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Changes to Tax Codes in 2017

2/6/2017

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The Internal Revenue Service (IRS) made some changes to the US tax code in late 2016 to reflect the adjustments brought about by factors such as inflation, medical expenses, and retirement planning. An important aspect to note is that these changes affect the 2017 tax preparation which is done in 2018. It’s, therefore, important to understand and take into account these amendments in tax laws so that you can have less of a hassle when preparing your 2017 taxes. Even if you are planning to hire a tax professional, you still need to be aware of what’s in and what’s out.

Inflation-Adjusted Tax Brackets
This is the significant change to the tax code. Inflation typically increases the nominal income for households. The IRS pushed the minimum taxable wage for married couples filing separately from $9,275 to $9,325. On the other hand, married couples filing jointly saw the minimum taxable wage move from $18,550 to $18,650 while that of the heads of households stands at $13,350 up from $13,250. 

As a whole, the tax differences resulting from the inflation adjustment are very minute. This is mainly because the rate of inflation has been relatively low and as such, the upward shift in the tax schedule hasn’t been as significant. Unless you expect significant bonuses or substantial changes in your salary, you may not need to make any year over year tax adjustments. 

An Increase in Standard Deductions
People filing their taxes individually as well as heads of households will get a deduction of $6,350 and $9,350 in 2017 respectively. Compared to deductions in 2016, this is a $50 increase. For couples filing jointly, their standard deduction will rise by $100 to $12,700. Even though the change isn’t very significant, anything to reduce your tax liability is welcome. 

Upward Adjustments for Both Traditional and Roth IRA Phase-outs 
The traditional IRA is considered the most popular retirement tool. This is mainly because IRA accounts are tax-deferred meaning the tax liability will become due when making your retirement withdrawals. Also, these accounts can lower your current tax liability. In 2017, single taxpayers will enjoy an additional $1,000 to their 2016 contribution limit for an income range of $62,000 to $72,000. For married couples within the salary range of $99,000 to $119,000, and filing jointly, they will also be able to contribute $2,000 above their 2016 limit. 

For Roth IRA, the individual phase out for single filers rose by $1,000 for those at the adjusted gross income range of $118,000 to $133,000. Couples filing jointly and whose adjusted gross income is in the range of $186,000 to $196,000 will enjoy an additional $2,000 to their contribution limit. 
This change simply means that more people will be able to make contributions to both Roth IRA and traditional IRA in 2017. 

Changes to Medical Expense Deductions
In 2016, a large number of Americans had to surpass the 10% threshold of their adjusted gross income before taking a deduction. On the other hand, taxpayers aged 65 and above were allowed a limit of 7.5% of their adjusted gross income to qualify for a tax deduction. Starting 2017, this has changed and now all people including the 65 year plus citizens have to meet the medical expenses threshold of 10% of their adjusted gross income for them to qualify for tax deductions. 

An Increase in Estate Tax Exemption
There is a modest increase in estate tax exemptions in 2017. This is particularly for those long-term investors and property barons. Estates of individuals who pass on in 2017 will be tax exempt up to $5.49 million. This is an increase of $40,000 from 2016 levels. Generally, estate taxes affect a small population which means this change will not be widely felt. Ironically, this small group of people has attracted the attention of many legislators and policy makers who are of the opinion that the tax exemptions should be scrapped off altogether. 

With all these changes in mind, it is important you take the time to compile tax information for your business and personal records. Be sure to understand your current situation and the potential changes it may undergo. Waiting for the last minute is not an option, and if you consider the tax assessment process to be overwhelming, you can enlist the help of a tax professional. 


Speak with a Tax Professional Today
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What You Must Know About Louisiana Sales Tax for Businesses in 2017 

1/23/2017

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The governor of Louisiana, John Bel Edwards, along with Louisiana State Legislature made some significant tax changes. These changes took effect on April 1, 2016, however, the full impact of some of the taxes will be felt from January 2017 going forward. 

According to economic experts, the change in the rate of Louisiana sales tax from the previous 4% to the current 5% will affect the sale of big ticket items. This means as a business; you need to understand the potential impact of these taxes on your company. Below are some of the critical taxation changes you should carefully watch.
new orleans sales tax

​Louisiana Sales Tax on Food and Beverages

Any food service business that has beverage and food sales is required to file a return. Businesses included in this are coffee shops, restaurants, tearooms, cafeterias, grills, luncheonettes, mobile canteens, soda fountains, ice cream shops, and many others. Where the business makes sales between $200,000 and $499,999, the sales tax rate applicable is 0.5%. On the other hand, for sales over $500,000, the applicable rate of tax increases to 0.75% for the portion above $500,000. 
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The taxable foods and beverages are those manufactured or prepared and served or sold by qualified food service businesses in Orleans Parish. 

