Online Advisor
Timothy W. Tuttle & Associates
Online Advisor
Timothy W. Tuttle &
Associates
Volume 4 Edition 7 Please email comments to newsletter@tuttlefirm.com 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
calendar year.
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.
New Business:
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
responses:
* 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
www.tuttlefirm.com