Fines for players and suspensions are growing in the NHL, so is this a case of protecting the integrity of the game or funding the newly acquired Phoenix Coyotes?  Or something else?

Boarding, roughing, hits, that’s what you expect when playing hockey. Speed of the skater directly impacts his ability to control hits, but a skilled player should have the brake power necessary to avoid injury.  Things happen, though.

When Alexander Ovechkin became the latest player suspended for a hard hit, the debate turned to the physical type of play Ovechkin demonstrates.   He’s not a mean guy trying to take someone down, but rather athletically fast and dangerous.  Coach Boudreau has the greatest player today on his roster, but at what cost?  Ovechkin had to pay just shy of $100,000, however his reputation of being a good player hasn’t been lost.  Unlike other players whose paychecks include hits and big penalty minutes, Ovechkin should not be perceived as a fighter or bad guy on the ice.

Fans love the physical nature of hockey.  That’s why we watch Alexander Ovechkin play.

Don Cherry has criticized Ovi in the past for grandstanding, and his egotistical emphasis of his play.  But when you are born to play, the play becomes you.  Alexander Ovechkin maintains his identity in truth.  Some have jumped on this suspension as an opportunity to vilify one of the greatest players to play hockey, in other words, “we told you so.”   The stance taken is that Ovechkin would eventually crash and burn because of his charismatic style of play and his karmic attitude toward life.

The NHL wants to be a positive influence, especially for the younger crowd, so Ovechkin’s nonchalant attitude needs to be reprimanded before kids seek him as a role model. Too late.  Good sportsmanship is not Ovechkin’s problem.  His problem, apparently, is that he doesn’t care what others think about him.  To kids this means he doesn’t buy into peer pressure or conformity to be true to who he is and who he has become.

Yes, Alexander Ovechkin plays aggressive hockey and a suspension isn’t surprising at this point in his career.  But the villainous character of Ovechkin only exists in the imagination.  His hit on Tim Gleason is just many that will happen in his career.  For any player a hard hit will occur and a scandal will brew on whether it was a low blow or accident.  Hockey fans have lost count of the suspensions this year due to nasty hits, and frankly support those deserved suspensions.  But these players are not evil.

Hockey has always had the defenders as the tough guys; the blue line was the dangerous point of no return, but as hockey has evolved all players are expected to defend their zone.  Look at left-wingers Sean Avery and Daniel Carcillo, who are the scrappers and cause chaos on and off the ice.  Perhaps the NHL is trying too hard to present Disney on Ice rather than Rangers vs. Flyers, or Capitals vs. Canes.

This from ExtraFootie now. Following Paul Robinson’s miracle save from a German international on Tuesday the guys have collected 5 of the best penalty saves from recent years.

Below is the most impressive, given that it comes from an outfield player.

Blackburn Rovers defeated Chelsea on penalties to advance to the semi-finals of the Carling Cup. Arsenal were also dumped out of the competition by Manchester City.

Gael Kakuta, the man at the center of the transfer controversy, was the unlucky player to miss the deciding spotkick as Blackburn Rovers beat Chelsea 4-3 in the penalty shootout. Rovers will now face Aston Villa in the semifinals.

The game at Ewood Park proved to be the most exciting fixture of the round as the teams were tied at 3-3 after extra time. Paulo Ferriera giving Chelsea a last gasp lifeline by scoring in the final minute of extra time.

Blackburn had taken the lead through Kalinic within the first ten minutes of the game and were mostly the better side in the first half. Ancelotti then made three changes at half-time bringing on Kakuta, Bruma and Drogba.

Drogba made an immediate impact as he levelled with a header in the 48th minute. Four minutes later Chelsea were ahead four minutes later when Zhirkov played in Kalou for the finish.

Blackburn came back into the game when an Emerton cross was misjudged by Hilario and ended up in the net. Chelsea were handled a blow when Kalou came off injured at the end of normal time. As Chelsea had used all their subs it meant they were forced to play with just ten men.

Benny McCarthy put Rovers back in front in the 93rd after converting a penalty which was earned by David Hoilett. Hoilett had two glorious chances to finish the game in the second half of extra time but scuffed them each time.

Ferriera equalized with seconds remaining on the clock to force penalties. Blackburn kicked off the shootout with McCarthy thumping the ball into the top corner. Ballack missed his kick but Kalinic failed to convert later and finally Robinson saved from Kakuta to put Rovers through to the semis.

Arsenal Lose Yet Again

Arsenal were looking to put behind their disappointing loss to Chelsea on Sunday as they took on Manchester City at the City of Manchester stadium. Arsene Wenger chose to field a second string side clearly indicating his  views of the Carling Cup. City on the other hand had their best starting eleven lined up.

The difference between the two sides was evident as City dominated the chances and saw more of the possession. However Arsenal did well at the back and held on till half-time.

After the restart though the quality in the Citizens squad shone through as Tevez opened the scoring with a solo effort. The Argentinian did all the work himself after robbing Rosicky of possession and firing into the top corner.

Shaun Wright Phillips made it 2-0 in the 68th minute when he took on Mikael Silvestre and thumped the ball into the net. Arsenal conceded their third in two games when Vladimir Weiss tapped in from close range.

Red Devils March On

Manchester United are now the only remaining ‘Top Four’ team in the Carling Cup. The Red Devils marched to a well fought victory over Tottenham on Tuesday night.

Fergie drafted a team of the reserves and his first team squad for the fixture. The first half belonged to Tottenham but they somehow found themselves 2-0 down at the break courtesy of one Darron Gibson.

Gibson’s first came against the run of play in the 16th minute when he let fly a powerful shot that beat Gomes into the bottom corner. His second also came in a period of Tottenham domination when he produced a glorious finish into the left hand corner.

The second half was a relatively dry affair with not many chances of note being created. Tottenham struggle to breakdown a United defence which quite frankly didn’t have much to do.

The result has setup an exciting semifinal derby between Manchester City and Manchester United. And if that game is anything like the one earlier this season then one can surely expect some fireworks.

Aston Villa Complete The Last Four

Aston Villa won the other quarterfinal on Tuesday night against Portsmouth. The Villans ran out 4-2 winners in an exciting game at Fratton Park.

Portsmouth who are still struggling with their financial troubles took the lead when Sylvain Petrov put the ball into his own net. But just minutes later Emile Heskey made it all square when he was left one on one with the keeper.

James Milner put the Villans ahead before half-time with a ferocious drive in the 27th minute. With roughly fifteen minutes to go Stewart Downing scored his first goal for the club to seemingly put the tie beyond Portsmouth.

