of cell phone users by Consumer Reports National Research Center.

That’s considerably lower than for most products the consumer center researches – and two of three cell phone users had a major complaint about service. High cost was the top complaint.

The consumer research center offered some of the following information to help cell phone users lower their cost and improve their service.Many cell phone users overbuy minutes

Two out of three cell phone owners use 200 minutes or less a month of their 600-minute plans. That’s partially because they take advantage of free nights and weekend, as well as mobile-to-mobile calling.

Review your bill to see if you could save money by switching to a plan with fewer minutes that still has periods of free calling.An unusually big bill? A call might help

Did your teenager go over limit by 800 texts?If you have one of those rare big bills because of unusual

usage, you may have a chance to have it reduced.Many carriers will reduce or forgive unusual charges if you

take the time to ask them to. Your best bet: Call a representative. Don’t rely on e-mailing your request.

Wireless surcharges under investigationThe Federal Communications Commission is

investigating the use of wireless surcharge fees charged by some individual carriers with names that sound like government fees, such as Federal Universal Service Fund Fee.

A coalition of consumer groups is fighting the fees, which can increase cell phone bills by as much as 30 percent. The coalition is calling on the FCC to prevent carriers from imposing the charges for expenses that are part of doing business. Question any suspicious fees.Avoid buying phone insurance

When you purchase a new phone, you are typically asked if you want to purchase insurance on it in case the phone is lost, stolen or damaged. The insurance usually runs from $4 to $8 a month, often with a $25 to $100 or more deductible.

Consumer Reports found that only 17 percent of buyers polled got a new phone because the old one broke, and only 3 percent because the phone was lost or stolen. Instead, they recommend keeping your old phone until the new phone’s contract ends. If you lose or break the new phone, reactivate the old one and use it until you qualify for a free or low-cost phone. ❚

Winter 2011Winter 2011

Are you thinking about starting a new business? Here are six tax tips every new business owner should know:

1. First, you must decide what type of business entity you are going to establish. The most common types of business are the sole proprietorship, partnership, LLC, corporation and S corporation.

2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit www.IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at the site.

4. Good records will help you ensure successful operation of your new business. You may choose any record-keeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special

kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.5. Every business taxpayer must figure

taxable income on an annual accounting period called a tax year. The most common tax years used are the calendar year or a fiscal year ending at the end of a month other than December. Tax years may not exceed 12 months and some taxpayers are restricted from using a fiscal year.6. Each taxpayer must also use a con-

sistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method.

Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them. Some businesses are required to use the accrual method.

Read more in IRS Publication 583, Starting a Business and Keeping Records. ❚

Six tips for starting a new business

Annoyed with your cell phone service? Some tips Manufacturing deductionIt’s the highest ever in 2010

Preparation of food and beverages for retail sale is not eligible for the deduction.

Good option for unemployed: Go back to schoolBe sure to look at tax benefits

Every business in the manufacturing sector, whether small or large, should consider the domestic production activities deduction, sometimes referred to as the IRC §199 deduction.

For 2010, the deduction has reached its maximum rate of 9 percent – three times the amount available initially. The deduction was first available in 2005 at a rate of 3 percent of “qualified production activity income.”

As a result, more businesses may find it worthwhile to calculate and substantiate the deduction than in previous years, when the percentage was lower.

The rules are complex, and the calculations can be difficult, so you need to weigh the benefit of the deduction against the cost of calculating and supporting it.

You must be willing to undertake the effort to properly identify and substantiate qualifying activities and to allocate income and expenses.

The deduction is available for a wide range of production activities performed in the United States, including manufac-turing; mining; oil extraction; farming; production of software, recordings and films; and construction of real property and related architectural and engineering services.

Preparation of food and beverages for retail sale is not eligible for the deduction. Activities that are purely services – except in the fields of construction, engineering and architecture – also do not qualify.

The domestic manufacturing deduction can be quite valu-able. A 9 percent deduction is equivalent to lowering your marginal tax rate by approximately 3 percentage points.

Most companies that qualify for the deduction will need the services of an experienced tax adviser to assist them with the required calculations. ❚

If you or someone close to you is temporarily out of work in these difficult economic times, you should be aware of some of the tax law provisions that could benefit you.

If you itemize your deductions, you may be able to deduct job-hunting expenses, as long as you are seeking a job in the same line of business. The expenses are nondeductible if you are seeking your first job or employment in a new line of business or if you have experienced a long period of unemployment.

