Timothy W. Tuttle & Associates
Volume 4 Edition 6 Please email comments to email@example.com June 2008
Major Tax Deadlines
For June 2008
* June 16 - Second quarter 2008
individual estimated tax is due.
* June 16 - Due date for calendar-year corporations to pay second installment of 2008 estimated tax.
* June 16 - Due date for calendar-year trust and estates to pay second installment of 2008 estimated tax.
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
IRS issues political activity reminder to
Every presidential election year, the IRS issues a reminder to tax-exempt organizations, such as churches and charities, not to engage in prohibited political activities.
By law, organizations with a 501(c)(3) tax-exempt status, may not "participate in, or intervene in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office."
Organizations can engage in advocating for or against issues and, to a limited extent, ballot initiatives or other legislative activities.
Tax-exempt organizations that break the rules risk losing their tax-exempt status. More information about the law pertaining to political campaign activity and tax-exempt status can be found at the IRS web site (www.irs.gov).
Vacation home planning can save your tax deduction
You can enjoy a vacation home and cut your taxes - with some careful planning and a little discipline.
The IRS rules can be complex and potentially restrictive, so a word of caution is in order as you plan the use of your vacation home.
Owners of vacation homes often rent out the property when they're not using it themselves. Renting out your vacation home may or may not make sense for you. The principal variables are the number of days you rent the property, the number of days of personal use, your individual tax situation, and your personal wishes for the use of your vacation home.
Rent for 14 days or less and a simple tax break is available. If you rent your vacation home for 14 days or less, all of the rental income is tax-free. This attractive tax benefit can help provide cash for your mortgage and other expenses.
Rent for more than 14 days and your tax planning and personal life become more complex. If you rent your vacation home for more than 14 days, all your rental income is reportable. Whether you treat the income and expenses as a second residence or as rental property depends on the personal use of your vacation home relative to the time the home is rented out. This test is made annually and determines the nature of deductions, loss carryovers, and the tax treatment if the vacation home is sold.
Please call us to guide you through the IRS rules to find the rental strategy that meets your financial goals, yet ensures the personal enjoyment of your vacation home.
It's time for midyear business planning
It's time to do a midyear review of your business tax planning. Here are six ideas to consider.
* Establish a retirement plan if you don't already have one. Examining the choices now gives you time to select the best plan for your business and to get the paperwork completed. Then you'll be set to make contributions as your cash flow allows - and to take the deduction on your 2008 tax return. Another plus: You may be able to claim a credit on your 2008 tax return for the costs of establishing the plan.
* Hire your kids. If your child is under age 18 and works for your unincorporated family business, there are no social security or Medicare taxes on the child's pay. Wages paid to the child are also deductible. Just make sure the compensation is reasonable for the work actually performed.
* Track your business driving. For 2008, the rate for business-related mileage is 50.5 cents per mile, and you can deduct actual costs for parking fees and tolls in addition to mileage. Keep detailed records to substantiate your deduction.
* Deduct equipment purchases. You can expense up to $250,000 of business equipment purchased this year. If you buy new equipment (not used), you may also qualify for 50% bonus depreciation in 2008.
* Check your benefits. If you offer health benefits to your employees, look into tax-advantaged plans such as health savings accounts, flexible spending accounts, or health reimbursement arrangements. These plans can reduce your taxes and help control your benefit costs.
* Start a business. Planning to acquire or start a business this year? Keep good records of your costs to get the business off the ground, including advertising costs, legal fees, and accounting expenses. Up to $5,000 of these expenses could be deductible on your 2008 tax return.
To discuss the tax-saving ideas best suited for your business, give us a call.
Does your business just say it or do it?
Many companies know how to SAY customer service; they just don't know how to DO customer service. Yet, good customer service leads to repeat sales and referrals, which lead to higher revenues and profits. The result is a stronger, more secure business.
Your sales staff knows this well. Their results are directly affected by customer perceptions. Other employees, such as those in support and back office functions, may not think of themselves as serving the customer. But the fact is that every employee has an impact, direct or indirect, on the customer's experience. An incorrect shipment, a late delivery, or a mistake on an invoice, all result in poor service. A goal of your business should be to meet, and preferably exceed, customer expectations as often as possible.
How do you teach every employee that customer service is part of their job? The answer is a combination of communication, training, and good management.
* Communication. Make all employees aware of the importance of customer service to the business as a whole. Explain the role they play in achieving good service. Consider posting measures of sales for all to see. If appropriate, develop measures of accuracy or error-free performance and track and share the results.
