Timothy W. Tuttle & Associates
Volume 7 Edition 10 Please email comments to email@example.com Oct 2011
Major Tax Deadlines:
For October, 2011
* October 3 - Generally, the deadline for those that are self-employed and small businesses to establish a
SIMPLE retirement plan for 2011.
* October 17 - Deadline for filing 2010 individual tax returns on automatic extension of the
April 18 filing deadline.
* October 17 - If you converted a regular IRA to a Roth IRA in 2010 and now want to switch
back to a regular IRA, you have until October 17, 2011, to do so without penalty.
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:
Take advantage of expiring tax breaks
A number of tax breaks are due to expire at the end of this year. Though Congress may renew
some or all of them, there is no way of knowing if or when they will. As part of your year-end
2011 tax review, consider whether any of these opportunities to cut your tax bill fit your
* The option for deducting state and local sales taxes in lieu of deducting state and local
* The above-the-line deduction for up to $4,000 of higher education expenses.
* The above-the-line deduction of up to $250 for classroom supplies purchased by teachers.
* The tax-free charitable contribution from an IRA of up to $100,000 allowed for taxpayers 70½
* 100% bonus depreciation on new equipment purchased by business.
* $500 energy credit for energy-saving expenditures for your personal residence.
* Section 179 expensing election on up to $500,000 of new or used business equipment
Consider making gifts before year-end
A lifetime gifting program might trim both your estate and income taxes. First, there's the
annual exclusion for gifts. Currently, you can give $13,000 annually to any number of
recipients without paying federal gift tax. Married couples can double this amount by gift-
splitting; a gift of $26,000 from one spouse is treated as if it came half from each.
Gifts do more than help out children who need the money. They also reduce your estate so your
estate will pay less estate tax upon your death. Apart from annual gift giving, you can
transfer (during your lifetime or through your estate) a total of $5,000,000 with no estate or
gift tax liability. On amounts above this threshold, you or your estate will be faced with
taxes at the current top rate of $35%. So a consistent program of annual gift giving might
create substantial tax savings.
Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn't a
charitable contribution. Conversely, a gift doesn't constitute taxable income to the
recipient. Gifts of income-producing property may, however, reduce your taxable income. Once
you've given the property away, the recipient, not you, receives the income it produces and
pays any income tax due on it.
One advantage to annual gift giving is that it is relatively simple to do, especially if
you're giving away cash. Another advantage is flexibility. You're not locked into anything;
you can see how much you can afford to give away each year. You can give away anything — cash,
stock, art, real estate. Valuation is the fair market value on the date of the gift.
Subsequent appreciation, if any, belongs to the donee's estate, not yours.
Before you give away assets, be sure you will not need them yourself to provide income in
later years. Consider the impact inflation will have on your resources.
Proper planning is essential in this area; get professional assistance before you do any gift
giving. Contact our office if we can help.
Two surveys reveal workplace information
Two recent surveys reveal some interesting things about what's important to employees and
In the first survey, employees were asked what was most important about their job. Job
security came in first, with health benefits a close second. Other things mentioned as being
important to employees were a balance between work and life, salary, and retirement benefits.
The second survey asked employers what mistakes job candidates made most frequently in job
interviews. The biggest mistake candidates made was having little or no knowledge of the
company at which they were applying. Other big mistakes applicants make included being
unprepared to discuss their skills or their goals and failing to make eye contact with the
Stay alert to spot employee theft
Employee theft happens more frequently than you hear or read about. It's believed that only a
small percentage of cases of employee dishonesty are reported and prosecuted. Too often, the
employee is just dismissed and moves on to steal from someone else. In other cases, especially
where financial controls are weak, the employee may steal small amounts for years without
There are many things you can do to spot employee theft in your business. Have an inquiring
mind, ask lots of questions, and never accept answers that don't make sense. Spend time each
month monitoring your financial results. Look for inconsistencies, such as inventory declining
in a slow sales month or excessive customer returns. Listen to customer complaints about late
deliveries or missing items, and don't accept "computer problems" as an excuse. If you know
your business, you don't have to be an accounting expert to sense when something is wrong.
You could also spot-check your accounting records by reviewing one category each month. For
example, you might scan the check register to see just what payments are being made. Look for
missing check numbers and ask to see any voided checks. Another month you might review the
payroll log or look over the records of returned items. Look for multiple entries of similar
items or suspicious customer names.
Finally, watch your employees for changes in behavior or spending that seems to be beyond
their means. And beware of an employee who insists on doing all the detail work and never
takes a vacation. It could be the sign of someone with something to hide.
For assistance with this or any business problem, contact our office.
What's New in Finances:
Census Bureau statistics show income decline
The annual report from the Census Bureau shows that median household income dropped 2.3% last
year to $49,445. That reflects a 7.1% drop from 1999 income after adjusting for inflation.
The percentage of Americans living in poverty increased to 15.1%, with 22% of children living
below the poverty line (set at $22,314 for a family of four in 2010).
Fewer Americans had health insurance coverage in 2010, with the uninsured rising to 16.3% from
13.1% in 2000.
One bright spot: Per capita net worth rose to $169,691 at the end of 2010, up from $147,889 in
Take advantage of the tax-free IRA charitable rollover
The "Tax Relief Act of 2010" extended the provision that allows taxpayers age 70½ or older to
make charitable donations of up to $100,000 directly from their regular or Roth IRAs. But the
provision is set to once again expire after this year. Should you take advantage of this
option in 2011?
Charitable IRA rollovers are penalty-free withdrawals that are neither included in, nor
deducted from, your taxable income. Such withdrawals qualify as required minimum distributions
(RMD) from your retirement account. Thus, if you do not need the IRA distribution to live on,
and you wish to make a donation, a charitable IRA rollover might be a win-win strategy.
Who are the best candidates for the tax-free IRA charitable rollover?
* If you need to take your RMD, but do not need the money and do not want to pay the tax on
the distribution, doing a charitable rollover would keep the RMD from inclusion in your
* If you make large donations, and your charitable contribution deduction is limited due to
the 50% or 30% of AGI limitations, this may be an opportunity for you to continue to fund your
charities and not exceed the limitations.
* If you are receiving social security, it may be better to make the IRA gift directly to
charity so taxable income doesn't increase and subject your social security benefits to
* If you claim the standard deduction, a donation to charity is not deductible. But you can
make the IRA gift directly to charity and avoid additional income tax on the RMD.
* If you want to reduce your taxable estate, a charitable IRA rollover can reduce your taxable
estate by $100,000 ($200,000 for a couple).
Keep in mind that there are unique restrictions on this type of charitable gift. The IRA
rollover cannot be contributed to a donor advised fund or supporting foundation. Also, if any
benefit is received in exchange for the gift, such as dinner tickets, the entire distribution
becomes taxable. As with any donation, the charity needs to provide you with a tax receipt
containing all the proper substantiation for your contribution. Without it, the gift is
disqualified. Also be aware that the donation must be made directly from the IRA to the
charity and not paid to you first.
The charitable IRA rollover is a powerful new tool for tax and gift planning. But remember,
the provision is set to expire this year. Give our office a call today for assistance in
analyzing whether this option is a tax-smart move for you.
Take a Break
Some tax facts
Some tax facts from National Taxpayer Advocate Nina Olson's annual report to Congress:
* Americans spend 6.1 billion hours preparing their taxes every year.
* There have been 4,428 changes to the tax code over the past ten years.
* Nine out of ten Americans have someone prepare their tax return or use tax software.
* The tax code is so long that no one is certain exactly how long it is.
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Timothy W. Tuttle & Associates