Timothy W. Tuttle & Associates
Volume 9 Edition 4 Please email comments to firstname.lastname@example.org April 2013
Major Tax Deadlines:
For April 2013
* April 1 - Deadline for payers who file electronically to file 2012 information returns (such as 1099s) with the IRS.
* April 1 - Deadline for employers who file electronically to send copies of 2012 W-2s to the Social Security Administration.
* April 15 - Individual income tax returns for 2012 are due.
* April 15 - 2012 calendar-year partnership returns are due.
* April 15 - 2012 annual gift tax returns are due.
* April 15 - 2012 income tax returns for calendar-year trusts and estates are due.
* April 15 - Deadline for making 2012 IRA contributions.
* April 15 - Deadline for employers to make contributions to certain retirement plans.
* April 15 - First installment of 2013 individual estimated tax is due.
* April 15 - Deadline for amending 2009 individual tax returns (unless the 2009 return had a filing extension).
* April 15 - Deadline for original filing of 2009 individual income tax return to claim a refund of taxes. Each year some taxpayers have tax refunds due them for prior years, and unless a return is filed to claim the refund by the three-year statute of limitations, the refund is lost forever.
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.
more information on tax deadlines that apply to you or your business, contact
What's New in Taxes:
Watch out for identity theft, says the IRS
The IRS is making the prevention of identity theft a top priority this year.
Here's what identity thieves have been doing: They steal a taxpayer's personal information and use it to file a tax return claiming a refund under the taxpayer's name. Then when the taxpayer actually files a return, the IRS won't accept it and notifies the taxpayer that a return under his name and ID number has already been filed.
The IRS recommends that taxpayers do the following in order to avoid becoming an identity theft victim:
* Guard your personal information. Identity thieves can get your information by stealing your wallet or purse, going through your trash, or posing as someone who needs your information for a legitimate reason.
* Watch out for IRS impersonators. Don't fall for phone calls, faxes, e-mails, or other contacts made by people claiming to be from the IRS. Don't respond to the message. Don't open any attachments in an e-mail or click on any links. Do not enter your personal information.
* The IRS recommends that you enter "phishing" in the search box at the top of its website (www.irs.gov) to get more information on avoiding tax scams. E-mail suspected scams to email@example.com.
* Protect information on your computer. Protect your tax information with a password, and once you're finished with your tax data, take it off your hard drive.
Start your 2013 tax planning with an estimate of your income.
A new tax rate of 39.6% when your taxable income exceeds $400,000 ($450,000 when you're married filing jointly) is just one reason to create an income projection for 2013.
Another reason: Additional rate changes take effect this year. For example, the maximum long-term capital gain rate increased to 20% when your income puts you in the highest ordinary income tax bracket. In addition, a 3.8% surtax may apply to net investment income - a term that includes interest, dividends, and capital gains - when your modified adjusted gross income (AGI) exceeds $250,000 ($200,000 if you're single).
Sorting inflows into various categories such as wages, investments, retirement plan distributions, passive income, and active business income gives you a clearer picture of what tax rules will apply.
For instance, this year you'll pay an additional 0.9% Medicare tax on wages and self-employment income when the combined total of those items exceeds $250,000 on a joint return ($200,000 when you're filing as single).
This tax is separate from, and based on a different type of income than the 3.8% net investment income tax. Depending on the sources of your income, you may be subject to both taxes.
* Planning suggestion 1: Investigate pre-tax fringe benefit options. The 0.9% additional tax is assessed on wages subject to Medicare tax. Health insurance premiums paid under your employer's cafeteria plan are exempt from Medicare tax, as are contributions made by your employer to qualified retirement plans.
* Planning suggestion 2: Switch taxable investments - especially those with a built-in loss - to municipal bonds. Tax-exempt interest is not considered net investment income when calculating the 3.8% tax.
* Planning suggestion 3: Place income-generating investments in retirement accounts. Future withdrawals can increase your adjusted gross income, but are not themselves subject to the net investment income tax.
* Planning suggestion 4: Make tax-free distributions from your traditional IRA to qualified charities when you're over age 70½. This provision was extended through the end of 2013.
* Planning suggestion 5: Increase the amount of time you actively participate in rental real estate activities, and evaluate the effect of grouping your properties in order to combine the time spent managing them.
Planning suggestion 6: Evaluate the legal form of your business. Flow-through
income from an S corporation in which you actively participate is not generally
subject to either of the new taxes. Also, depending on your personal tax rate,
you may want to take another look at converting to C corporation status.
IRS announces a few changes in 2013 deduction limits for business vehicles
The IRS has published depreciation limits for business vehicles first placed in service this year. The limits for passenger autos remain the same as the 2012 limits, but limits for light trucks and vans have some changes.
Because 50% bonus depreciation is allowed only for new vehicles, the limits are different for new and used vehicles. Here's a quick review.