Pompey however found a goal back through Kanu with three minutes left on the watch. But it was not to be a tense finish as Ashley Young sealed the result by converting Agbonlahor’s low cross.

Yesterday was cold in Glasgow. Minus 4 apparently during the night, though I didn’t experience it personally.

December seems to have come upon us so quickly this year and the winter frosts almost overnight. Although winter doesn’t really start till December 21st it feels like it has started.

A new month means new targets, invoicing and planning; realising that there are only 17 days this month in which to get anything done and that’s the biggest challenge in my business. Many of our clients are well organised and thanks to our innovative communications strategy we usually get most sets of accounts into our office within 3 months after the clients’ year end. But there are a few who don’t seem to see their accounts as important to them, merely an imposition that has to be gone through to get your tax return done; which is in itself another imposition on business life.

Planning your business doesn’t only mean planning doing the things your customers want or need from you but also planning to get the things done in your business YOU need to do to make your business work. It’s called working on your business, and I have no copyright claim on that phrase: it’s an old chestnut.

Getting your accounts done IS working on your business. Some of our most successful clients have their accounts stuff to us 4 weeks after their year end – a stark contrast to those who think it’s all right to give the stuff into us 4 weeks before the tax return is due.

Latecomers pay more – usually at least 10% more as a surcharge on the bill – but it seldom makes them change what they do.

We’re not alone in charging for late arrival of information. Companies House charge £150 for being 1 day late with accounts; HMRC charge £100 for being 1 day late with your tax return.

Being on time is easy, just by planning and seeing accounts differently,  as something important to be done as part of your business, you can decide to deliver your accounts to your accountant on time.

I shouldn’t really complain. At least if people deliver their accounts late I get to stay indoors for longer.

And stay out of the cold.

JohnF

Glows-

Wonder guy Marian Hossa returned to the line-up for the Blackhawks Wednesday night.

Would the Windy City have something to be thankful for?  Hossa showed up with a short-handed goal and a goal, but by weeks end, three shots on goal weren’t enough to deliver Friday night.  Half glow, half blow.

Avs rookie Matt Duchene scored his first home-ice goal at the Pepsi Center Saturday, but not enough to beat division rival the Minnesota Wild, but staying in the hunt for tops in the West.

Sid the Kid roped up his fourth hat trick in a slugfest against the New York Rangers.

Blows-

A two game suspension for Flyer Daniel Briere for a hit on Avalanche defenseman Scott Hannan.  Those Avs fans were mad.

Buffalo Sabre Craig Rivet, 35, and Philadelphia Flyer Daniel Carcillo, 24, took out frustrations twice on each other posting 20 minutes for fighting. Carcillo topped that with a game misconduct call for 10.

Out 4-6 weeks winger David Clarkson is a huge deficit for the Deveils. But Clarkson isn’t the only bruiser; Saturday, the game tallied 20 minutes of fighting with Pelley vs. Thompson and Corrente vs. Jackman.  Deep bruisers.

The New York Rangers have been turning the fists and digging in.  First, fighting with Tampa Bay earlier in the week posting 8 for roughing, 20 for fighting and 30 for misconduct.  Next night against the Pittsburgh Penguins, both hooked for 15 for fighting and 30 for misconduct.

> RESERVE NOW

by Trish Voss

According to the results of the 2009 HIMSS Security Survey, the majority of organizations are spending less than three percent of their budget on information security. Yes, that’s right, less than three percent. This is remarkable considering three-quarters of the surveyed organizations said they found patient data at risk due to inadequate security controls, policies and processes.

Since the introduction of new regulatory requirements, the survey showed organizations have made little, if any, improvement to the maturity of their security programs. I know hospitals face huge challenges with limited budgets and try to balance their resources to best care for their patients, but there is a lot riding on the security of their patient’s data.

When conducting a quantitative risk analysis, organizations try to numerically determine the probabilities of adverse events and possible loss if the events occur. With data breaches increasing, fines for HIPAA violations up to $1.5 million dollars, and additional resources allocated to enforcing the HIPAA privacy and security rules, I think organizations may want to take a second look at their risk analysis and adjust their security budgets accordingly.

When a Motorist receives a Traffic Citation, prompt attention is required, or severe Penalties may be imposed, which could include: a Driver’s License Suspension, Fines, Costs, Vehicle Impound, Increased Insurance Rates, Loss of Insurance Coverage and even Jail.  Traffic Offenses should be carefully reviewed and promptly resolved by Payment of the Citation or Court Challenge.

  Be advised, that “Points” assessed against a Driver’s License can substantially raise Insurance Premiums by Hundreds of Dollars, per “Point”, and also result in loss of Driving Privileges. Often a Court Challenge of the Ticket is worth the effort, as a more Just result may be possible, rather than merely paying the Citation.  Never, under any circumstances, ignore a Traffic Citation, as the Fines and Costs will quickly escalate. For a Free Consultation contact The Law Offices Of Samuel G. Forte, Esquire at: (215) 332-5888.  www.fortelawfirm.Law.officelive.com

by James Lawson

So, remember a couple of weeks ago when I wrote about it being a tough week for HIPAA violators because of the two cases that had gone to trial that week? Well apparently the fun is not over for health care systems concerned about privacy breaches. It appears that the U.S. Department of Health and Human Services has now increased the level of fines available for HIPAA violations up to $1.5 million dollars based on a new interim final rule.  Healthcare IT News wrote about it last week, you can read the article here.

This is significant in that it changes the prior limits of breach from $100 for each violation or $25k for all identical violations all the way up to a new maximum penalty of $1.5 million. I  have to say, this  is now a significant penalty and could adversely effect a hospital’s bottom line. In fact, if you had a hospital that was not doing a  really good job of securing patient data, it  could face many of these type of fines and possibly put that hospital out of business. This is a real game changer in my opinion. If you are a CIO, CEO or privacy officer you likely now are going to have an additional ulcer from this one; now you may have to worry about bankrupting your hospital if you are not diligent in your duty to protect patient data.

Interestingly enough I think it also bears mentioning that the same body levying these fines is funded by those fines, so I believe that there is a good chance we will these fines soon — and likely a concerted effort by that body to fine many violators.

While we have this new update to the interim final rule, what we don’t have is a facility that has seen this penalty yet. When that happens it could be an event that shakes up the healthcare community so they verify that they are protecting patient data or else suffer even more serious consequences.

Allocation of Interest

The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. If you use the proceeds of a loan for more than one type of expense, you must make an allocation to determine the interest for each use of the loan’s proceeds.

