Dear Clients and Friends:

Once again, tax season was an extremely busy one. The majority of the tax work came in between March 15 and March 30. This created a tremendous amount of work that had to be accomplished in the first two weeks of April. In the future, I would appreciate if you would sent us your information earlier.

To our new clients, I would like to welcome you to the firm. I hope that our relationship will be a mutually beneficial one. To those who have referred these clients, I would like to thank you for the confidence you have shown in us. I thank you for your loyalty, and I hope that your faith and confidence in us continues.

The following is a quick review of retirement plan regulations for 2005. Traditional and Roth IRA contribution limits are $4,000 for 2005. You are allowed to make an additional $500 contribution if you are over 50 years of age in 2005. Traditional IRA contributions are totally phased out for active participants in another retirement plan when you are single, with an adjusted gross income of $60,000 or greater, or married filing jointly with an adjusted gross income of $80,000 or greater. Spousal contributions are totally phased out when your income exceeds $160,000. Roth IRA contributions are totally phased out if you are single when your adjusted gross income exceeds $110,000, married filing jointly at $160,000, and married filing separately at $10,000.

Elective deferrals to a 401K are limited to $14,000 in 2005. If you are over 50 years of age you can contribute an additional $4,000 in 2005. This maximum contribution to a profit sharing plan or SEP account is $42,000 in 2005.

A tax issue that continues to rear its ugly head is the Alternative Minimum Tax (AMT). AMT is a separate tax calculation that penalizes taxpayers who itemize their deductions and are located in metropolitan areas. AMT does not allow a deduction for taxes paid. Accordingly, real estate taxes and state income taxes are not deductible under the AMT formula. In addition, miscellaneous itemized deductions are also not deductible under AMT. According to recently released estimates, AMT effected 4 million taxpayers in 2004. AMT reform has been on accountants’ radar for years. The problem with fixing it is that there would be substantial revenue loss to the government, especially at a time when the nation’s budget deficit is at a record high.

There is not much on the horizon for additional tax legislation this year. Congress is contemplating two tax bills, one dealing with the elimination of estate taxes and the other dealing with energy related tax breaks. Last year both measures died in the Senate. This years prospects for some sort of enactment seem more likely.

The number one question asked by our clients is how long to keep records. Please note, that for our active clients, we keep your files for at least nine years. The governmental agencies have a statute of limitations of three years from the time that you file a tax return to challenge or audit that return under most circumstances other than criminal charges. I usually advise my clients to keep their records for five to seven years. Obviously, records of permanent nature such as home purchases and stocks and securities that you continue to own should be kept longer.

We are a full service financial firm and are here to assist in all aspects of your business and individual tax planning. Before making any major financial decisions, please contact us to review your situation.

To the more than 230 clients on extension, please do not wait until the last minute to provide us with your information. We have both an August 1, 2005 and October 1, 2005 deadline. These are the dates that we must have your information in order to prepare your individual tax returns by August 15, 2005 or October 15, 2005.

Please remember that the key to financial planning is both communication with us along with you keeping detailed records of your income and deductions. We thank you for your continued support and look forward to serving you in the future.

Sincerely,

Eliot H. Lebenhart, CPA