February 20, 1996 Trim the Business Fat 1. Lease equipment instead of buying it. 2. Use a cellular telephone sparingly 3. Drop the vanity high priced address for lower cost space 4. Check out new payroll software 5. Hire student interns for entry level positions 6. Don`t accept a hotel or car rental company`s first price quote 7. Don`t rush package deliveries unnecessarily 8. Buy generic offices supplies 9. Scrutinize workers` compensation insurance Death, Taxes & Bugs Three things are certain at this time of year, death, taxes and Turbo Tax and MacInTax tax preparation software will have software bugs. Information about the bugs can be found on the Internet World Wide Web which consumers of the product may reach through a free connection provided with the tax products; they can also call 800 numbers for information about the problems. Consumers can work around the problems by following instructions and will soon be able to order fixed versions of the programs. Persons who use the Internet will have to wander through several screens of information on the web to find information about the bugs. Intuit, which has known about some of the flaws since mid-January and plans to send registered users a written description of all the bugs by the end of February. Form 1099s Due February is known for birthdays of Presidents, Valentine`s Day and for issuing Form 1099s to independent contractors. A Form 1099 is issued to all non incorporated taxpayers who rendered business services to other businesses and are paid $600 or more in one calendar year. Form 1099 was described in the January newsletter and is the form issued to the provider of the services by the payor. The Form 1099 includes on it the payee`s name, address, taxpayer identification number, and amount paid. Failure for the payor to provide a correct taxpayer identification number (TIN) results in a $50 penalty per each Form 1099 with a $50,000 maximum penalty. In order to obtain the information for the Form 1099s (whether or not you or we are preparing the 1099s) the Form W-9, Request for Taxpayer Identification Number, is the official vehicle to give to the payee to have filled out. One advantage of having a signed W-9 is that if the TIN is incorrect, the $50 penalty will be transferred to the payee from the payor. We advise the Form W-9 be sent out as soon as possible and recommend before a payment is made which reaches the $600 mark, a signed W-9 is obtained. Remember, the deadline to send out Form 1099s is February 28. If you need Form W-9 please call us. Greece and the History of Taxation The Greeks` greatest asset was their ability to build a civilized society without losing their liberty. They believed tyranny was the product of taxation and that the tax system was the barometer of liberty. In fact, Euclid, invented plane geometry to help tax collectors determine land size and harvest taxes. Taxation and tyranny were the same to the Greeks. They were the only people in history who succeeded in limiting "special" taxes to the emergencies that prompted them. Even today, tax ethics have never advanced beyond the principle laid down by the father of just taxation, Aristedes: "due proportion". But the good times were brief, under the Athenian League, tax rates doubled, then doubled again, the golden age of Greece arose on tax money, the very evil the Greeks had fought the Persians to avoid. The freedom-loving Greeks became the worst tax tyrants up to that time. Sparta revolted and defeated Athens, prompting the most revered civilization in the ancient world to pass into history. Blending Mutual Funds The hot investment for the mid `90s isn`t which stock to purchase or even which mutual fund to buy. It`s how to get your mutual funds to work together. To do the job right, however, investors first have to understand the funds they are combining. That`s the catch. It isn`t easy doing basic research on mutual funds. Most funds are conglomerates since they invest in a broad span of industries. Researching a conglomerate is difficult. Funds are also moving targets. Portfolios change constantly and managers sometimes take large positions that transform a fund. Fidelity`s Magellan Fund, for example, slashed its stock exposure last year, selling off technology stocks and moving money into cash and bonds. At year end only 68% of its money was in stocks, down from 97% just six months earlier. Some say the fund has even less in stocks-as little as 50%-but since there is a six week lag in reporting, investors will have to wait to find out. Also, this fund under Jeff Vinick`s stewardship is different from the fund Peter Lynch captained. So what`s an individual investor to do? How do you keep your domestic growth fund from turning into a market timing fund or an international fund. The first step is to recognize that you can retain more control if you set clear limits in your selection process. What you have to do from the beginning is to limit yourself to funds that have clear objectives rather than those that give their managers a lot of latitude. Perhaps the easiest way is to stick with index funds which invest in a set market basket of stocks pegged to a specific market index such as Standard & Poors 500 stock index. The problem with index funds? They`re no fun! If you want to venture beyond index funds, however you have to do some homework. With some 7000 mutual funds out there anyone who wants to research even 1% of those funds is facing a pile of prospectuses. So limit your search by first deciding what kind of funds you want. Mutual funds are generally categorized by their investment objective. An aggressive growth fund for example, invests in smaller, riskier companies than a growth fund. An equity-income fund typically puts at least 65% of its funds into stocks with above-average dividend yields. Foreign stock funds invest outside the U.S. while emerging market funds invest in smaller developing countries. Sound too complex? The second solution is to pick a financial advisor who will do this work for you. As always, if you have any questions about these or any other financial matters, do not hesitate to call me.