Online Advisor
Timothy W. Tuttle & Associates
 


Volume 14 Edition 8                      Please email comments to newsletter@tuttlefirm.com                     Aug 2018


Major Tax Deadlines:

For August 2018      

September 3: Labor Day

Summer is in full swing and the air conditioners are working overtime. Hopefully you are finding ways to stay cool while enjoying your outdoor activities. Included in this newsletter are articles about a new tax trap created by student loan forgiveness, tips to improve your financial situation and ideas to ensure that you are not sharing too much online. For your business, there are articles explaining "economic nexus" for sales tax and best practices for setting up your accounting system. Lastly, there are tips to help you manage your capital gains taxes.

Should you wish to review your situation please feel free to call. Also feel free to forward this newsletter to someone who may benefit.

Student Loan Forgiveness Creates New Tax Trap

There's a new student loan repayment program that forgives some student loan debt if other payments are made. This new debt forgiveness is creating a tax surprise for the unsuspecting student. Here is what you need to know.

The debt forgiveness program dilemma

To combat the hardship of high student loan debt, a popular new repayment option is the income-based repayment plan. These plans limit monthly payment amounts to a percentage of discretionary income. They also limit the number of repayment years. If your loan is not paid by a pre-determined future date and you've been making the payments as agreed, the balance of the loan is forgiven.

While the prospect of having a portion of the debt canceled is enticing, it can create an unexpected tax burden if you are not prepared. Here's why it may be a problem:

Some exceptions apply

Before you begin to worry about a surprise tax bill, consider your other options:

Even with the additional tax liability that is realized, debt relief is generally a good deal for most. The hardship comes if you are not prepared for how to handle the tax payment that becomes due. Before signing an agreement that relieves debt, it makes sense to review your situation to avoid any surprises on your tax bill.

Ideas to Improve Your Financial Health

No-one likes to be blindsided by financial hardship. Listed here are 10 ideas to help ensure your financial situation stays healthy.

This list is by no means complete, but if you focus on the areas mentioned, your financial life will become more planned and less likely to be struck by an unforeseen surprise.

Dramatic Sales Tax Change

The U.S. Supreme Court issued a ruling in the South Dakota vs Wayfair case that opens the door for states to impose sales tax on sellers outside their borders. The case highlights a new standard of business presence called "economic nexus" that may have major implications for businesses and consumers alike.

Economic nexus explained

The exact definition varies, but in general, economic nexus makes a connection between a taxing authority (usually a state) and a seller based on certain sales or transaction levels. The Supreme Court agrees with South Dakota that having economic presence is enough to require an out-of-state retailer to register with the state to collect and remit sales tax. For example, the state of South Dakota mandates that if a retailer has $100,000 in annual in-state sales or has 200 separate in-state sales transactions over the previous 12 months, they must collect sales tax on all sales in South Dakota.

What it means for businesses

What's next?

As many as 16 states have economic nexus laws in place to try to take advantage of the new ruling, with many more to introduce legislation. By nature, Internet retailers will be hit the hardest and are expected to lobby in states that have not passed economic nexus laws. In addition, it will take states some time to get their systems updated to handle the new laws and increased filings. While there might be some short-term delays during implementation, sales tax changes appear to be on their way.

Are you Sharing Too Much Information Online?

In today's digital age, it is impossible to avoid the internet. Even if you don't have a computer and actively avoid social media, there is information about you in some corner of the web. Here are some tips to help you manage your digital footprint:

The best defense of your private information is you. Having a plan and actively managing your online profiles is the best way to minimize the chance of your personal data falling into the wrong hands.

Setting up Your Business Accounting System

You've done the hard work. You have a new business idea or you've found an existing business to purchase. Want to help ensure your business success? Pay attention to correctly setting up your business' accounting system. Here's how:

Remember, by spending time setting up the accounting system that is right for you, you are increasing your business' chance for success.

Manage Capital Gains Tax Tips

If not tracked and managed properly, capital gains tax can come as a large surprise at tax-filing time. In fact, many taxpayers don't realize they have a capital gain until they get their 1099 form in January and see a capital gain distribution. Here's what you need to know.

Understand capital gains and their taxability

Capital gains are recognized when you sell a capital asset for more than your basis in that asset. Capital assets are typically something of value like your home, a car and other investments. Basis is typically the original cost of the asset being sold. The difference between the sales price of the asset and your basis is the amount of the taxable capital gain.

The IRS taxes short-term capital gains for assets owned less than one year as ordinary income up to 37 percent, but taxes long-term capital gains at a maximum 23.8 percent (20 percent plus a potential 3.8 percent net investment tax).

Ways to manage capital gains tax

There are many factors that come into play when buying or selling an asset. Just make sure the tax implications are considered before you make the transaction.

As always, should you have any questions or concerns regarding your situation please feel free to call.


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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
www.tuttlefirm.com