While you are unemployed, or if you have additional time on your hands because of a temporary layoff or reduced work hours, consider the possibility of improving your marketability through education or training. The tax law provides a number of valuable benefits. And best of all, most of these benefits are available for any field of study, not just your current field.

American Opportunity Tax Credit – Formerly known as the Hope credit, the maximum American Opportunity Tax Credit is $2,500. The credit amount is 100 percent of the first $2,000 of qualifying expenses, plus 25 percent of the next $2,000.

The credit is available for four years of a full- or part-time degree or certificate program. Qualifying expenses include tuition and fees, but not room and board.

The credit is phased out for a single taxpayer with modified adjusted gross income over $80,000 or for joint filers with over $160,000. The credit is allowed against both the regular and alternative minimum tax (AMT), and up to 40 percent of it may be refundable. The credit is set to expire after 2010.

Lifetime Learning Credit – The maximum credit is $2,000 per year for a postsecondary eligible education institution. Moreover, the credit is available for courses taken to acquire or improve your job skills.

The credit amount is 20 percent of the first $10,000 in qualifying expenses.

Work-related expenses – An employee can deduct work-related expenses, job-hunting expenses, plus other miscellaneous expenses, as a miscellaneous deduction, but only for amounts that exceed 2 percent of adjusted gross income. If you are self-employed, you can deduct the expenses directly from self-employment income.

To the extent education expenses qualify for a credit and/or an itemized deduction, you can’t double-count the same expenditure. You should determine which characterization is the more beneficial to you.

Finally, if you have been unemployed for more than 60 days, be sure to tell prospective employers that hiring you could qualify them for tax credits under the Hiring Incentives to Restore Employment Act. ❚

Only 54 percent of cell phone owners are satisfied with their service, according to a recent annual survey of cell phone users by Consumer Reports National Research Center.

That’s considerably lower than for most products the consumer center researches – and two of three cell phone users had a major complaint about service. High cost was the top complaint.

The consumer research center offered some of the following information to help cell phone users lower their cost and improve their service.Many cell phone users overbuy minutes

Two out of three cell phone owners use 200 minutes or less a month of their 600-minute plans. That’s partially because they take advantage of free nights and weekend, as well as mobile-to-mobile calling.

Review your bill to see if you could save money by switching to a plan with fewer minutes that still has periods of free calling.An unusually big bill? A call might help

Did your teenager go over limit by 800 texts?If you have one of those rare big bills because of unusual

usage, you may have a chance to have it reduced.Many carriers will reduce or forgive unusual charges if you

take the time to ask them to. Your best bet: Call a representative. Don’t rely on e-mailing your request.

Wireless surcharges under investigationThe Federal Communications Commission is

investigating the use of wireless surcharge fees charged by some individual carriers with names that sound like government fees, such as Federal Universal Service Fund Fee.

A coalition of consumer groups is fighting the fees, which can increase cell phone bills by as much as 30 percent. The coalition is calling on the FCC to prevent carriers from imposing the charges for expenses that are part of doing business. Question any suspicious fees.Avoid buying phone insurance

When you purchase a new phone, you are typically asked if you want to purchase insurance on it in case the phone is lost, stolen or damaged. The insurance usually runs from $4 to $8 a month, often with a $25 to $100 or more deductible.

Consumer Reports found that only 17 percent of buyers polled got a new phone because the old one broke, and only 3 percent because the phone was lost or stolen. Instead, they recommend keeping your old phone until the new phone’s contract ends. If you lose or break the new phone, reactivate the old one and use it until you qualify for a free or low-cost phone. ❚

Winter 2011Winter 2011

Are you thinking about starting a new business? Here are six tax tips every new business owner should know:

1. First, you must decide what type of business entity you are going to establish. The most common types of business are the sole proprietorship, partnership, LLC, corporation and S corporation.

2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit www.IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at the site.

4. Good records will help you ensure successful operation of your new business. You may choose any record-keeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special

kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.5. Every business taxpayer must figure

taxable income on an annual accounting period called a tax year. The most common tax years used are the calendar year or a fiscal year ending at the end of a month other than December. Tax years may not exceed 12 months and some taxpayers are restricted from using a fiscal year.6. Each taxpayer must also use a con-

sistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method.

Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them. Some businesses are required to use the accrual method.

