Timothy W. Tuttle &
Volume 15 Edition 04
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Major Events This Month:
For April 2019
- Individual tax returns due
- C corporation tax returns
- First-quarter 2019
estimated tax due
April 21: Easter
Other April 15 Deadlines:
- Six-month filing extension
- 2018 gift taxes
- 2018 IRA contributions
- 2018 HSA contributions
Tax day is upon us! As we tie
a bow on the first tax season using the new tax laws, here's a fun tax quiz you
can use to impress your friends with some quirky state tax knowledge. This issue
also includes handy metrics to track your business performance, tips to help you
decide if you should buy or lease your next vehicle, and five big questions
people are asking as the tax deadline approaches.
Call if you would like to
discuss how any of this information relates to you. If you know someone that can
benefit from this newsletter, feel free to send it to them.
Tax Quiz: Wild State Tax Laws
Think taxes are simple and
filled with common sense? Think again! Enjoy this fun quiz to see how well you
know the crazy world of state taxes.
If you have a hankering
for an apple or banana at work, you'll pay an extra tax to buy fruit from a
vending machine in which state?
B. South Dakota
C. California. Cold food
is tax-exempt if purchased at a store, but subject to tax on 33% of the price if
you purchase fruit from a vending machine. If you sell fruit in this
state...good luck keeping track of the tax.
Looking to finally get
that "mom" tattoo on your arm? Which of these states charges a 6% tax on that
B. Arkansas. Body
piercings are also taxed at 6%. So if you are waffling between getting that
tattoo or a nose ring, you can eliminate taxes as a deciding factor!
Have you ever looked at a
tree in your yard and thought, "wow, that tree sure is exceptional"? If you have
one of these "exceptional" trees on your property you might be entitled to a
$3,000 tax deduction in which state?
A. Hawaii. Worried about
how new developments were destroying the environment in the 70's, the Hawaii
State Legislature added the tax deduction for expenditures paid to maintain an
Next time you are at a
bakery in this state and the baker lifts the knife to cut your bagel, stop them.
It could be a taxable event! Can you name the state?
D. New York
D. New York. Slicing a
bagel meets the state's definition of prepared food and is subject to an 8
percent sales tax. That goes for applying cream cheese as well.
Looking for a long-term
retirement tax-savings tip? Which state exempts you from state taxes once you
B. New Mexico
C. Rhode Island
B. New Mexico. If you are
100 or older and are not claimed as dependent, you are exempt from filing and
paying New Mexico personal income tax.
As you enjoy the nice spring
weather, spread some of this fun tax knowledge with family and friends.
4 Key Metrics to Fortify Your
Even the best, well-prepared
business plans can unravel quickly without a process in place to evaluate
performance. Creating a scorecard with quality metrics can give you the daily
insight you need to successfully run a business without drowning in the details.
Create a scorecard that
An effective scorecard gives
you a holistic view of the state of your business in one report. The report
consists of key financial and non-financial metrics to provide a daily look at
the health of your business. To be useful, your measures should be concise,
available on-demand, and include properly targeted data to help you quickly spot
trends and react appropriately.
Effective business metrics
to consider right now
- Quick Ratio (financial)
Add up your total cash, short-term investments and accounts receivable. Then
divide that total by your current liabilities. This is your quick ratio. It's
a simple way to see if you have enough funds on hand to pay your immediate
bills. A value of 1.0 or more means your liquid assets are sufficient to cover
your short-term debts. A value less than 1.0 may mean you're relying too
heavily on debt to fund your operations or pay expenses.
- Retention Percentage
First, create a list of customers who made purchases this year and a list of
customers who made purchases last year. Then, remove all new customers gained
in the current year. Divide the total number of customers from last year by
the remaining number of customers for this year. This is your customer
retention percentage. Measure this over time to see if your business is
retaining or losing core customers. If you have a condensed sales cycle, you
can shrink the period down further. For example, by looking at this
calculation each month, you can see how it builds over the year.
