Timothy W. Tuttle & Associates
Volume 5 Edition 6 Please email comments to firstname.lastname@example.org June 2009
Major Tax Deadlines
For June 2009
* June 15 - Second quarter
2009 individual estimated tax is due.
* June 15 - Due date for calendar-year corporations to pay second installment of 2009 estimated tax.
* June 15 - Due date for calendar-year trust and estates to pay second installment of 2009 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 you or your business, contact our office.
What's New in Taxes
School's out! That
means moving time for millions
Millions of people move each year, often during the summer months when children are out of school. If you're considering a move this summer, be aware that moving can have some important tax consequences.
* Retirement plans. If you have a retirement plan at work, you may have several choices upon leaving a job. You can roll your retirement funds into an IRA, possibly roll the money into a new employer's plan, or perhaps even leave the money in your former employer's plan. Keep in mind that any amount distributed directly to you is subject to automatic 20% income tax withholding, and you may also face a 10% early withdrawal penalty.
* 401(k) loans. Facing a layoff or new job and need cash? Tap your 401(k) balance only as a last resort. If you have an existing 401(k) loan, pay it off. If you leave your employer and can't repay the loan within a preset time, the loan balance is considered a withdrawal. As such, you'll be hit with income taxes and possibly a 10% penalty.
* Job search expenses. Expenses incurred to search for a new job are tax-deductible, even if your job search doesn't land you that coveted position. To qualify, you must be looking for a job in the same occupation.
* Moving expenses. If your job-related move qualifies (the IRS has both a distance and a time test), you can deduct the costs of moving your household goods and your family.
* Home sale. When you sell your home, you can exclude up to $250,000 of the gain from your taxes. The exclusion amount is $500,000 for married couples filing a joint return. To qualify for the full exclusion, you must have owned and occupied the house as your main home for two out of the five years prior to its sale. A partial exclusion may apply if you fail the two-year test due to a job-related move.
If you're considering a job-related move and want help sorting out the tax issues, give us a call.
Energy-saving home improvements could cut your 2009 taxes
President Obama signed the "American Recovery and Reinvestment Act of 2009" into law on February 17, 2009. Among the various provisions in the law are new energy tax credits that can really add up to savings for the homeowner. Making energy-saving improvements to your home will help to save on utility bills, enhance your efforts to go "green," add value to the home, and perhaps reduce your tax bill for 2009. These residential energy tax credits fall into two main categories: energy efficiency improvements and renewable energy systems. In many cases, the "Recovery Act" adjusts or extends similar energy credits previously available.
* Energy efficiency
The "Recovery Act" adjusts the residential energy property credits previously allowed, increasing the tax credit to 30% and the maximum aggregate cap to $1,500. The credit applies to eligible property placed into service in your principal residence during 2009 and 2010. Qualifying improvements for this energy credit include insulation; exterior windows and doors; central air conditioning systems; water heaters and furnaces burning natural gas, propane, or oil; stoves using renewable biomass fuel such as wood, pellets, and plants; hot water boilers; electric heat pump water heaters; certain metal roofs; and advanced main air circulating fans.
Installation of these items as part of a newly constructed home does not qualify for the credit. For certain eligible items, the credit can be calculated based only on the cost of materials; for other items, the cost of installation also can be included. This credit is not subject to income phase-outs, and the credit is allowed under the alternative minimum tax.
* Renewable energy
The 2009 law also generally removes the tax credit dollar limits for renewable energy systems. Such property includes solar hot water heaters, geothermal heat pumps, and wind energy systems. The tax credit, available through 2016, is up to 30% of the cost, including both labor and materials. Primary residences, second homes, and rental units qualify for this credit; existing and newly constructed structures are eligible.
Now may be the right time to upgrade the energy efficiency of your home. To discuss the tax breaks available for the improvements you have in mind, give us a call. We can help you sort through the details.
2009 vehicle deductions
Each year the IRS publishes depreciation limits for business vehicles first placed in service that year. Because 50% bonus depreciation is allowed only for new vehicles, these limits are different for new and used vehicles.
For new business cars, the first-year limit is $10,960; for used cars, it's $2,960. After year one, the depreciation limits are the same for both new and used vehicles purchased in 2009: $4,800 in year two, $2,850 in year three, and $1,775 in all following years.
The 2009 first-year depreciation limit for trucks and vans is $11,060 for new vehicles and $3,060 for used vehicles. Limits for both new and used vehicles in year two are $4,900, in year three $2,950, and in each succeeding year $1,775.
For details relating to your 2009 business vehicle purchases, contact us.