Allocate your interest expense to the following categories.

• Nonpassive trade or business activity interest
• Passive trade or business activity interest
• Investment interest
• Portfolio interest
• Personal interest

In general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses.

The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds.

Secured loan. The allocation of loan proceeds and the related interest is not generally affected by the use of property that secures the loan.

Example.

You secure a loan with property used in your business. You use the loan proceeds to buy an automobile for personal use. You must allocate interest expense on the loan to personal use (purchase of the automobile) even though the loan is secured by business property.

If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used.

Allocation period. The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates.

• The date the loan is repaid.
• The date the loan is reallocated to another use.

Proceeds not disbursed to borrower. Even if the lender disburses the loan proceeds to a third party, the allocation of the loan is still based on your use of the funds. This applies whether you pay for property, services, or anything else by incurring a loan, or you take property subject to a debt.

Proceeds deposited in borrower’s account. Treat loan proceeds deposited in an account as property held for investment. It does not matter whether the account pays interest. Any interest you pay on the loan is investment interest expense. If you withdraw the proceeds of the loan, you must reallocate the loan based on the use of the funds.

Example.

Connie, a calendar-year taxpayer, borrows $100,000 on January 4 and immediately uses the proceeds to open a checking account. No other amounts are deposited in the account during the year and no part of the loan principal is repaid during the year. On April 2, Connie uses $20,000 from the checking account for a passive activity expenditure. On September 4, Connie uses an additional $40,000 from the account for personal purposes.

Under the interest allocation rules, the entire $100,000 loan is treated as property held for investment for the period from January 4 through April 1. From April 2 through September 3, Connie must treat $20,000 of the loan as used in the passive activity and $80,000 of the loan as property held for investment. From September 4 through December 31, she must treat $40,000 of the loan as used for personal purposes, $20,000 as used in the passive activity, and $40,000 as property held for investment.

Order of funds spent. Generally, you treat loan proceeds deposited in an account as used (spent) before either of the following amounts.

• Any unborrowed amounts held in the same account.
• Any amounts deposited after these loan proceeds.

Example.

On January 9, Edith opened a checking account, depositing $500 of the proceeds of Loan A and $1,000 of unborrowed funds. The following table shows the transactions in her account during the tax year.

Edith treats the $800 used for personal purposes as made from the $500 proceeds of Loan A and $300 of the proceeds of Loan B. She treats the $700 used for a passive activity as made from the remaining $200 proceeds of Loan B and $500 of unborrowed funds. She treats the $800 used for an investment as made entirely from the proceeds of Loan C. She treats the $600 used for personal purposes as made from the remaining $200 proceeds of Loan C and $400 of unborrowed funds.

For the periods during which loan proceeds are held in the account, Edith treats them as property held for investment.

Payments from checking accounts. Generally, you treat a payment from a checking or similar account as made at the time the check is written if you mail or deliver it to the payee within a reasonable period after you write it. You can treat checks written on the same day as written in any order.

Amounts paid within 30 days. If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account.

If the loan proceeds are deposited in an account, you can apply this rule even if the rules stated earlier under Order of funds spent would otherwise require you to treat the proceeds as used for other purposes. If you apply this rule to any payments, disregard those payments (and the proceeds from which they are made) when applying the rules stated under Order of funds spent.

If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment.

Example.

Frank gets a loan of $1,000 on August 4 and receives the proceeds in cash. Frank deposits $1,500 in an account on August 18 and on August 28 writes a check on the account for a passive activity expense. Also, Frank deposits his paycheck, deposits other loan proceeds, and pays his bills during the same period. Regardless of these other transactions, Frank can treat $1,000 of the deposit he made on August 18 as being paid on August 4 from the loan proceeds. In addition, Frank can treat the passive activity expense he paid on August 28 as made from the $1,000 loan proceeds treated as deposited in the account.

Optional method for determining date of reallocation. You can use the following method to determine the date loan proceeds are reallocated to another use. You can treat all payments from loan proceeds in the account during any month as taking place on the later of the following dates.

• The first day of that month.
• The date the loan proceeds are deposited in the account.

However, you can use this optional method only if you treat all payments from the account during the same calendar month in the same way.

Interest on a segregated account. If you have an account that contains only loan proceeds and interest earned on the account, you can treat any payment from that account as being made first from the interest. When the interest earned is used up, any remaining payments are from loan proceeds.

Example.

You borrowed $20,000 and used the proceeds of this loan to open a new savings account. When the account had earned interest of $867, you withdrew $20,000 for personal purposes. You can treat the withdrawal as coming first from the interest earned on the account, $867, and then from the loan proceeds, $19,133 ($20,000 − $867). All the interest charged on the loan from the time it was deposited in the account until the time of the withdrawal is investment interest expense. The interest charged on the part of the proceeds used for personal purposes ($19,133) from the time you withdrew it until you either repay it or reallocate it to another use is personal interest expense. The interest charged on the loan proceeds you left in the account ($867) continues to be investment interest expense until you either repay it or reallocate it to another use.

Loan repayment. When you repay any part of a loan allocated to more than one use, treat it as being repaid in the following order.

1. Personal use.
2. Investments and passive activities (other than those included in (3)).
3. Passive activities in connection with a rental real estate activity in which you actively participate.
4. Former passive activities.
5. Trade or business use and expenses for certain low-income housing projects.

Line of credit (continuous borrowings). The following rules apply if you have a line of credit or similar arrangement.

1. Treat all borrowed funds on which interest accrues at the same fixed or variable rate as a single loan.
2. Treat borrowed funds or parts of borrowed funds on which interest accrues at different fixed or variable rates as different loans. Treat these loans as repaid in the order shown on the loan agreement.

Loan refinancing. Allocate the replacement loan to the same uses to which the repaid loan was allocated. Make the allocation only to the extent you use the proceeds of the new loan to repay any part of the original loan.

Debt-financed distribution. A debt-financed distribution occurs when a partnership or S corporation borrows funds and allocates those funds to distributions made to partners or shareholders. The manner in which you report the interest expense associated with the distributed debt proceeds depends on your use of those proceeds.

How to report. If the proceeds were used in a nonpassive trade or business activity, report the interest on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership or S corporation in column (a) and the amount in column (h). If the proceeds were used in a passive activity, follow the Instructions for Form 8582, Passive Activity Loss Limitations, to determine the amount of interest expense that can be reported on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership in column (a) and the amount in column (f). If the proceeds were used in an investment activity, enter the interest on Form 4952. If the proceeds are used for personal purposes, the interest is generally not deductible.