- Asset Turnover Ratio
Divide your total sales by average total assets from your company balance
sheet. (beginning assets plus ending assets, divided by two) for the same time
period. The end result tells you the amount of sales generated for each dollar
committed to your assets. The number may not reveal much by itself, but when
reviewed over time, you'll have a better understanding of whether the assets
used to run your business are becoming more or less effective.
- Net Income Per Employee
Divide your net income by your total number of employees for a given time
period. In theory, as your workforce develops, it should generate more income
per employee. Remember to account for part-time employees prior to making your
calculation (e.g., a part-time employee working 20 hours per week is 1/2 an
employee for purposes of this calculation). If the income per employee is
getting lower over time, figure out why. Perhaps you have high employee
turnover, or there is an area of your company that can benefit from
While each ratio may help you
analyze different aspects of your business, they don't tell you the whole story.
Finding the right mix of metrics for your scorecard can take some time, but the
end result is a valuable tool that can take your business to the next level.
Leasing vs. Buying a Car
Knowing the tricks makes you a better
There are many reasons for
you to lease a car versus buy a car, but too often it is the auto dealer's
profit motive that determines which method you use rather than what's best for
your budget and lifestyle. To help you make an informed decision, here are some
things to consider:
When to lease
- You want a car with lower
down payments and monthly costs.
- You don't like making your
own vehicle repairs.
- You prefer a new car every
couple of years.
- You don't drive many miles
- You are not hard on your
When to buy
- You plan to have the
vehicle for many years.
- You are willing to drive a
- You drive more miles than
a lease allows.
- You are worried about
keeping the car in excellent condition.
- You want to work on or
modify the car.
Tips to know if you decide
If you think leasing a
vehicle is an option for you, here are some tips to ensure you are making the
- Negotiate before
revealing your intentions. Negotiate the price before telling the dealer
you wish to lease. The purchase price you negotiate should be the price the
dealer uses in calculating the lease payments as well as an outright purchase.
If it is not, this technique forces the dealer to disclose this fact.
- Ask about the annual
percentage rate (APR). Ask the dealer to disclose the effective APR built
into the lease. If the dealer gives you a lease factor instead of an interest
rate, multiply the lease factor by 2,400 to get a general interest rate. For
example, a lease factor of 0.0025 multiplied by 2,400 returns an interest rate
of 6 percent.
- Question the residual
value. Ask what the projected residual value of the car is at the end of
the lease. This value is often overstated by the dealer to artificially lower
your lease payment, but can impact your ability to purchase your vehicle at
the end of the lease. Future residual value is an estimate and can often be
negotiated with the dealer.
- Compare with a loan.
Use the negotiated purchase price to calculate your loan payments. Use this
information to compare your monthly lease payment with your car loan payment.
- Read the lease
agreement! If ever there is a time to read the fine print, leasing a car
is one of them. Pay special attention to early termination clauses and cost
for excess miles. These two factors can dramatically impact your lease versus
Tax Day is Here!
5 Big Questions People Are Asking
The individual tax deadline
of April 15 is fast approaching. Do you have all your tax arrangements in order?
Here are five important questions that people are asking.
- What happens if I don't
file on time?
There's no penalty for filing a late tax return after the deadline if you are
set to receive a refund. However, penalties and interest are due if taxes are
not filed on time or a tax extension is not requested AND you owe tax.
To avoid this problem, file your taxes as soon as you can because the
penalties can pile up pretty quickly. The failure-to-file penalty is 5 percent
of the unpaid tax added for each month (or part of a month) that a tax return
- Can I file for an
If you are not on track to complete your tax return by April 15, you can file
an extension to give you until Oct. 15 to file your tax return. Be aware that
it is only an extension of time to file - not an extension of time to pay
taxes you owe. You still need to pay all taxes by April 15 to avoid penalties
So even if you plan to file an extension, a preliminary review of your tax
documents is necessary to determine whether or not you need to make a payment
when the extension is filed.
- What are my tax payment
You have many options to pay your income tax. You can mail a check, pay
directly from a bank account with IRS direct pay, pay with a debit or credit
card (for a fee), or apply online for an IRS payment plan.