Hotel Occupancy Sales Tax in Louisiana

Any business establishment in Jefferson or Orleans Parish that is engaged in the provision of lodging facilities or accommodation for transient guests is required to pay sales tax. In both Jefferson and Orleans parishes, the hotels will be required to pay 4% tax. In Orleans Parish, the businesses will be expected to pay an additional $1 per night if their hotels have between 300 to 999 rooms. In the case of hotels with a thousand rooms and above, they will be charged $2 per night. Included in this is hotel rooms that are booked via rental sites such as AirBNB. 

Automobile Rental Tax

If as a business you rent automobiles in Louisiana for a duration of up to 29 days, you are supposed to collect sales tax in addition to the other applicable taxes. By definition, an automobile includes any vehicle designed to transport passengers as well as their baggage. However, the tax doesn’t apply to pickup trucks rentals.

​The rate of sales tax is 3% which comprises 2.5% state tax and an additional 0.5% local tax. The only exemptions to this apply where the automobile is rented by a vehicle repair dealer or an insurance company to serve as a replacement vehicle for a customer while theirs is being repaired. Also, vehicles which are rented and the lessor furnishes the driver, are exempted from this tax. 

​Sales Tax Holidays

​In the past, people from Louisiana have been enjoying generous sales tax holidays. However, with the new sales tax rates in place, residents will be expected to pay approximately 2% during sales tax holidays on hunting gear, school supplies, and hurricane preparation. 
Louisiana Sales Tax

​Lessening of Sales Tax Exemptions

​Exemptions on the purchase of manufacturing equipment and business utilities were lessened and this means businesses will be expected to pay more when buying manufacturing equipment or paying utilities. 

Internet Purchases

baton rouge sales tax
The days when shoppers from online retailers such as Amazon used to enjoy tax-free purchases are over. Under the new Louisiana sales tax, all purchases shipped to destinations within Louisiana will be subject to sales tax starting January 1, 2017. This is also applicable to Louisiana retailers who sell their merchandise online.

Before this came into effect, online buyers only kept track of their purchases over the year and then did a self-reporting during the tax filing period. The implications of this change in tax application means New Orleans shoppers will be paying anything up to 10% more when they complete their online orders.

A typical Amazon purchase will include 5% state sales tax in addition to city sales taxes which can range up to 5%. The general sales tax in Orleans Parish is 5%, but when making food and drug purchases; this drops to 4.5%.
In Jefferson Parish, the general sales tax is 4.75%, but food and drug purchases attract a much lower sales tax of 3.5%.
The reason why Amazon is collecting the sales tax is that the law requires that it does so or face the alternative ordeal of reminding customers the items they bought from them and the much they owe in sales taxes each year. With the addition of Louisiana and Colorado, Amazon now charges sales taxes in 29 states within the U.S. also to include the District of Columbia.

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10 Audit Red Flags in the New Year

12/30/2016

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While it may seem early to start talking about taxes, many documents, and information pertaining to tax season end on December 31st. So, after you’ve had a visit from Santa, it’ll be time to start thinking about your trip to your accountant or bookkeeper. Just be sure to check these tips to reduce the number of red flags you’ll raise later.
new orleans tax deductions

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1. Unreported Income
​One of the easiest ways to catch the IRS’ eye is not to report all of your income. If someone had you fill out a 1099, they reported it to the IRS. However, if you forgot to mention it as well, things won’t add up, and they’ll definitely think that you’re intentions are less than honorable.

2. Business Deductions are Too High 
Many think that working from home is enough to warrant receiving the home business deductions so they can save on meals out, travel expenses, vehicles, and even entertainment. Deductions that are higher than earnings may look suspicious if it occurs for more than three years.

3. Operating a Cash Business
If you run a cash only business, you absolutely need to have some form of paper trail. Because the IRS knows that much of these transactions can go without any sort of trace, they can easily wind up in the IRS’ crosshairs. As long as you can prove you aren’t hiding it all, you can reduce the amount of flags you raise.