Interest You Can Deduct

You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements.

• You are legally liable for that debt.
• Both you and the lender intend that the debt be repaid.
• You and the lender have a true debtor-creditor relationship.

Partial liability. If you are liable for part of a business debt, you can deduct only your share of the total interest paid or accrued.

Example.

You and your brother borrow money. You are liable for 50% of the note. You use your half of the loan in your business, and you make one-half of the loan payments. You can deduct your half of the total interest payments as a business deduction.

Mortgage. Generally, mortgage interest paid or accrued on real estate you own legally or equitably is deductible. However, rather than deducting the interest currently, you may have to add it to the cost basis of the property as explained later under Capitalization of Interest.

Statement. If you paid $600 or more of mortgage interest (including certain points) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement. You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person’s trade or business. A governmental unit is a person for purposes of furnishing the statement.

If you receive a refund of interest you overpaid in an earlier year, this amount will be reported in box 3 of Form 1098. You cannot deduct this amount. For information on how to report this refund, see Refunds of interest later in this chapter.

Expenses paid to obtain a mortgage. Certain expenses you pay to obtain a mortgage cannot be deducted as interest. These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses. If the property mortgaged is business or income-producing property, you can amortize the costs over the life of the mortgage.

Prepayment penalty. If you pay off your mortgage early and pay the lender a penalty for doing this, you can deduct the penalty as interest.

Interest on employment tax deficiency. Interest charged on employment taxes assessed on your business is deductible.

Original issue discount (OID). OID is a form of interest. A loan (mortgage or other debt) generally has OID when its proceeds are less than its principal amount. The OID is the difference between the stated redemption price at maturity and the issue price of the loan.

A loan’s stated redemption price at maturity is the sum of all amounts (principal and interest) payable on it other than qualified stated interest. Qualified stated interest is stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a single fixed rate.

You generally deduct OID over the term of the loan. Figure the amount to deduct each year using the constant-yield method, unless the OID on the loan is de minimis.

De minimis OID. The OID is de minimis if it is less than one-fourth of 1% (.0025) of the stated redemption price of the loan at maturity multiplied by the number of full years from the date of original issue to maturity (the term of the loan).

If the OID is de minimis, you can choose one of the following ways to figure the amount you can deduct each year.

• On a constant-yield basis over the term of the loan.
• On a straight-line basis over the term of the loan.
• In proportion to stated interest payments.
• In its entirety at maturity of the loan.

You make this choice by deducting the OID in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued.

Example.

On January 1, 2008, you took out a $100,000 discounted loan and received $98,500 in proceeds. The loan will mature on January 1, 2018 (a 10-year term), and the $100,000 principal is payable on that date. Interest of $10,000 is payable on January 1 of each year, beginning January 1, 2009. The $1,500 OID on the loan is de minimis because it is less than $2,500 ($100,000 × .0025 × 10). You choose to deduct the OID on a straight-line basis over the term of the loan. Beginning in 2008, you can deduct $150 each year for 10 years.

Constant-yield method. If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. You figure your deduction for the first year using the following steps.

1. Determine the issue price of the loan. Generally, this equals the proceeds of the loan. If you paid points on the loan (as discussed later), the issue price generally is the difference between the proceeds and the points.
2. Multiply the result in (1) by the yield to maturity.
3. Subtract any qualified stated interest payments from the result in (2). This is the OID you can deduct in the first year.

To figure your deduction in any subsequent year, follow the above steps, except determine the adjusted issue price in step (1). To get the adjusted issue price, add to the issue price any OID previously deducted. Then follow steps (2) and (3) above.

The yield to maturity is generally shown in the literature you receive from your lender. If you do not have this information, consult your lender or tax advisor. In general, the yield to maturity is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan.

Example.

The facts are the same as in the previous example, except that you deduct the OID on a constant yield basis over the term of the loan. The yield to maturity on your loan is 10.2467%, compounded annually. For 2008, you can deduct $93 [($98,500 × .102467) − $10,000]. For 2009, you can deduct $103 [($98,593 × .102467) − $10,000].

Loan or mortgage ends. If your loan or mortgage ends, you may be able to deduct any remaining OID in the tax year in which the loan or mortgage ends. A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event.

If you refinance with the original lender, you generally cannot deduct the remaining OID in the year in which the refinancing occurs, but you may be able to deduct it over the term of the new mortgage or loan. See Interest paid with funds borrowed from original lender under Interest You Cannot Deduct, later.

Points. The term “points” is used to describe certain of the charges paid, or treated as paid, by a borrower to obtain a loan or a mortgage. These charges are also called loan origination fees, maximum loan charges, discount points, or premium charges. If any of these charges (points) are solely for the use of money, they are interest.

Because points are prepaid interest, you generally cannot deduct the full amount in the year paid. However, you can choose to fully deduct points in the year paid if you meet certain tests. For exceptions to the general rule, see Publication 936.

The points reduce the issue price of the loan and result in original issue discount, deductible as explained in the preceding discussion.

Partial payments on a non-tax debt. If you make partial payments on a debt (other than a debt owed the IRS), the payments are applied, in general, first to interest and any remainder to principal. You can deduct only the interest. This rule does not apply when it can be inferred that the borrower and lender understood that a different allocation of the payments would be made.

Installment purchase. If you make an installment purchase of business property, the contract between you and the seller generally provides for the payment of interest. If no interest or a low rate of interest is charged under the contract, a portion of the stated principal amount payable under the contract may be recharacterized as interest (unstated interest). The amount recharacterized as interest reduces your basis in the property and increases your interest expense.

Interest You Cannot Deduct

Certain interest payments cannot be deducted. In addition, certain other expenses that may seem to be interest are not, and you cannot deduct them as interest.

You cannot currently deduct interest that must be capitalized, and you generally cannot deduct personal interest.

Interest paid with funds borrowed from original lender. If you use the cash method of accounting, you cannot deduct interest you pay with funds borrowed from the original lender through a second loan, an advance, or any other arrangement similar to a loan. You can deduct the interest expense once you start making payments on the new loan.

When you make a payment on the new loan, you first apply the payment to interest and then to the principal. All amounts you apply to the interest on the first loan are deductible, along with any interest you pay on the second loan, subject to any limits that apply.

Capitalized interest. You cannot currently deduct interest you are required to capitalize under the uniform capitalization rules. See Capitalization of Interest, later. In addition, if you buy property and pay interest owed by the seller (for example, by assuming the debt and any interest accrued on the property), you cannot deduct the interest. Add this interest to the basis of the property.

