Timothy W. Tuttle & Associates
Volume 5 Edition 3 Please email comments to firstname.lastname@example.org March 2009
Major Tax Deadlines
For March 2009
* March 2 - Farmers and fishermen who did not make 2008 estimated tax payments must file 2008 tax returns and pay taxes in full.
* March 2 - Payors must file information returns (such as 1099s) with the IRS. (Electronic filers have until March 31 to file.)
* March 2 - Employers must send W-2 copies to the Social Security Administration. (Electronic filers have until March 31 to file.)
* March 8 - Daylight Saving Time begins.
* March 16 - 2008 calendar-year corporation income tax returns are due.
* March 16 - Deadline for calendar-year corporations to elect S corporation status for 2009.
* March 31 - Deadline for payors who file electronically to file 2008 information returns (such as 1099s) with the IRS.
* March 31 - Deadline for employers who file electronically to send copies of 2008 W-2s to the Social Security Administration.
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 you or your business, contact our office.
What's New in Taxes:
Tax breaks are included in the new Recovery Act
The American Recovery and Reinvestment Act of 2009 includes a bevy of new tax breaks. The key provisions summarized below are generally retroactive to January 1, 2009.
* Making work pay credit. Employees and self-employeds can claim a credit for 2009 and 2010 equal to the lesser of 6.2% of earned income or $400 ($800 for joint filers). The credit phases out once adjusted gross income (AGI) reaches $75,000 for singles and $150,000 for couples.
* Alternative minimum tax (AMT). The new law creates another "patch" for 2009 through higher exemption amounts: $46,700 for singles and $70,950 for couples. This change will prevent an estimated 26 million middle-income taxpayers from being hit by the AMT.
* First-time homebuyer's credit. This credit is enhanced for 2009. The maximum credit increases from $7,500 to $8,000 for homes purchased from January 1, 2009, through November 30, 2009. Repayment isn't required if you live in the home at least three years. Phase-out of the credit remains for an AGI above $75,000 for singles and $150,000 for joint filers.
* New vehicle deductions. A buyer can claim a new above-the-line deduction for sales and excise taxes on the first $49,500 of a vehicle's price. The deduction phases out for an AGI above $125,000 ($250,000 for joint filers). It applies to 2009 purchases after February 16.
* Education credits. For 2009 and 2010, the maximum Hope credit - renamed the "American Opportunity Tax Credit" - increases from $1,800 to $2,500 and may be claimed for all four years of college (instead of the first two). Phase-out begins at $80,000 of AGI for singles and $160,000 for joint filers.
* Child tax credit. The refundable portion of the child tax credit is increased for 2009 and 2010 by lowering the income threshold for refundability from $8,500 to $3,000.
* Energy incentives. Among numerous energy provisions, the new law increases the residential energy credit from 10% to 30% and raises the maximum cap to $1,500 for installations in 2009 and 2010.
There's much more in the new law, ranging from a tax exclusion for $2,400 of unemployment benefits in 2009 to a one-time $250 payment to certain retirees and veterans. For guidance in tax planning under these latest changes, contact us.
Itemizing deductions: Three facts you should know
You know the general rule about itemized deductions: Compare your total allowable expenses against your standard deduction, and use the amount that provides the greatest tax benefit.
Illustration. If you're under age 65, married filing jointly, itemizing may reduce your 2008 tax bill if your qualifying deductions are greater than the basic 2008 standard deduction of $10,900 ($5,450 for single filers under age 65).
Here are three other facts about itemizing you may be less familiar with.
1. There's a special rule when you're married and file separate returns. If either of you itemizes, the other's standard deduction amount is usually considered to be zero. When this situation applies, you'll generally be better off itemizing no matter the amount of your allowable expenses.
2. Your itemized deductions may be limited. For instance, unreimbursed medical expenses are deductible only if the amount you spent exceeds 7.5% of your adjusted gross income (AGI). Miscellaneous deductions such as certain legal fees must equal more than 2% of AGI to be deductible.
In addition, if your AGI for 2008 reached $159,950, the total amount of your itemized deductions is reduced.
3. You can itemize even though your standard deduction is higher. Why would you want to? One reason: The standard deduction isn't considered in the computation of the alternative minimum tax (AMT), but some itemized deductions are. If you're subject to the AMT, in certain cases your overall tax liability may be less if you choose to itemize.
Other rules may apply to your situation. For help with the calculations or with any of your tax filing concerns, give us a call.
New law has tax breaks for businesses
The American Recovery and Reinvestment Act of 2009 contains a number of provisions that will affect businesses. Here's a brief overview.
* Bonus depreciation. First-year 50% bonus depreciation for new business equipment purchases is extended through 2009 (through 2010 for certain property).
* Increased expensing. Code Section 179 first-year expensing of new and used business equipment purchases is extended through 2009 at the higher limit of $250,000. The deduction is reduced once purchases for the year exceed $800,000.
* Loss carryback period. The new law allows businesses with average gross receipts of $15 million or less to carry back net operating losses for up to five years, rather than the normal two years. The longer carryback period applies only to losses incurred in a tax year beginning or ending in 2008.
* Work opportunity tax credit. Two new categories of targeted groups are eligible for the work opportunity tax credit: unemployed veterans and disconnected youth. The credit applies to workers in these groups hired in 2009 and 2010.
* COBRA benefits. Employees who lose their jobs between September 1, 2008, and January 1, 2010, may elect to pay 35% of their COBRA coverage and have that treated as paying the full amount. The former employer is required to pay the remaining 65% and will be credited for this amount against income tax withholding and payroll taxes otherwise payable to the federal government. Income and other limitations on COBRA coverage apply.