4. Improper Deductions
Some think that being a local business owner means writing everything off. Unless the right deduction codes are used and items like claiming vehicles that double as personal use are deducted, the IRS will know you’re claiming too many deductions. Tax returns of 20% or higher than average will quite possibly get flagged. ​
​5. Making Too Much Profit
Individuals and businesses that earn more get more attention as they have more money to hide from the government potentially. Businesses or individuals who make $1 million or more are much more likely to receive an audit, just as businesses with assets of $10 million and higher will be. ​
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6. Not Claiming a Home Office Correctly
You can work from home, but in order to claim a “home office,” it needs to legally be a dedicated home office space that is used for business only. However, few know how to properly have their home office as an exclusive business center, leading to the IRS taking note, especially if you attempt to claim home expenses for your business. 
new orleans taxes
7. Claiming 100% Business Vehicle Use
Very few New Orleans business owners use a vehicle solely for business purposes. Claiming that you do is a great way to wind up with an audit. Instead, keep a log of every mile put on the vehicle for business purposes. If you do intend on claiming it as a solely business-only vehicle, you should have a separate personal vehicle as well.

8. Too Many Charitable Donations
Having a big heart can get you in trouble. The IRS will compare your donations to those of a similar income and determine if you’re trying to claim too many charitable donations. If you have received a receipt for all of your donations, you can prove that they were legitimate. At the very least, consider donating money with checks, as they are easily proven
new orleans cpa
9. Incorrect Real Estate Losses
You can claim rental losses, but doing so will make it seem like you are a real estate investment professional. Unless you spend half of your working hours, over 750 hours as a developer, broker, or a landlord, the IRS will think you’re simply putting on a second hat to get away with tax fraud. Before claiming real estate losses, make sure you qualify to do so.
​10. Using a Bad Tax Preparation Service or Accountant
If a New Orleans Accountant or Bookkeeping service is a little too good at their job, they may get flagged by the IRS. So by association, you will be flagged for using them. There’s a fine line between getting the return that you deserve, and getting a fat paycheck from Uncle Sam that shouldn’t be happening.

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At Accounting Services Unlimited, LLC, we can ensure that the IRS will leave you alone and give you the audit protection you deserve. To make sure you're getting the best return or need an expert New Orleans accounting firm or bookeepper, call today to schedule your consultation and get through the upcoming tax season the safe & convenient way.
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Make a List, Check it Twice: End of Year Tax Advice

12/5/2016

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new orleans tax tips
Everyone knows that they should regularly keep up with their taxes, but, if you're like many, you probably wait to do it a week before they need to be submitted. As 2016 comes to a close, there are a few things to consider for the 2017 tax season.
  1. Make Sure the Year is Balanced
    If you’ve been the diligent type, then it’s time to make sure that all of your receipts and records even out before January 1st gets here. If applicable, you can begin distributing 1099 and W-2 forms. It’s also a good idea to reconcile your notes payable to keep up with debts owed, as well as any remaining payroll items for the year. 
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  2. Utilize a Checklist
    While many rely on a series of sticky notes plastered all over their computer screen, a dedicated tax checklist will speed the process along and help keep you focused and organized. How many times have you thought that you were finally finished, only to realize you left something out? A checklist is easy enough to make, and you can find a template online for one of these with a quick search.

  3. Take Advantage of Gifts
    Each individual can give up to $14,000 annually as tax-free gifts. If you have someone who 's hard to buy for on your Christmas list, cash is always appreciated. Just ensure that you’re giving it to them correctly and not accidentally breaking the rules. Speaking of giving, make sure you have records of all charity contributions for the year. By having them recorded now, it will save a ton of time later, and will give you a better idea of what you're you’re going to owe. 

  4. Utilize Your Retirement
    Each year, if you have a Roth IRA retirement account, you can place $5,500 tax-free into your account. Because Roth IRAs are not taxed until after the money comes out, you can potentially rack up a ton in savings before the IRS gets to touch it. As with any investment account, there are many stipulations, so it’s best to meet with a financial advisor before going nuts trying to max out your account. The good news is that if you have a traditional IRA, converting to a Roth IRA account is easy enough to do.  

    The end of the year a terrific time to sock additional funds into a 401(K) or other retirement funds if you have one. If you don't have a retirement account, now is a good opportunity to begin one. Many retirement accounts can reduce your taxes owed, or at least incur a deduction. As always, it’s best to meet with an expert to find out the exact rules for your state.

  5. Don’t Wind Up a Scrooge
    Some people think that tax-free gifts can be used to pay for expenses such as tuition and medical costs. While there may be some exceptions, the general rule is that these types of payments, especially to health insurance providers, must be paid directly. On the other hand, make sure that the individual(s) you intend on gifting money to is eligible to receive them. The worst gift of all is thinking you’re getting some extra spending money, only to have to pay it back to Uncle Sam later. 

  6.  Know Your Tax Bracket
    It’s always good to know your tax bracket, particularly if you are an employer. Employers belonging to higher tax brackets not only incur certain surtaxes but are also subject to Medicaid and other withholdings to consider as they reconcile their year-end taxes. 