Commitment fees or standby charges. Fees you incur to have business funds available on a standby basis, but not for the actual use of the funds, are not deductible as interest payments. You may be able to deduct them as business expenses.

If the funds are for inventory or certain property used in your business, the fees are indirect costs and you generally must capitalize them under the uniform capitalization rules. See Capitalization of Interest, later.

Interest on income tax. Interest charged on income tax assessed on your individual income tax return is not a business deduction even though the tax due is related to income from your trade or business. Treat this interest as a business deduction only in figuring a net operating loss deduction.

Penalties. Penalties on underpaid deficiencies and underpaid estimated tax are not interest. You cannot deduct them. Generally, you cannot deduct any fines or penalties.

Interest on loans with respect to life insurance policies. You generally cannot deduct interest on a debt incurred with respect to any life insurance, annuity, or endowment contract that covers any individual unless that individual is a key person.

If the policy or contract covers a key person, you can deduct the interest on up to $50,000 of debt for that person. However, the deduction for any month cannot be more than the interest figured using Moody’s Composite Yield on Seasoned Corporate Bonds (formerly known as Moody’s Corporate Bond Yield Average-Monthly Average Corporates) (Moody’s rate) for that month.

Who is a key person? A key person is an officer or 20% owner. However, the number of individuals you can treat as key persons is limited to the greater of the following.

• Five individuals.
• The lesser of 5% of the total officers and employees of the company or 20 individuals.

Exceptions for pre-June 1997 contracts. You can generally deduct the interest if the contract was issued before June 9, 1997, and the covered individual is someone other than an employee, officer, or someone financially interested in your business. If the contract was purchased before June 21, 1986, you can generally deduct the interest no matter who is covered by the contract.

Interest allocated to unborrowed policy cash value. Corporations and partnerships generally cannot deduct any interest expense allocable to unborrowed cash values of life insurance, annuity, or endowment contracts. This rule applies to contracts issued after June 8, 1997, that cover someone other than an officer, director, employee, or 20% owner. For more information, see section 264(f) of the Internal Revenue Code.

Capitalization of Interest

Under the uniform capitalization rules, you generally must capitalize interest on debt equal to your expenditures to produce real property or certain tangible personal property. The property must be produced by you for use in your trade or business or for sale to customers. You cannot capitalize interest related to property that you acquire in any other manner.

Interest you paid or incurred during the production period must be capitalized if the property produced is designated property. Designated property is any of the following.

• Real property.
• Tangible personal property with a class life of 20 years or more.
• Tangible personal property with an estimated production period of more than 2 years.
• Tangible personal property with an estimated production period of more than 1 year if the estimated cost of production is more than $1 million.

Property you produce. You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow it. Treat property produced for you under a contract as produced by you up to the amount you pay or incur for the property.

Carrying charges. Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. You can choose to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. For more information, see chapter 7.

Capitalized interest. Treat capitalized interest as a cost of the property produced. You recover your interest when you sell or use the property. If the property is inventory, recover capitalized interest through cost of goods sold. If the property is used in your trade or business, recover capitalized interest through an adjustment to basis, depreciation, amortization, or other method.

Partnerships and S corporations. The interest capitalization rules are applied first at the partnership or S corporation level. The rules are then applied at the partners’ or shareholders’ level to the extent the partnership or S corporation has insufficient debt to support the production or construction costs.

If you are a partner or a shareholder, you may have to capitalize interest you incur during the tax year for the production costs of the partnership or S corporation. You may also have to capitalize interest incurred by the partnership or S corporation for your own production costs. To properly capitalize interest under these rules, you must be given the required information in an attachment to the Schedule K-1 you receive from the partnership or S corporation.

Additional information. The procedures for applying the uniform capitalization rules are beyond the scope of this publication. For more information, see sections 1.263A-8 through 1.263A-15 of the regulations and Notice 88-99. Notice 88-99 is in Cumulative Bulletin 1988-2.

When To Deduct Interest

If the uniform capitalization rules, discussed under Capitalization of Interest, earlier, do not apply to you, deduct interest as follows.

Cash method. Under the cash method, you can generally deduct only the interest you actually paid during the tax year. You cannot deduct a promissory note you gave as payment because it is a promise to pay and not an actual payment.

Prepaid interest. You generally cannot deduct any interest paid before the year it is due. Interest paid in advance can be deducted only in the tax year in which it is due.

Discounted loan. If interest or a discount is subtracted from your loan proceeds, it is not a payment of interest and you cannot deduct it when you get the loan. For more information, see Original issue discount (OID) under Interest You Can Deduct, earlier.

Refunds of interest. If you pay interest and then receive a refund in the same tax year of any part of the interest, reduce your interest deduction by the refund. If you receive the refund in a later tax year, include the refund in your income to the extent the deduction for the interest reduced your tax.

Accrual method. Under an accrual method, you can deduct only interest that has accrued during the tax year.

Prepaid interest. See Prepaid interest, above.

Discounted loan. See Discounted loan, above.

Tax deficiency. If you contest a federal income tax deficiency, interest does not accrue until the tax year the final determination of liability is made. If you do not contest the deficiency, then the interest accrues in the year the tax was asserted and agreed to by you.

However, if you contest but pay the proposed tax deficiency and interest, and you do not designate the payment as a cash bond, then the interest is deductible in the year paid.

Related person. If you use an accrual method, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. The relationship is determined as of the end of the tax year for which the interest would otherwise be deductible. See section 267 of the Internal Revenue Code for more information.

Below-Market Loans

If you receive a below-market gift or demand loan and use the proceeds in your trade or business, you may be able to deduct the forgone interest. See Treatment of gift and demand loans later in this discussion.

A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. A gift or demand loan that is a below-market loan generally is considered an arm’s-length transaction in which you, the borrower, are considered as having received both the following.

• A loan in exchange for a note that requires the payment of interest at the applicable federal rate.
• An additional payment in an amount equal to the forgone interest.

The additional payment is treated as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction.

For any period, forgone interest is:

1. The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31,
   minus
2. Any interest actually payable on the loan for the period.

Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Internal Revenue Bulletins are available on the IRS web site at www.irs.gov/irb. You can also contact an IRS office to get these rates.

Loans subject to the rules. The rules for below-market loans apply to the following.

1. Gift loans (below-market loans where the forgone interest is in the nature of a gift).
2. Compensation-related loans (below-market loans between an employer and an employee or between an independent contractor and a person for whom the contractor provides services).
3. Corporation-shareholder loans.
4. Tax avoidance loans (below-market loans where the avoidance of federal tax is one of the main purposes of the interest arrangement).
5. Loans to qualified continuing care facilities under a continuing care contract (made after October 11, 1985).

