Timothy W. Tuttle & Associates
Volume 5 Edition 5 Please email comments to email@example.com May 2009
Major Tax Deadlines
For May 2009
* May 15 - Deadline for
calendar-year exempt organizations to file 2008 information returns.
* June 1 - Deadline for IRA, SEP, SIMPLE, Roth IRA, MSA, and education savings account trustees to file annual statements (Form 5498) with the IRS, with copies to participants.
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:
IRS gives up on private
The use of private debt collection agencies to collect overdue taxes was started in 2006. Some in Congress have agitated for an end to the program from its very beginning. Now, after an extensive review of the cost-effectiveness of the program, the IRS announced that it will not renew contracts with the private agencies.
Instead, the IRS plans to hire an additional 1,000 collection personnel in 2009. The Commissioner stated that collection work is best done by IRS employees who, in these troubled economic times, have more options in dealing with taxpayers struggling to meet their tax obligations.
How long should you keep tax records?
After filing your 2008 tax return, you may be wondering how long to keep your tax records. Unless fraud, evasion, or a substantial understatement of income is involved, the IRS generally has only three years in which to question your return. If the IRS asks, you must be able to prove the validity of your tax return, which includes providing the underlying supporting data. How long you keep your paperwork depends directly on the statute of limitations, but here are some guidelines.
* Your copy of the tax return. Consider keeping it forever since you never know when this document will come in handy. Remember that in many cases, the IRS destroys original returns after four or five years. It's always best to have your copy to fall back on.
* Cancelled checks, bank/investment statements, and receipts. Keep them for seven years. Because of various combinations of the statute of limitations and technical provisions in the law, keeping them for seven years, rather than just for three years, is recommended.
* Stock or bond trade confirmation statements. Keep for seven years after the sale of the stock. For example, say that you bought 200 shares of stock in 1986 and sold them in 2008. You'll want to hold on to both the buy and sell confirmation statements until at least April 2015.
* Escrow closing documents and improvements to property. Keep for seven years after the sale of the property. Keep these documents to prove your cost of the property when it is finally sold. This is true for rental property, investment property, and even your personal residence. You might think that keeping cost basis records on your personal residence is no longer required because of the gain exclusion rules on the sale of a principal residence. That's not entirely true, since these laws could change at any time, or your gain could exceed the gain exclusion limits.
This listing is not all-inclusive, and you might have special circumstances. If you need any help with your recordkeeping requirements, give us a call.
Government jobs pay
more than private sector jobs
Even as the economy struggles, workers in government jobs are enjoying an increase in pay and benefits.
According to the Bureau of Labor Statistics, the average private sector hourly wage in December 2008 was $27.35. Workers in government jobs were earning an average hourly wage of $39.25. These figures include pay and benefits, and it is in the area of benefits that the gap between private and public pay has widened. Public employees' benefits averaged $13.38 an hour, while private company employees averaged $7.98 an hour in benefits.
Health benefits were a major factor in the variance between public and private compensation. Government paid an average of $8,800 a year for a worker's medical insurance, while private companies paid $4,100.
How does your company measure up?
No matter how successful your business has been in the past, you can probably do better. And if you've been struggling to keep your head above water, there's certainly room for improvement. So how can you gain ground on the competition?
Try the process known in business circles as "benchmarking." This is a strategic technique for comparing various aspects of your business to the top marks in your particular industry or profession. Then you can play "follow the leader" by emulating the best practices in those areas where you need to improve.
Benchmarking first gained wide acceptance in the manufacturing sector. For example, suppose a manufacturing company determines that it can produce only 100 widgets per hour as opposed to 500 widgets an hour produced by a competitor. This indicates a need to improve the company's widget making process. The same analytical tool may be extended to virtually every line of work.
Be mindful that benchmarking is not a one-shot deal. It is an ongoing process that requires you to continually challenge yourself to improve performance.
What aspects of a business might benefit from benchmarking? Naturally, this varies according to industry, location, and other factors, but the following areas are generally worth examination:
* Costs of producing goods or providing services.
* Length of time needed to design and market products.
* Procedures used in production activities.
* Personnel management procedures.
* Sales department activities.
* Marketing and advertising.
* Factors influencing public opinion about your products or services.
Benchmarking can create results where it counts - on the bottom line. Contact our office if we can assist with evaluating your business practices.
What's New in Finances:
Credit card companies
The economic downturn has claimed another casualty: the rewards programs offered by credit card companies. Used to encourage credit card holders to charge purchases, these programs offered cash rebates, airline tickets, and other freebies for each dollar charged.
Now banks are struggling to remain profitable and are cutting back on their rewards programs. Airlines, too, are trimming their free mileage programs by raising the number of miles required to qualify for free tickets.
If you use a credit card that offers rewards for purchases charged, be aware of these changes. You might want to monitor your rewards more carefully than in the past and cash them in before they expire or stricter redemption rules are put into effect.
Put your tax refund to good use
Did you recently receive an income tax refund? Here are some suggestions for making the most of it.
* Pay off consumer debt. This is generally one of the best uses for extra cash. For example, if you typically carry a credit card balance and pay 16% interest, you'll realize a 16% return if you pay off that debt. You probably won't save quite as much by paying off other types of loans, but you should consider that as well.
* Contribute to an individual retirement account (IRA). A contribution to an IRA is a good idea whether it's tax-deductible or not because IRA earnings grow tax-deferred. If you're self-employed and show a profit for the year, you can also make a tax-deductible contribution to a Keogh plan.
* Start or add to an education fund. Consider investing your extra money for your child's education. We can help you decide whether your education fund should be held in your name, your child's name, or in trust. We can also make sure that you don't get snared by the "kiddie tax."
* Invest in yourself. While planning for your family's education, don't forget yourself. Have you put off training for new job responsibilities or a new career because you couldn't afford it? Now that you have some extra cash, spending it on yourself may be the best investment of all. You also may be entitled to a tax deduction for education expenses that are required by your employer or that improve the skills required on your current job.
Don't just spend a tax refund; put it to work improving your financial well-being.
Take a Break
A history lesson…
"Maybe if we did a better job of listening, history wouldn't have to repeat itself."
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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