The new law is a massive 1,000 page document, so this quick review by no means covers all the provisions that may affect your business. For guidance in your business tax planning under this latest law, contact our office.
Has your business considered the benefits of going green?
We see, hear, and read every day that the world is becoming more environmentally conscious and taking steps to "go green." While many of these may be out of reach for smaller businesses, there are several things that even small businesses can do to head toward going green.
* Recycling. Most communities these days provide recycling centers. Therefore, businesses should find it fairly easy to provide internal receptacles and to transport or purchase recycling pick-up services for such recyclables as paper (including shredded), newspapers and magazines, aluminum cans, and plastic bottles.
* Installing energy-efficient light bulbs. Compact fluorescent light bulbs are more energy-efficient than incandescent bulbs, offering a greener alternative. Also, watch for the next generation of commercial-use energy-efficient LED (light-emitting diode) bulbs. While LED pricing currently is rather high, LED bulbs typically use one-tenth the power of traditional light bulbs and last up to 20 times longer. Also, as volumes increase, prices should fall.
* Going smoke-free (or tobacco-free). One way for businesses to create a cleaner, healthier environment is to go smoke-free. This might involve eliminating smoking indoors, while providing limited smoking areas outside; or a business might go totally smoke-free, prohibiting smoking anywhere on the premises - indoors or outdoors. Further, a business might offer its employees complimentary or discounted programs to assist them in their efforts to quit smoking.
* Providing favored parking spaces. Businesses might consider offering special parking spaces for hybrid vehicles and transportation forms that use lesser amounts of fuel (e.g., motorcycles, scooters). The provision of easily accessible bicycle racks also is important.
* Going "paperless." While most would agree that going totally paperless probably is unachievable, many companies already have begun to make progress in decreasing the amount of paper they use. To reduce paper, consider offering electronic portals to clients or utilizing other electronic means of sharing and working with data.
* Offering "green" shopping bags. As you shop these days, you will see that many stores are selling reusable shopping bags. Consider distributing to your customers, clients, and prospects a green shopping bag with your business logo. You take a step toward environmental consciousness, while garnering some publicity at the same time.
These are just a few of the steps a small business can take toward "going green." The benefit to your business includes energy cost savings and maybe a bit of positive publicity, plus making a contribution to a healthier environment.
What's New in Finances:
Home foreclosures may be slowing
Statistics on home foreclosures for January 2009 showed a 10% decrease from December 2008 foreclosures. Though the January rate is still up 18% from a year ago, the decline from December may be an indication that moratoriums and mortgage modifications may be having an effect.
According to a RealtyTrac report, one in every 466 homes had a foreclosure filing in January. The states with the highest home foreclosure rates were Nevada, California, Arizona, Florida, and Oregon.
President Obama recently announced a foreclosure prevention plan designed to help struggling homeowners with refinancing or modifying their mortgages.
RealtyTrac estimates that another three million foreclosures will occur in 2009.
Put your financial house in order
With another new year underway, now is a great time to assess your household finances, make any needed changes, and prepare for new opportunities. To help you get started, here are a few suggestions.
* Take control of your credit cards. Over-reliance on credit cards hurts you in several ways. With interest rates typically in double digits, it's the most expensive way to borrow money. Think of those monthly interest payments as draining off dollars that you could be investing in a home or saving for your later years. And too much debt can hurt your credit score and make other borrowing more difficult. It takes time and discipline to reduce credit card debt, but it's well worth the effort.
* Build a cash reserve for emergencies. Your financial situation can quickly spin out of control if you can't come up with cash when you need it. If you lose your job, you might have to live on reduced income for several months. Or there could be unplanned medical bills, car repairs, or home repair costs. Even if you have insurance, reimbursements can take time, and there are deductibles to meet. Work hard to put aside at least three months' living expenses. Invest it in a safe, liquid account, and resist the temptation to raid it for non-emergencies.
* Review your credit report. The law requires each of the three major credit bureaus to give you a free copy of your credit report every twelve months. The reports shouldn't contain significant errors; if they do, make sure the discrepancies get resolved.
* Make or update a home inventory. Go through your house with a video camera and describe what you see, along with pertinent information about your most valuable assets (purchase dates, prices, estimated values). Make an extra copy or two of the tape. Keep one for yourself, put one in a safety deposit box, or send one to a friend or relative (preferably in another town) for safe keeping. Should you experience a fire or other disaster, your home inventory can be vital for getting insurance claims approved.
* Increase your savings. The start of a new year is often a time when companies provide cost-of-living adjustments (COLAs) to their employees. If your employer provides such a benefit, consider contributing a portion of the increase to your 401(k) plan or other savings account. It's a relatively painless way to save more.
* Calculate your net worth. This is a great yardstick for measuring your household's financial growth (or shrinkage) from year to year. Simply put, your net worth is the value of your assets (house, personal property, bank accounts, car, investments) minus your liabilities (mortgage, credit card balances, loans). Widely available financial software can help you automate this task.
* Set financial goals. Financially speaking, where do you want to be a year from now? What steps do you have to take now to make that happen? Take time to dream; then put your goals in writing. Thoughtful planning is a first step toward prioritizing both spending and saving.
* Purge old financial records. If you're a financial packrat who keeps old cancelled checks and bank statements long past when they may be needed for an IRS audit or your own use, consider shredding them.
If you'd like additional suggestions for setting your financial house in order this coming year, give us a call.
Take a Break
Who would have guessed?
* Bulletproof vests, fire escapes, windshield wipers, and laser printers were all invented by women.
* Half of all Americans live within 50 miles of their birthplace.
* It is impossible to lick your elbow.
least 75% of people who read this will try to lick their elbow.
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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