Except as noted in (5) above, these rules apply to demand loans (loans payable in full at any time upon the lender’s demand) outstanding after June 6, 1984, and to term loans (loans that are not demand loans) made after that date.

Treatment of gift and demand loans. If you receive a below-market gift loan or demand loan, you are treated as receiving an additional payment (as a gift, dividend, etc.) equal to the forgone interest on the loan. You are then treated as transferring this amount back to the lender as interest. These transfers are considered to occur annually, generally on December 31. If you use the loan proceeds in your trade or business, you can deduct the forgone interest each year as a business interest expense. The lender must report it as interest income.

Limit on forgone interest for gift loans of $100,000 or less. For gift loans between individuals, forgone interest treated as transferred back to the lender is limited to the borrower’s net investment income for the year. This limit applies if the outstanding loans between the lender and borrower total $100,000 or less. If the borrower’s net investment income is $1,000 or less, it is treated as zero. This limit does not apply to a loan if the avoidance of any federal tax is one of the main purposes of the interest arrangement.

Treatment of term loans. If you receive a below-market term loan other than a gift or demand loan, you are treated as receiving an additional cash payment (as a dividend, etc.) on the date the loan is made. This payment is equal to the loan amount minus the present value, at the applicable federal rate, of all payments due under the loan. The same amount is treated as original issue discount on the loan. See Original issue discount (OID) under Interest You Can Deduct, earlier.

Exceptions for loans of $10,000 or less. The rules for below-market loans do not apply to any day on which the total outstanding loans between the borrower and lender is $10,000 or less. This exception applies only to the following.

1. Gift loans between individuals if the loan is not directly used to buy or carry income-producing assets.
2. Compensation-related loans or corporation-shareholder loans if the avoidance of any federal tax is not a principal purpose of the interest arrangement.

This exception does not apply to a term loan described in (2) above that was previously subject to the below-market loan rules. Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less.

Exceptions for loans without significant tax effect. The following loans are specifically exempted from the rules for below-market loans because their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender.

1. Loans made available by lenders to the general public on the same terms and conditions that are consistent with the lender’s customary business practices.
2. Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public.
3. Certain employee-relocation loans.
4. Certain loans to or from a foreign person, unless the interest income would be effectively connected with the conduct of a U.S. trade or business and not exempt from U.S. tax under an income tax treaty.
5. Any other loan if the taxpayer can show that the interest arrangement has no significant effect on the federal tax liability of the lender or the borrower. Whether an interest arrangement has a significant effect on the federal tax liability of the lender or the borrower will be determined by all the facts and circumstances. Consider all the following factors.
   1. Whether items of income and deduction generated by the loan offset each other.
   2. The amount of the items.
   3. The cost of complying with the below-market loan provisions if they were to apply.
   4. Any reasons, other than taxes, for structuring the transaction as a below-market loan.

Exception for loans to qualified continuing care facilities. The below-market interest rules do not apply to a loan owed by a qualified continuing care facility under a continuing care contract if the lender or lender’s spouse is age 62 or older by the end of the calendar year.

A qualified continuing care facility is one or more facilities (excluding nursing homes) meeting the requirements listed below.

1. Designed to provide services under continuing care contracts (defined below).
2. Includes an independent living unit, and either an assisted living or nursing facility, or both.
3. Substantially all of the independent living unit residents are covered by continuing care contracts.

A continuing care contract is a written contract between an individual and a qualified continuing care facility that includes all of the following conditions.

1. The individual or individual’s spouse must be entitled to use the facility for the rest of their life or lives.
2. The individual or individual’s spouse will be provided with housing, as appropriate for the health of the individual or individual’s spouse in an:
   1. independent living unit (which has additional available facilities outside the unit for the provision of meals and other personal care), and
   2. assisted living or nursing facility available in the continuing care facility.
3. The individual or individual’s spouse will be provided with assisted living or nursing care available in the continuing care facility, as required for the health of the individual or the individual’s spouse.

As much as I effin love free stuff, I effin hate unfree stuff. I probably hate unfree stuff more than I love free stuff; that’s how much I hate unfree stuff.

Unfree stuff are late charges, overdraft fees, fines, penalties, tickets; pretty much anything that is completely unnecessary, takes up precious time and/or drains your bank account. The good thing is that most of these things can be avoided; the sad thing is that sometimes I just can’t seem to avoid them.

Earlier today I went to the Santa Clara County Courthouse, to get a court date for my latest unfree gift from the government. I ran a red light and was ticketed for my offense. I will most likely have to pay a $174 fine, and will be going back to court early next year to try and reduce my fine. Read more about it here.

All of the other things I mentioned can be avoided as well. Late fees at the library can be avoided if I just turn my books in on time, or simply renew them online. Overdraft fees can be avoided if I transfer enough money over from one account to the other in time. Occasionally I even forget to return the DVDplay rentals on time, which results in a $1 penalty.

When you add up all the unfree things over time, it can really add up. Instead of buying something that would be useful to me, I end up forking over money to cover my stupid mistakes. Unfree stuff kills precious time too, as I will be taking a few hours out of the day to attend my court hearing. Stoopid.

In 1974, Congress enacted RESPA, the Real Estate Settlement Procedures Act primarily to address abusive practices, promote greater understanding to home buyers and to prohibit practices such as kickbacks or referral fees that result in higher costs.

If you have a real estate matter involving RESPA, visit our law firm website at http://www.SebastianGibsonLaw.com for more information and call us at any of the numbers easily found on our website.

Efforts began in earnest in 2008 to reform RESPA and on November 17, 2008, HUD published its new 341-page RESPA final rule. Though published in the Federal Register, there is a one year implementation period and mandatory compliance begins January 1, 2010.

RESPA was created in the first place partly because various types of entities involved in the purchase and sale of real estate such as Realtors, lenders, construction companies, and title insurance companies were often engaged in providing undisclosed kickbacks to each other, thereby causing the costs of real estate transactions to become inflated.

RESPA was designed to prevent kickbacks not just in California, one of the states with the greatest number of foreclosures in this current economic crisis, but throughout the U.S. But RESPA has been criticized for failing to prevent what it was meant to prevent. Lenders and others in the real estate industry in California, for instance, still see customers go with the default service providers associated with a lender or Realtor, even though the documents the home buyer signs explicitly state they can choose any service provider they wanted.