* Training. Every employee with customer contact should be trained on good service, whether it's a salesperson, a receptionist, or a delivery driver. For those in support roles, emphasize how cooperation and teamwork can contribute to good service. Instill a culture that serving the customer is everyone's job.
* Good management. As the owner or manager, your actions and your priorities set the tone for the company. Employees will follow your lead and pay attention to the things you consider important. Look for ways to measure customer satisfaction and show your employees that you're monitoring it. And don't overlook the other way to improve customer service - minimizing the things that go wrong. Make sure you're aware of errors and complaints. Set goals for improved performance and hold people to them.
Finally, involve your employees. Make it clear that better service is a shared goal and ask for their suggestions. You might be surprised how well they respond.
What's New in Finances
Are children priceless?
Parents generally consider their children to be priceless, but one group has put a price tag on children.
The parenting Web site BabyCenter, using data from the College Board and the Department of Agriculture, estimates that raising a child born today through college will cost more than $338,000. If the child goes to a private college, add $70,300 to that amount.
The numbers vary depending on region of country, with the West totaling $426,190 (including private college tuition) and the Midwest costing $392,116.
Think before breaking your 401(k) nest egg
With today's shrinking home values, rising adjustable mortgage rates, and tighter loan standards, many people are turning to their 401(k) plans as sources of needed cash. But early withdrawals can exact a heavy price, and even borrowing from a 401(k) can have adverse consequences.
* Due to the tax effect, withdrawing funds from a qualified retirement plan is not like taking cash out of your bank account. A 401(k) withdrawal is taxed as ordinary income, and if you're under age 59-1/2;, a 10% penalty usually will be added to the tax. Borrowing from a 401(k) generally is preferable to simply withdrawing the funds, because no tax applies to the loan proceeds.
However, many plans either restrict their participants' borrowing or don't allow borrowing at all. Where loans are permitted, they're individually limited to the lesser of $50,000 or one-half of the borrower's plan assets. Most 401(k) loans require interest at one or two points above the prime rate, and the loans must be fully repaid within five years, unless the proceeds are applied to a personal residence. The borrower must sign a legally enforceable loan agreement and adhere to the agreement's terms.
* If you leave your job with a 401(k) loan outstanding, you'll generally have 30 to 90 days to either fully repay the loan or face being taxed (and penalized, if you're under age 59-1/2) on the outstanding balance.
When you repay the loan, you'll be paying with after-tax dollars, and you'll be taxed again on those dollars when you withdraw them upon retirement. And unlike ordinary mortgage interest, the interest paid on a 401(k) loan used to buy or improve a home is not deductible.
* Borrowing from a 401(k) is an especially bad idea for funding an ongoing cash need. For example, using the proceeds to offset a hike in your adjustable mortgage payments would only compound the problem. You'd be burdened with an additional loan, the proceeds eventually would run out, and the mortgage payments almost certainly would not go back down.
* Finally, borrowing from your 401(k) tends to defeat the purpose of participating in the plan in the first place - to accumulate funds for a comfortable retirement. Removing money from a fund slows its growth, particularly since most people must cut back on current contributions in order to make repayments.
Call us if you're thinking about borrowing from your 401(k) or you'd like to discuss other funding sources. We'll help you make the decision that's right for your individual circumstances.
Take a Break
Are you as smart as an 1895 eighth grader?
So your granddad only got an eighth grade education. Could you pass the arithmetic portion of the final exam given to eighth graders in Salina, Kansas in 1895? Give it a try.
1. Name and define the Fundamental Rules of Arithmetic.
2. A wagon box is 2 feet deep, 10 feet long, and 3 feet wide. How many bushels of wheat will it hold?
3. If a load of wheat weighs 3942 lbs., what is it worth at 50 cents a bushel, deducting 1050 lbs. for tare?
4. District No. 33 has a valuation of $35,000. What is the necessary levy to carry on a school seven months at $50 per month, and have $104 for incidentals.
5. Find the cost of 6720 lbs. of coal at $6.00 per ton.
6. Find the interest of $512.60 for 8 months and 18 days at 7 percent.
7. What is the cost of 40 boards 12 inches wide and 16 ft. long at $1.20 per meter?
8. Find the bank discount on $300 for 90 days (no grace) at 10 percent.
9. What is the cost of a square farm at $15 per acre, the distance around which is 640 rods?
10. Write a Bank Check, a Promissory Note, and a Receipt.
The grammar, history, spelling, and geography sections were no snap either.
You are receiving this eNewsletter because you have a business relationship with The Tuttle Firm, or have expressed an interest in our services. If this is not the case, and you wish to be deleted from our newsletter email list, please send an email to firstname.lastname@example.org and state "Remove Me" in the subject line.
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