Read more in IRS Publication 583, Starting a Business and Keeping Records. ❚

Six tips for starting a new business

Annoyed with your cell phone service? Some tips Manufacturing deductionIt’s the highest ever in 2010

Preparation of food and beverages for retail sale is not eligible for the deduction.

Good option for unemployed: Go back to schoolBe sure to look at tax benefits

In what may seem questionable logic to some, the Equal Employment Opportunity Commission has recently reaffirmed its position that it is illegal to use a prospective employee’s criminal conviction

record – even felony convictions – as an “absolute measure” of whether they should be hired.

This is because its use could result in discrimination against minorities, who have higher arrest and conviction rates. In 2008, African Americans were about six times more likely to be incarcerated than whites. The incarcera-tion rate for Latinos was 2.3 times higher than for whites.

The only exception is when there is a clear, demon-strable business reason not to hire based on criminal history, according to the EEOC.

More employers are beginning to use criminal back-ground checks in hiring. About 73 percent of major employers report that they check applicants’ criminal records, according to a 2010 survey by the Society for Human Resource Management.

Employers see the checks as one way to weed out

undesirable candidates, keep a safe work environment, reduce fraud and prevent negligent hiring claims.

“Past behavior is the best predictor of future behavior” is an old dictum in the field of psychology. But the EEOC says the practice is snowballing because of the ease of doing searches quickly and efficiently using new technology.

And the adverse impact is increasing because of the already tight job market. Minorities with criminal records are having an especially hard time finding employment.

For these reasons, employment experts are warning employers to expect closer scrutiny from the EEOC and to exercise caution when basing hiring decisions on criminal histories. Doing so may lead to liability for discrimination under Title VII and/or state anti- discrimination laws on either a disparate treatment or disparate impact basis.

There is a distinction between arrest records and conviction records. According to the EEOC, prior convic-tions may be considered in hiring if they are job-related, based on the following three factors:

◆ The nature and gravity of the offense◆ How long ago the conviction occurred (for example,

last year versus 20 years ago)◆ How the job relates to the type of crime committed

(e.g., a convicted embezzler seeking an accounting position)

However, according to the EEOC’s policy guidance, employers who consider arrest records in hiring, must not only evaluate those three business necessity factors, they must also evaluate whether the applicant

actually engaged in the alleged misconduct. A blanket exclusion of people with arrest records “will almost never withstand scrutiny,” according to the EEOC.

Regardless of how you feel about the EEOC’s logic in this matter, it might be wise business practice to heed the experts’ advice. ❚

Winter 2011

© 2011 CPAmerica International

S E E

I N S I D E

Good option for unemployed: Go back to school

Manufacturing deduction highest ever in 2010

Six tips for starting a new business

ofItems Interest

Not hiring based on criminal history can be discriminatory

Criminal background

checks

The only exception is when there is a clear, demonstrable business reason not to hire based on criminal history

Remember rules for mortgage interest deductionsWith mortgage interest rates at generational lows, you

may be inclined to purchase a new home, take out a loan to make improvements on your existing home or take out a second mortgage to pay down high-interest credit card debt.

The IRS has issued a reminder that interest deductions on home mortgages are limited, including limitations for home acquisition and home equity indebtedness.

➥ There is one limit for loans used to buy, build or substantially improve a residence – called home acquisi-tion debt.

➥ There is another limit for loans secured by a quali-fied residence but used for other purposes – called home equity debt.

The tax law allows a deduction for interest on indebted-ness secured by your residence. Acquisition indebtedness cannot exceed $1 million. Home equity indebtedness cannot exceed $100,000.

Small businesses beware: IRS audit rates rising

Is your business ready for a visit from the IRS?

In the last five years, the number of hours the IRS spent auditing small businesses with assets of $10 million or less increased by 30 percent, according to a recent study by Syracuse University’s Transactional Records Access Clearinghouse.

In the same time period, the time the IRS spent auditing companies with $250 million or more in assets dropped by 33 percent.

The average number of hours spent on each audit of large corporations also went down, from 973 in 2005 to 830 in 2009.

By contrast, the average number of hours spent on a small or mid-sized business audit remained substantially the same.

Client

3330 W. Esplanade Avenue Suite 100

Metairie, Louisiana 70002

AdvisorAdvisor

CERTIFIED PUBLIC ACCOUNTANTS

3330 W. Esplanade AvenueSuite 100

Metairie, Louisiana 70002

CERTIFIED PUBLIC ACCOUNTANTS