    Having an idea of what your tax bracket requires will help you determine what you can contribute to retirement funds, as well as what you can give away as charity and gift contributions. Knowing what you will owe now will make it easier to submit later on. And, considering it may be a different bracket from the last filling, it never hurts to discover it as you’re thinking about taxes.

  7. Know the Ins and Outs of the AMT
    The AMT, or the Alternative Minimum Tax, is as expensive as it is confusing. While the AMT was started to make sure wealthier fillers didn’t get out of paying their fair share via loopholes (like Donald Trump so famously bragged about), it could, almost 50 years later, wind up costing you a ton without you even realizing it.

With the myriad of tax laws and tax rulings on business owners, it's always best to speak with a tax expert regarding what's best for your specific business type and industry. Remember... a free consultation today, may save you a bundle tomorrow. Schedule a meeting with one of our tax experts today!

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How to Set Prices for Your Business

6/7/2013

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product pricing tips
Sure your products and services are invaluable, but you have to put a price tag on them right? Since consumers are more price conscious than ever, we’ve compiled a rough guide on where to start when setting prices in various fields that will help keep even the twitchiest customer happy.
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  • ​Retail: Cost-plus pricing dominates in retail space. This is a very straightforward method of calculating prices where you determine your cost (both for the goods and your fixed costs) plus a specific percentage of profit margin. This allows you to find fair prices for a wide range of goods easily.
  • Restaurants: A good rule of thumb for menu prices is to find your costs and double it. Now, the costs of your ingredients are only part of that price – make sure to factor in labor for prep time, cook time and clean up. Recent research has shown that the upper limit that most middle-income diners are comfortable spending is about $20.00. Keep this in mind when setting your prices.
  • Services: Pricing intangible services is simultaneously the trickiest and the easiest thing on this list. You have the greatest control over pricing here as the biggest cost is going to be your labor, and you can choose to charge hourly or per-project. Cost-plus pricing comes in to play here too, but in pricing services, the percentage of the profit margin is often set by looking at the industry and remaining competitive.
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5 Questions to Ask Before Starting a Business

6/5/2013

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Are you sitting on a great idea for a business but not sure if you’re ready to take the next step? Every entrepreneur has been in your shoes before and that’s why we’ve compiled a list of five questions every person starting a new business should ask themselves to see if they’re ready. You may be closer to quitting your job and striking it on your own than you realized.
  1. Does my product or service fulfill a need in the community? 
    If you’re going to start your own business you need to figure out how it will make money – and that means figuring out who your customers are, why they want your product, and where they’re willing to buy it from. Be aware of your community and what they need – preferably stepping in to a market that has little to no competition.
  2. Am I ready to do this professionally for the foreseeable future? 
    You may enjoy baking a batch of two of cupcakes at home every Christmas, but that does not mean that you’re going to like churning out 3-400 every day when your business takes off. Successfully running a small business takes plenty of time and effort, and who wants to spend their time and effort on something they don’t love?
  3. How much will it cost to get started?
    One of the biggest mistakes you can make is to decide that you can “wing it” with the money, and just figure it out as you go along. Once you’ve found your market and have resolved yourself to sticking with your business, the most important thing you can do is to create a solid business plan. A business plan is a roadmap for your business, and will help you every step of the way.
  4. Where am I going to get the money I need to get started?
    If you’ve done your homework up to this point you have a realistic idea of how much your business will cost to get started and what the return on the investment will be. Bankers and other investors will be much more likely to entertain your proposal.
  5. What’s Plan B?
    Nobody wants to think that maybe it won’t work – but part of smart planning is to know where the exits are. Come up with ways to scale back your business – or even put it on hold- during rough times. It’s better to be small or to go on hiatus than give up completely.
open a new orleans business
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Pitfalls in Cutting Costs

4/25/2013

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Whether we care to admit it or not, there comes a time in every business where you start to feel the pinch. When you are running low on cash you start to look around at things you can cut from your budget. Be careful when you’re making cuts though – decisions you make during lean times will affect you when things get better. We’ve talked before about smart ways to cut costs, today we’re going to talk about how to avoid common mistakes in reducing expenses.
  • Cut Hours, Not Employees – Sure, this isn’t likely to make you anybody’s best friend, but your employees would much rather get a reduction in hours (or even a reduction in salary) than get fired outright. Bear in mind that layoffs take a toll on employee morale, reducing the productivity of the employees you do need. When your cash flow does improve, you can just provide more hours to your already-trained employees, and can skip the time-draining process of training a new hire.
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  • Keep Customers Happy – When times get tough, it may be tempting to reduce the amount of money spent on services provided to customers – but it’s your customers that are going to bring you back in the black. Find places that customers will not notice to trim your budget (changing your credit card processor, renting cheaper/less equipment, etc.), and keep your customers happy!

