Timothy W. Tuttle & Associates
Volume 4 Edition 7 Please email comments to firstname.lastname@example.org July 2008
Major Tax Deadlines
For July 2008
* July 31 - Due date for filing
retirement or employee benefit plan returns (5500 series) for plans on a
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 audits more returns
The IRS recently released data showing an increase in taxpayer audits during fiscal year 2007 (which ended September 30, 2007).
The 2007 IRS audit rate for individual returns reporting income of $1 million or more increased 84% over 2006. The total number of individual returns audited in 2007 for all income levels increased by 7% to 1.3 million, the highest
number of audits since 1998.
Business audits for 2007 also increased, up 14% from the prior year. The audit focus was on partnerships and S corporations, with audits of these pass-through entities increasing 26% in 2007. Audits of large corporations decreased
slightly in 2007, but audits of mid-sized corporations increased.
The IRS filed 3.8 million levies and about 700,000 liens during 2007. IRS enforcement activities produced $59.2 billion in revenue during 2007, compared with $48.7 billion in 2006 and $34.1 billion in 2002.
Summer tax moves
* Your vacation home. If you have vacation/rental property, you might increase your tax deductions by adjusting the number of days you use your vacation home.
* Day camp. If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.
* Business entertaining. Summer is a good time to do business entertaining. Keep records of the cost, the date, the attendees, and the business purpose. Your tax deduction is limited to 50% of the cost.
* Hire your children. Put your children to work in your business this summer. A reasonable wage paid for legitimate work is a business deduction.
* Estate taxes. The estate tax is still with us. Make time this summer to create or update your estate plan as part of your overall tax-reduction efforts.
* Kiddie tax. Consider your options if the "kiddie tax" will affect your children this year (up to age 19; to 24 for full-time students).
* College fund. Now that the tax benefits of Section 529 plans have been made permanent, investigate their suitability in building a college fund for your children.
* Summer driving. Keep track of tax-deductible summer driving. The IRS has just increased the standard mileage rate for business, medical, and moving driving. For the last six months of 2008, the business mileage rate has been increased to 58.5 cents a mile. The rate for medical or moving costs has been increased to 27 cents a mile. The rates for the first six months of 2008 (January 1 through June 30) remain at 50.5 cents for business and 19 cents for medical and moving. The rate for charitable driving remains at 14 cents a mile for all of 2008.
IRS raises mileage rates
With gas prices soaring, the IRS has responded to numerous requests to increase the standard mileage deduction for business driving.
For the final six months of 2008, the standard mileage rate for business driving has been raised to 58.5 cents per mile. The rate for business miles driven from January 1, 2008, through June 30, 2008, remains at 50.5 cents per mile. (The IRS also increased the deductible rate for medical and moving mileage for the last six months of 2008 to 27 cents a mile. For the first six months of 2008, the rate is 19 cents a mile.)
The IRS adjusts the standard mileage rates for business driving annually, but when driving costs rise dramatically during the year, the Service may consider a midyear change. Rates are based on annual fixed and variable costs of operating a car.
A study by the National Federation of Independent Businesses determined that the cost of energy is ranked as the second most troubling problem for small businesses this year.
Turn a complaint into an opportunity
Nobody in business wants an unhappy customer, but when a customer complains, think of it as three opportunities in one.
* An opportunity to get free feedback on something that's not working right in your organization.
* An opportunity to convert a disgruntled customer into a loyal customer.
* An opportunity to head off negative publicity as the complainer shares his gripe with others.
How do you turn a complaint to your advantage? Here are the four steps you need to take.
1. The initial response. The initial response to a complaint should be respectful and helpful, not defensive or "it's not our fault."
2. Understanding the complaint. Make sure you really understand the true complaint. This is perhaps the most important part of the process. By allowing the customer to vent, you'll defuse a large part of the hostility and ill will. Also, this step provides valuable feedback to pinpoint the exact problem and find out exactly what went wrong.
3. Fixing the problem. Employees must know clearly who has the responsibility and the authority to fix a problem. You may choose to compensate the customer for inconvenience, but at a minimum, you must remedy the customer's immediate concern.
4. The follow-up. A supervisor or higher-level manager should always follow up with the customer to make sure that the problem has been resolved. This is a key step in turning the customer from "disgruntled" back to "loyal."
For assistance with this or any of your business concerns, contact our office.
What's New in Finances:
Don't put your 401(k) on automatic pilot
Automatically enrolling new employees into a company's 40l(k) plan was made easier by the Pension Protection Act of 2006. A survey of 5,490 plans by Plansponsor, a Connecticut research firm, revealed that about 25% of companies now have automatic enrollment in their plans.
The good news about automatic enrollment is that it gets workers to start saving. The not-so-good news is that the rate of saving is often below the rate these employees would have chosen on their own. Trusting to automatic savings to build an adequate retirement fund is unwise; employees need to realize that they must take responsibility for themselves and increase savings levels if necessary.
Reverse Mortgages: Need retirement income?
If you own your home and are age 62 or older, one option to increase your retirement income could be a reverse mortgage.
As the name implies, a reverse mortgage is the opposite of a traditional mortgage. With a traditional mortgage, you borrow a sum of money to purchase a home, then pay off the debt over time. With a reverse mortgage, you receive loan proceeds - as a lump-sum payout, an annuity, a line of credit, or a combination of all three - but make no payments as long as you reside in the property. The loan, with any accrued interest, comes due when you move out or pass away.
To qualify for a reverse mortgage, you need to be at least 62 years old and own the home outright (or have a balance that can be paid off with the loan proceeds). How much you can borrow depends on your age, the home's market value, and interest rates.
* The downside. Be aware that there is a downside to a reverse mortgage. Closing costs can be very steep, often over 5% of the home's value. In addition, borrowers may have to purchase mortgage insurance, and they're still on the hook for property taxes and homeowner's insurance.
Federal truth-in-lending laws require lenders to provide information about interest rates, payment terms, and other costs. If you're interested, shop for a reverse mortgage as you would for any other loan. Make sure the basic terms of competing loans are comparable. Then go with the lowest price by comparing interest rates, upfront fees, and other charges. If you need help, give us a call.
How to get that summer job
557 hiring managers were asked in a SnagAJob.com survey what they looked for when hiring a summer employee. Their
* A positive attitude and eagerness to have the job - 39%
* Ability to work the hours needed - 28%
* Previous experience in the industry - 20%
* Commitment to work the full summer - 13%
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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