Timothy W. Tuttle & Associates
Volume 3 Edition 11 Please email comments to email@example.com Nov 2007
Major Tax Deadlines
Major Tax Deadlines For November 2007
During November: It's wise to estimate your
2007 income tax liability and review your options for minimizing your
2007 taxes. Call us if you would like to schedule a tax-planning session.
NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.
Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.
* Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
* Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.
For more information on tax deadlines that apply to your business, contact our office.
What's New in Taxes:
AMT relief is still a work in progress
Both Republicans and Democrats agree that the alternative minimum tax (AMT) is affecting taxpayers who were never the intended target of this alternate tax system.
Designed to make sure the wealthy did not use credits, deductions, and other tax breaks to eliminate taxes completely, the AMT now affects a large number of middle-income taxpayers. That's due to the fact that AMT exemption amounts have not been indexed for inflation.
Congress is considering a number of AMT fixes, including a one- or two-year "patch" or complete elimination of the tax. Unless Congress acts to fix the tax for 2007, the AMT is estimated to affect 23 million taxpayers - mostly middle-class families. Under current law, about 70% of married taxpayers with children, who earn $75,000 to $100,000, will be subject to the AMT.
Tax-cutting time for 2007 is running out
Time is running out on moves you can make to reduce your 2007 tax bill. Some actions to consider right now:
* Be sure to max out your 401(k) plan at work. This year you can sock away $15,500 ($20,500 if you're 50 or older).
* Establish a pension plan for your small business. You may qualify for a tax credit of up to $500 in each of the plan's first three years.
* Make gifts to family or others to utilize your tax-free $12,000 per donee gifting allowance for 2007.
* Plan year-end business equipment purchases to take full advantage of the increased expensing limit of $125,000 for 2007.
* The option to deduct either sales taxes or state and local income taxes was reinstated for this year. If you plan to deduct sales tax, consider squeezing certain planned big-ticket purchases into 2007.
* Review your investments for possible year-end selling to rebalance your portfolio at the lowest tax cost or to offset gains and losses.
* Donations to charity require substantiation for deductibility, so get the documentation you'll need for your 2007 return. Remember, all money donations require a written record, even those under $250.
* Educators can deduct up to $250 for classroom supplies they purchase with their own money.
* Single taxpayers with income of $65,000 or less ($130,000 or less for couples) can deduct up to $4,000 for higher education tuition and fees. For singles with income of no more than $80,000 ($160,000 or less for couples), the deduction limit is $2,000.
* 2007 is the final year for those age 70½ or older to make a charitable donation of up to $100,000 from an IRA without reporting the distribution as income.
* Itemizers may deduct qualified mortgage insurance premiums this year. The policy must have been issued in 2007, and income limits apply.
There are other new and soon-to-expire provisions that could affect your tax situation this year. Call our office for planning assistance while there is still time to take tax-cutting action for 2007.
Small tax-exempt organizations have new
Thanks to a provision in the Pension Protection Act of 2006, tax-exempt organizations with annual gross receipts of $25,000 or less will generally have to file a new annual report with the IRS.
Form 990-N is to be filed electronically. The IRS calls the new form an e-Postcard because it is short, easy, and electronic. It asks for the organization's name, address, name and address of a principal officer, and confirmation that the organization's gross annual receipts are normally $25,000 or less.
If an organization fails to file the required report for three consecutive years, it risks losing its tax-exempt status.
For more information or assistance with filing, contact our office.
Keep employees informed
Surveys show that employees tend to underestimate the amount of money that their employer spends on employee benefits. It's up to you to get them to realize their paycheck is only part of the compensation they are receiving as employees.
Make your employees aware of their total compensation package. After all, your employees can't appreciate all those extra dollars the company pays if they don't know about them.
In conjunction with preparing an employee's W-2 for 2007, prepare a list of the amounts that make up his or her total compensation package. You might find it a good idea to go over each employee's total benefits package during the employee's annual review.
Your benefits summary should include such items as the following:
Pension plan contribution $____________
Deferred compensation $____________
Medical and dental insurance $____________
Life insurance $____________
Disability insurance $____________
FICA (social security & Medicare) $____________
Worker's compensation $____________
Unemployment insurance $____________
Total wages and benefits $____________
Also include the number of paid vacation days, personal days, sick days, and the value of employer-provided benefits such as work clothing, parking, and meals.
What's New in Finances:
Your retirement kitty may have to last a
You know you must invest during your working years in order to build a fund for retirement. But what you don't know is how many years you'll be drawing on your retirement money. Now there are new statistics that may be helpful in estimating how long your retirement kitty has to last.
According to the National Center for Health Statistics, a person born in the U.S. in 2005 can expect to live about 78 years on average. That's 3% longer than life expectancies of a decade earlier.
The average U.S. individual who lives to age 65 can expect to live an additional 19 years. That's the average; many people will live beyond that.
As you do the calculations for your retirement savings, you may want to stretch your life-expectancy estimates out. According to one financial analyst, you should probably assume that you or your spouse will live to be 100. Underestimating your life span could mean you'll outlive your retirement funds. For assistance with the numbers, give us a call.
Keep your holiday spending under control
The holiday season should be a pleasant time - exchanging gifts, entertaining family and friends, and extending goodwill to others. Most of us enjoy the holidays, but too often the enjoyment is followed by financial headaches. January's bank statements and credit card bills bring the realization that once again we lost control of our finances.
It doesn't have to be that way. Before the holidays begin, make a budget. Estimate the cost of everything you plan to spend, from gifts to holiday decorations, entertaining, and special events. If the total cost is manageable, then stick firmly to your budget as you shop. If it's not, look for ways to cut back.
Consider how you can save on holiday gifts. Many families draw names and give one nice gift to one person, rather than multiple small gifts to everyone. Give elderly relatives "gift certificates" good for your help with home or garden chores. Other cost-saving ideas: Make or bake gifts instead of buying them; give combined gifts from parents and children instead of individual gifts; agree with your close friends on a gift spending limit.
The holidays are a special time for children. But even here you can curb the excesses of gift giving and teach some good lessons too. Don't feel you have to give your children every gift they ask for. When they make their list, encourage them to prioritize the things they really want. Remember, their favorites are often the simple toys that encourage them to use their imagination.
Show your children there's more to the holidays than just receiving presents. Have them participate in choosing and wrapping a gift for a less fortunate child. Encourage them to make their own gifts for family and friends. Arrange family outings and fun activities so the holidays become a series of enjoyable events.
Aim for more emphasis on holiday experiences and less on spending money. You'll enjoy the season more and may reduce the financial hangover.
Take a Break
Step away from the table
According to a 2007 study, obesity has risen dramatically since 2000. About 6.8 million American adults were "morbidly obese" in 2005, up from 4.2 million in 2000. According to government data, 66% of people in the U.S. are either overweight or obese.
The numbers probably reflect what is going on in society. People are eating out more often than ever, and restaurant meals average 170% larger than meals prepared at home. Keep that in mind when you are asked if you would like your order super-sized.
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The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in ONLINE ADVISOR, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.
Timothy W. Tuttle & Associates