For new business cars first placed in service this year, the first-year depreciation limit is $11,160; for used cars, it's $3,160. After year one, the limits are the same for both new and used cars: $5,100 in year two, $3,050 in year three, and $1,875 in all following years.
The 2013 first-year depreciation limit for light trucks and vans is $11,360 for new vehicles and $3,360 for used vehicles. Limits for both new and used vehicles in year two are $5,400, in year three $3,250, and in each succeeding year $1,975.
For details relating to your 2013 business vehicle purchases, contact our office.
Don't let your start-up company make these hiring mistakes
Challenges that merely annoy an established firm often capsize a start-up company. This is especially true in the area of staffing. When a big corporation makes a hiring mistake - bringing in a natural-born accountant to do a sales job, for example - the company suffers, but survives. Committed by a fledgling firm, the same mistake may spell disaster. After all, if your company employs only five people, one wrongly hired employee will make up a fifth of your work force. That person's incompetence or poor people skills can bludgeon the firm's bottom line.
Following are three of the most common hiring mistakes made by start-up companies. Avoid these blunders and you'll be well on your way to building a productive team.
* Staffing the firm with friends and family. While this strategy may work in some circumstances, hiring pals and relatives often spells trouble. For one thing, friends and family members often expect - even subconsciously - to be treated differently from other employees. Such a double standard, whether real or perceived, can hurt morale and productivity. As a general rule, hiring decisions should focus solely on the needs of the firm and applicant qualifications.
* Trusting in a handshake. Memories fade. Expectations fluctuate. As with other important aspects of your business, employee arrangements should be laid out in clearly written documents. This can be as simple as drafting employee offer letters that cover compensation, rights to intellectual property, and bonus arrangements. Employee handbooks are also a good way to spell out the responsibilities of the firm and its staff. Many a business has been injured by a disgruntled employee who claims the firm did him wrong. Without a written contract or other document laying out company and employee responsibilities, the firm may have no legal recourse against such claims.
* Bringing in a partner for the wrong reasons. Sure, you might save money in the short term by selling a portion of your firm to a partner. But think long and hard about the downside risks. Do you really need to surrender a portion of your company - including control over important management decisions - to someone else? What will this partner contribute? Can you find other ways to fill gaps in your team? Remember, a bad partnership may end up in the business equivalent of divorce court. So choose wisely.
assistance with any of the issues facing your start-up business, give us a call.
What's New in Finances:
"Full House" is the new home trend
Surveys are showing that having more than one generation living under the same roof is becoming increasingly common. And that trend may be affecting home design.
A third of homeowners report that they expect to have grown children or aging parents move in with them at some point. About 15% say an adult child has already moved back home with them.
The multi-generational housing trend is higher than it has been since the 1950s. A Pew research study reports that almost 22% of young adults were living at home in 2010 compared with 16% in 2000.
Builders are responding to this trend with home designs focused on providing usable space for the different ages of the home's occupants. Out are large, fancy living and dining rooms that seldom get used. In are additional bedrooms for the additional home occupants and family-oriented spaces that can be utilized by children, parents, and grandparents.
Watch out for job scams on the Internet
In the current U.S. employment environment, many job seekers are feeling desperate - a desperation that provides a golden opportunity for crooks. In the past, fraudsters who specialized in job scams ran ads in newspapers or posted fake employment listings at local grocery stores. Although rip-off artists continue to use such venues, sophisticated criminals now employ a far more efficient tool to nab unsuspecting victims: the Internet.
For example, a bogus advertisement - touting jobs that require no experience and no education - may be posted on a legitimate website using a professional-looking logo and slick testimonials. Or job seekers may be required to pay an enrollment or membership fee to get information that's freely available elsewhere. They may be offered a "job" forwarding money from one bank account to another, often in Europe or China. If the money comes from stolen credit cards, anyone who transfers the funds - even unknowingly - may face criminal charges and end up in jail! One company duped job seekers by offering to provide study materials for a civil service examination that didn't exist. Others were offered jobs as movie actors or newspaper reporters, without regard to experience, training, or appearance.
Fraudsters perpetrate employment scams for several reasons. They may want to collect personal information to steal your identity. They may seek direct access to your bank or credit card accounts to buy stuff with your money. They may even try to use you as a pawn in an illegal activity, such as receiving and reshipping stolen property.
How can you avoid these types of scams?
* Don't pay fees for referrals to government jobs.
* Don't pay upfront fees to receive information.
* Never accept a "job" that consists of simply transferring money to someone else's account (known as a "payment forwarding" scam).
* Don't provide personal information, such as personal bank account numbers or social security numbers, until you're confident that your employer is legitimate.
If you think you've been scammed, take these steps:
* Close all bank accounts and e-mail addresses associated with the fraud.
* Check your credit reports for unusual activity.
* Report the company name and job listing to the website where the scam was posted.
* If you think you've been a victim of a "payment forwarding" scam, file a police report.
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 the Online Advisor,
or for assistance with any of your tax or business concerns, contact our office.
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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