However, Section 8 of RESPA quite explicitly and forcefully prohibits a person from giving or accepting a fee, kickback or anything of value for referrals of settlement service businesses relating to a federally regulated mortgage loan. It also prohibits fee-splitting or a person from giving or accepting any part of a charge for services that are not performed.

Violations of Section 8’s kickback, referral fee and unearned fee provisions subject a person who violates RESPA to criminal and civil penalties. In criminal cases, a person in violation of Section 8 cam be fined up to $10,000 and imprisoned for up to one year. In a civil lawsuit, a person in violation of Section 8 can be liable to the person who was charged for a settlement service an amount equal to three times the amount of the charge paid by the person for the service, and for the person’s attorneys fees. Individuals have one year to file a complaint to enforce violations of Section 8 in federal court in the district the property is located or where the violation occurred.

Without oversimplifying Section 8, a real estate agent in California or anywhere in the U.S. may not offer nor may a real estate agent accept anything of value for referring business to a settlement provider such as a mortgage banker, mortgage lender or title company or to a friend who refers the agent business. Realtor to Realtor referrals are excluded and there is a contract for such referrals that is enforceable. It is probably still acceptable to take such contacts out to dinner, discuss business and thank them for their support, but that is about as far as one can go.

With all that has happened in the mortgage industry in California and throughout the U.S. that has led to the current economic recession (and some would call it a depression), anyone criticizing the kickback and fee-splitting prohibitions should remember the excesses in lending to unqualified home buyers that led us to the situation the financial industry now finds itself.

Entities who are found to have formed sham joint ventures for the purpose of evading the Section 8 prohibitions risk potentially millions of dollars in damages and attorney fees as well as criminal charges and imprisonment.

If you believe you have been the victim of a violation of RESPA in California and have been improperly charged as a result of such a violation, or if you are in the real estate industry and are facing RESPA litigation or need advice regarding RESPA, we recommend that you visit our law firm website at http://www.SebastianGibsonLaw.com and call us to set up a consultation with the law firm of R. Sebastian Gibson.

We have submitted a new version 1.2 of our London Congestion Charge Check and Remind application for approval. This is a mammonth upgrade, in fact it was a complete rewrite in some parts! The core feature (as always) was the ability to check with our server whether you are in the London Congestion Charging Zone and register for an alert if you have not paid.

You can now also view your current location relative to the Congestion Charging Zone as well as view the boundaries of the zone on a map.

A lot of work has also been done to improve the look and feel of the application with more helpful hints, tips and help embedded within the application.

NEW FEATURES:

• View a map of your current location
• The London Congestion Zone boundary is also highlighted on the map
• Additional hints and embedded help and support
• New look and feel

ENHANCEMENTS:

• Faster communication between the iPhone and AutoAlert Server

BUG FIXES:
Improved speed & stability improvements.

With the 2nd quarter of the season in the rear view mirror, it is time to look ahead to the 3rd quarter of the season. Winning aside (while important, it is too overarching to evaluate at this level), what sort of goals should the team have in the next phase of the season?

Looking back to my 2nd Quarter Thoughts, some of the goals were achieved, some were not. The running game goals I feel were reached. The outside zone run to the right has become fairly reliable at getting a couple yards, and a second running threat was added, though not who I expected (I thought that Jackson returning from injury would be the man, nice to see Ahman Green though, I always liked him). Adapting the offense to the challenges that they’ve met, and the offensive line goals I feel were not met. The 3rd down defense goals, of weaning the defense off the turnover, I feel was met (we’re currently ranked 4th in the NFL at 34%, 3rd down % is just as good of an indicator of unit quality as scoring, and better than yards surrendered in my opinion). And finally, the rookie class took a big step forward in the 2nd quarter. Clay Matthews took over full time at OLB and has played great, BJ Raji’s playing time and impact has been rapidly increasing, TJ Lang has been a regular on the line and looks like he belongs, and is starting this week, and Quinn Johnson made some nice blocks when he’s been in the game. Brad Jones is about to show what he can do on defense. Jarius Wynn, out with an injury, was the only rookie who is still awaiting that next step.

Settle on An Offensive Line: I know that injuries have played a large role, but they’ve got to settle into a starting lineup to use the rest of the year. TJ Lang seems to be the all purpose fill in. If he is not going to be that any longer (if he gets the starting RT gig for good), somebody should be readied to be an all purpose backup. No shifting in case of injury. Continuity is often just as important as ability when it comes to offensive line play, our lineup is constantly in flux it seems.

Step Through the Door Aaron: I feel that Aaron Rodgers is currently standing in a doorway, the doorway to eliteness. He can see through it, and has done what people in that room are doing at times, but he has not joined that group. Many QB’s get to the point where Aaron is now and go no further. Only a select few QB’s have ever stepped through that door.

Every QB has weaknesses. There is always some natural hitch in their games that they possess. There is no perfect QB. It seems they all follow a similar path too. At first heavy coaching hides their biggest weakness. As they get more comfortable on the field and the rest of their game progresses, that weakness shows up again. The QB will fight that weakness the rest of their career. Some QB’s are able to mentally self coach that tendency of theirs out of them, to keep it at bay.

Brett Favre early on had very bad tunnel vision. His making something out of broken plays was a direct offshoot of that tunnel vision. He continued to fight that tunnel vision throughout his career, and found ways around it. To this day I still believe that Brett makes up his mind on who he is going to throw to prior to the snap, he just changes the guys up and can hide who it is until the toss.

Aaron has the exact opposite problem. He cannot make up his mind at times. He needs to find a workaround for this that works for him. If he can consistently find a way to force himself to make a decision, earlier than he is totally comfortable with, he will step through the door. His all around game is very complete, aside from this one item. QB’s can sit at this stage for a very long time, or forever. Rarely is this a quickly fixed problem. To see Aaron making progress on this particular item, with consistency, will be huge. Much more important I feel than the outcome of the remaining games. But if he does take that step, winning should come much more frequently and easier.

Get Out of the Slump McCarthy: Something is off with Mike. Any creative endeavor, play calling and coaching included, is subject to slumps. It goes with the territory. Offensively Mike is clearly in a slump right now. It is something that creative people always have to fight, they have to find a way out of their creative doldrums that happen from time to time. For Mike, I have no path, only a final goal.