New rules for NOLs
Essentially, a net operating loss or NOL is generated when a business has more deductions than income.
Under prior rules, a business that had an NOL could carry that loss back only two years for a refund of taxes paid in those earlier years. (The business could also choose to carry the loss forward for up to 20 years.)
The "American Recovery and Reinvestment Act of 2009" changed the carryback period to as many as five years. The new rule applies only to 2008 net operating losses in companies with average gross receipts over the last three years of $15 million or less.
* Planning opportunities
The carryback periods of three, four, or five years are elective. That means that the taxpayer can choose how long to carry back the NOL as long as it doesn't exceed five years.
This opens up many tax planning opportunities, especially if taxable income has fluctuated significantly over the years. Not only that, it's a terrific benefit to taxpayers with NOLs larger than could be absorbed over the traditional two-year period.
As an alternative to carrying the loss back to prior years, you can still elect to forgo the carryback altogether and simply carry your losses forward to reduce future taxes.
Remember that the new NOL rules are elective, and you may choose to carry losses back as you see fit for up to five years.
There are filing and time restrictions on this tax break for businesses, so contact us if you need details and filing assistance.
What's New in Finances
"Do Not Call" doesn't
Registering with the National Do Not Call Registry is supposed to keep you from getting all those annoying mass marketing phone solicitations.
It appears that the current recession has brought out scam artists hungry for revenue and unconcerned about the illegality of their sales pitches. During the first quarter of this year, the Federal Trade Commission received 450,000 complaints from those who signed up with the Do Not Call Registry, but who are still receiving unwanted calls.
Among the scams currently being pitched: extended auto warranties, swine flu cures, debt renegotiation plans, and free lunch seminars promoting "low-risk" investments.
Be aware that the scammers are especially active right now, and be very skeptical of offers and promotions made by phone or e-mail.
How to deal with finances after a spouse's death
The death of a spouse can leave the survivor with a bewildering array of financial problems. In many families, one partner handles all the financial matters. If that partner passes away first, without having discussed and documented the couple's financial affairs, the survivor may face a steep learning curve or make poor financial decisions out of ignorance.
In many cases, the surviving spouse will be the wife. In fact, recent studies indicate that seven out of ten baby boomer wives will outlive their husbands. So getting a handle on the family's financial affairs is especially important for women.
If you're dealing with the death of a spouse, here are a few guidelines to help you navigate.
* Locate important documents. These include wills, insurance policies, deeds, investment certificates, powers of attorney, birth and marriage certificates, bank statements, and vehicle titles. You'll need these documents to change beneficiaries, revise asset titles, and verify account balances.
* Keep paying bills. Don't risk losing your good credit by neglecting ongoing expenses.
* Check survivor benefits. Contact the Social Security Administration to learn about survivor benefits. Also call your spouse's former employer to find out about employee benefits, such as payouts of unpaid salary, unused vacation, and pensions.
* Decide how you'll handle life insurance proceeds. Benefits may be paid in a lump sum or an annuity. If you take proceeds in a lump sum, you'll want to place them at least temporarily in readily available investments, such as money market accounts. Survivors often live on insurance proceeds for many years, so think twice before using the insurance money to remodel the house, pay off the mortgage, or take an expensive vacation.
* Get competent legal and financial advice. Seek out qualified and trusted professionals to help you through the process of probate, taxes, and planning for your financial future. All too often, the surviving spouse makes irrevocable financial decisions or unnecessary purchases in the days and weeks following a partner's death. Unfortunately, widows and widowers are easy prey for con artists. Someone may call with a great deal on a "sure fire" investment, or attempt to capitalize on your grief by offering unnecessary goods or services. A trusted professional advisor can provide objectivity when such "opportunities" are presented.
* Plan before a death occurs. Ideally, you and your spouse will develop a financial plan before a death occurs. One way to organize such a plan is to set up a tabbed binder that outlines the family's financial affairs. One tab might list key contacts, such as lawyers, accountants, and business associates. Another tab might disclose the location of important documents.
Discussing and documenting your financial affairs will be time well spent. If you need assistance, give us a call.
Take a Break
Web surfing is good for the brain
A study by UCLA scientists found that Web surfing stimulates the brain and may possibly improve brain function. The study compared people aged 55 to 76 who surfed the Internet with those who didn't. MRI scans showed more brain activity in the group that surfed regularly, especially in the areas of the brain which are involved in complex reasoning and decision-making.
"A simple, everyday task like searching the Web appears to enhance brain circuitry in older adults, demonstrating that our brains are sensitive and can continue to learn as we grow older," said Dr. Gary Small, member of the research team.
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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