  • Don’t Stop Marketing – Marketing your business during down times may seem like an extravagance, but it’s the only way to make sure your name is still on everybody’s minds. Since customers are choosier than ever during economic slumps, advertising can make a bigger impact than ever.
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Looking Beyond the Bottom Line on your Profit and Loss Statements

4/2/2013

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Running your small business is no easy task – and when you have a million things to do at any given moment, you tend to look for the bottom line. How much will that cost us? How much will we make? So maybe when you go to review your profit and loss statement you don’t take full advantage of everything it’s really telling you. Below you’ll find some tips on what to look for to make sure you get the most out of your statements.
  • Respond to Fluctuations in Sales– Everybody can anticipate to a certain degree how their business will react to big events like holidays, but let small trends fall through the cracks. Looking at the data, you may notice that the performance of certain products or services you offer hanges fluctuates in predictable ways. Knowing when demand for your business will be high will help you prepare to meet that demand and Increase your overall profitability
  • Check Your Expenses – Your profit and loss statement will show you not only how much you’ve made, but how much you’ve spent to make that money. Compare profit and loss statements from quarter to quarter to make sure that you understand any increase in expenses. This will also give you a chance to evaluate whether or not it is possible or necessary to omit any expenses from your bottom line.
  • Continue Growth – Of course your bottom line will tell you if you’re profitable now, but it won’t tell you whether that growth will continue. Much like checking in on your expenses, looking at your profit and loss statements over a period of several quarters will give you an overall idea of the “health” of your business and allows you a chance to course-correct if necessary.
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Should Your Business Go Paperless?

3/27/2013

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paperless business
Ever since the advent of the computer revolution, people on the cutting edge of technology have touted the benefits of a paperless office. Within the past ten years, technological advances in computing and networking have dramatically changed the way we do business, and now more than ever, that goal seems within reach. It may be tempting to bid farewell to the stacks of papers on your desk, but before you turn on that shredder, take the time to weigh the pros and cons of implementing a paperless system.

​Going paperless is a great way to have more cash on hand. In addition to the obvious reduction in costs of office supplies, switching to a paperless system for your billing gives you the opportunity to build an automated billing system, ensuring that there are no delays in invoicing. However, building these systems and the underlying infrastructure needed to run them will cost money upfront. If you’re serious about making the switch, be prepared to make the investment.

In addition to the investment of cash, it also takes a significant investment in time to get your paperless office running. Although new documents can be created digitally for easy access, documents created prior to the transition will need to be digitized (you can do this in-house or through a number of reputable digitization services). Your employees will also need to undergo training on the new system.
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Keep in mind that switching to a paperless office is not an all-or-nothing proposition. You may find that one department in your business is ready, while another may never be. No two businesses are alike, so move in the direction that makes sense for you.

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Keeping Costs Low in your Small Business

3/18/2013

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Perhaps the oldest adage in the world of business is that it takes money to make money. While there’s no denying the truth of that statement, there’s nothing saying that you can’t spend a little less and make more. Cutting costs from your budget may seem like a daunting task, but by closely following your business’ finances you can find several places to trim fat without even noticing it. Each business is different, and the best ways to keep your budget lean will come the more time you spend with it. Below are a few suggestions to help get you started:
  • Need to replace office equipment? Consider purchasing previously used equipment online through services such as eBay or Craigslist. If you can break away from the cult of the new,you’ll find deep discounts on top-quality equipment, oftentimes still under the original manufacturer’s warranty.
  • Hire an Intern.  If you have a project that requires hands-on work, but you don’t have the manpower to complete it with your current staff, consider offering the position as an internship rather than hiring a temp worker. Local colleges or trade schools will be happy to match you with a student who will work for little or no cost in exchange for school credit.
  • Don’t be afraid to ask for a discount. If you’re making a large order, most retailers will be happy to offer a percentage off the total cost. Certainly don’t force the point, but you may be surprised at what they can do for you if you simply ask.
  • Use in-house talent whenever possible. During employee reviews, think about what projects you have coming down the line that their talents may be well-suited for. If possible, try giving them a small project that you may have traditionally hired outside help for. For example, if you have someone that deals primarily in Customer Service that knows graphic design, let them take a pass at your new website. And since someone within your company will not have to spend time getting acquainted with your business ethos, you’re likely to see an improvement in both the turnaround time and the quality of the work.
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