It is hard to put a finger on why he may be in this slump. Part of me says he has partially mentally checked out of the full offense, partially because of the other squads (defense/special teams), and partially because of Aaron, who like I said is at a point where he can step into the group of elites, but isn’t there yet. McCarthy could be doing what he can to prod that step. If it means losing some games, so be it, as long as Aaron takes that step. I get the sense that McCarthy is both calling plays that prod Aaron to make quick decisions (though he hasn’t been), and is calling plays that and giving Aaron a lot of options to become somewhat of his own playcaller on the field. Aaron is struggling with both at the moment, but that isn’t a reason to back it off.

Hopefully though this quarter McCarthy gets back to what he did best. He could run our offense on smoke and mirrors with the best of them. Right now we need some of that magic.

Find a Pass Rush: The defense is doing a lot of things right, they have made a lot of progress since early in the season, but they simply cannot rush the passer. The right side of the line, Clay and Cullen, has largely been doing an acceptable job, but the left side, typically Kampman and Jolly, has been completely ineffective. Kampman is not the rusher he once was, even if we were in a different scheme, and Jolly isn’t much of a rusher. Sadly, the only place where a rush on the left side might come from, is from rookies. As BJ Raji gets more comfortable on the field, he should be able to bring pressure from the DE spot, if not Jarius Wynn did an excellent job during preseason. I would like to see his playing time increase. Brad Jones is going to get a start this week. Hopefully he shows what he did in preseason, that he has a very good speed rush. Dom could possibly add a 3rd and long situational play that sees Brad replace the LDE on the field, either over the G with Kampman over the T or vice versa. As of right now, we are going to continue to struggle with blitzing until a front 4 rusher shows himself to be worthy of a double team.

Stop the Penalties on Special Teams: Overall our team gets a high number of penalties, but neither the offense or defense compare to the special teams group when it comes to flags. It seems that almost every return is accompanied by a yellow hankie. Our special teams units have other problems, namely the lack of a punt returner, a poor punter, and coverage breakdowns, but right now none is more correctable than the flags. The special teams flags have got to stop. A lot of yards are being left on the field because of special teams flags.

Progress in all of these areas in the 3rd quarter will go a long way toward the ultimate sign of progress, the W-L record.

Incorrect information was knowingly given to the Department in order to reduce workers’ compensation premiums (RCW 51.48.020). shall be liable to the state for up to ten times the amount of the difference in premiums paid and the amount the employer should have paid and for the reasonable expenses of auditing his or her books and collecting such sums. Such liability may be enforced in the name of the department. An employer is guilty of a class C felony found guilty.

Books and records were not provided when requested.  A failure to provide records penalty was assessed according to RCW 51.48.040. This penalty comes with a price tag of $250 per occurrance. That means the Field Auditor can fine each employee in each quarter. Also, it applies to employers that thought they had  hired independent contractors. This is not a business friendly State. Unfortunately, L&I is not  honoring the First Time Waiver of Penalties (Senate Bill 5042) that can waive first-time paperwork violations.

Payroll records for covered workers were not kept as required by WAC 296 17 35201.  As a result, hours will be estimated by dividing the gross wages by the average hourly wage or multiplying the number of workers by 480 per quarter. This penalty is left to the discretion of the Field Auditor and Litigation Specialist at Reconsideraton. The Litigaition Specialist is told to assess the highest figure and override the Field Auditor.

Employers are required to have an industrial insurance account and pay industrial insurance premiums as required by RCW 51.12.010.  This insurance pays medical expenses and lost wages in the event of an on-the-job injury. An industrial insurance account was not open before workers were hired.  An unregistered employer penalty will be assessed starting at $500 according to RCW 51.48.010.

Washington law (RCW 51.48.030) requires every employer to make, keep, and preserve records which are adequate to facilitate the determination of premiums due to the state for workers’ compensation insurance for their covered workers. In the administration of Title 51 RCW, the department of labor and industries has deemed the records and information required in the various subsections of this section to be essential in the determination of premiums due to the state fund. The records so specified and required, shall be provided at the time of audit to any authorized representative of the department who has requested them.

     Failure to produce the requested records within thirty days of the request, or within an agreed upon time period shall constitute prima facie evidence of noncompliance with this rule and shall invoke the statutory bar to challenge found in RCW 51.48.030 and/or 51.48.040.

     (1) Employment records. Every employer shall with respect to each worker, make, keep, and preserve original records containing all of the following information for three full calendar years following the calendar year in which employment occurred:

     (a) The name of each worker;

     (b) The Social Security number of each worker;

     (c) The beginning date of employment for each worker and, if applicable, the separation date of employment of each such worker;

     (d) The basis upon which wages are paid to each worker;

     (e) The number of units earned or produced for each worker paid on a piecework basis;

     (f) The risk classification applicable to each worker whenever the worker hours of any one employee are being divided between two or more classifications;

     (g) The number of actual hours worked (WAC 296-17-31002) by each worker, unless another basis of computing hours worked is prescribed in WAC 296-17-31021;

     (h) A summary time record for each worker showing the calendar day or days of the week work was performed and the actual number of hours worked each work day;

     (i) The workers’ total gross pay period earnings;

     (j) The specific sums withheld from the earnings of each worker, and the purpose of each sum withheld;

     (k) The net pay earned by each such worker.

     (2) Business, financial records, and record retention. Every employer is required to keep and preserve all original employment time records for three full calendar years following the calendar year in which employment occurred. The three-year period is specified in WAC 296-17-352 as the composite period from the date any such premium became due.

     Employers who pay their workers by check are required to keep and preserve all check registers and bank statements. Employers who pay their workers by cash are required to keep and preserve records of these cash transactions which provide a detailed record of wages paid to each worker.

     (3) Recordkeeping – Estimated premium computation. Any employer required by this section to make, keep, and preserve records containing the information as specified in subsections (1) and (2) of this section, who fails to make, keep, and preserve such records, shall for the purpose of premium calculation assume worker hours using the average hourly wage rate for each classification, and also will be subject to penalties prescribed in subsection (4) of this section. The records compiled by the department shall be the basis for determining the average hourly wage rate: Provided, That the average hourly wage rate shall be no less than the state minimum wage existing at the time such assumed hours are worked. Notwithstanding any other provisions of this section, workers employed in a work activity center subject to Classification 7309 shall be reported on the basis of the average hourly wage.

     (4) Failure to maintain records – Penalties. Any employer required by this section to make, keep, and preserve records containing the information as specified in subsections (1) and (2) of this section, who fails to make, keep, and preserve such record, shall be liable, subject to RCW 51.48.030, to a penalty in the amount of two hundred fifty dollars for each such offense. Failure to make, keep, and preserve records containing the information as specified in subsections (1) and (2) of this section, for a single employee shall constitute one offense, for two employees two offenses, and so forth.