No matter how you pay your tax bill, finalize tax payment arrangements by the
end of the day on April 15.
- When will I get my
According to the IRS, 90 percent of refunds for e-filed returns are processed
in less than 21 days. Paper filed returns will take longer.
24 hours after you receive your e-file confirmation (or 4 weeks after you mail
a paper tax return), you can use the
Where's My Refund?
feature on the IRS website to see the status of your refund.
- Oops, I forgot a tax
document. Now what?
The first thing to do is determine the impact the new information has on your
filed return. For example, if you claim the standard deduction and then
receive a mortgage interest statement that does not bring your expenses above
the deduction threshold, there's nothing more you need to do. Simply file the
statement with your other tax documents.
If, on the other hand, you receive something like a Form 1099 with additional
income, you will need to amend the tax return to claim the income. In cases
like this, please call in order to review your situation and the timing of the
Don't Let Disaster Befall Your
A crucial deadline is approaching and you can
The filing deadline for most
non-profit organizations is May 15. Missing this deadline results in penalties
that can devastate the organization's budget, or worse, strip them of their
non-profit status and make your donations non-tax deductible! Here's what you
can do to help them:
- Check the charitable
status online. The IRS has a master list of charitable organizations
recognized as non-profits in good standing. Here you can see the current
status of your favorite charities and even view past tax returns to get an
idea of where they stand.
- Remind the
organization. Many small non-profits, like youth sporting groups and local
school booster clubs, often forget to file their annual report because
officers are constantly rotating in and out of the organization. Each
transition of responsibilities increases the likelihood that important data,
like a filing requirement, will get lost. A simple reminder from you might be
what they need to get back on track.
- Get involved. Learn
how the organization operates and see if there is anything you can do to help.
Oftentimes, one individual is juggling multiple roles within the organization.
Your skill set, whatever it may be, might be exactly what they need to free up
someone else to properly handle the annual filings.
- Tell them to get help!
A simpler filing option may be available to them. If they have less than
$50,000 in gross receipts, filing is much less complex with the Form 990-N
e-Postcard. Larger organizations must fill out Form 990 or Form 990-EZ.
Take action now! The
implications of losing the non-profit status are vast. Please call if your
favorite charity needs help filing their non-profit tax return.
Don't Leave Your Business
5 Insurance Tips to Protect Your Assets and
Your Bank Account
Have you conducted a business
insurance review lately? Changes in your business equipment, real estate
holdings, the amount of inventory, and the number of employees are all good
reasons to review your insurance. Here are a few policy review tips to consider:
- Keep in regular contact
with your insurance company. Keep your insurance agent apprised of what
you are doing in your business. Try to meet with your agent throughout the
year, and conduct a detailed annual review of your insurance needs.
- Understand how business
changes affect your policy. Figure out how your policy covers common
changes, as well as other changes you know are happening soon. This involves
understanding the limits and terms of your policy. You can start by asking if
you're properly insured for property damage, liability coverage, health and
disability, and life insurance.
- Conduct a competitive
review. Periodically conduct a competitive review of your insurance needs.
Bring in at least two other insurance providers, as well as your current
provider. The frequency of the review will be driven by changes in your
business, the stability of your current insurance provider, and the need to
understand the evolving landscape of business liabilities. A review will keep
your premiums competitive, as well as help you learn about coverage holes in
your current policy.
- Identify evolving
coverage risks. As the business climate evolves, so should your insurance
coverage. Think about what's on the horizon. Who would have anticipated the
need to cover cyber attacks and identity theft 10 years ago?
- Review safety plans and
company policies. This goes hand-in-hand with a business insurance review.
Make sure your team is adhering to established employment and operations
policies. Getting an insurance claim approved and maintaining reasonable
premiums often depend on specific factors you can reinforce through these
Finding the right level of
coverage for the right price is possible, but it takes some preparation and
planning. Invest some time now to review your insurance policies to save a lot
of potential pain and money down the road.
As always, should you have
any questions or concerns regarding your situation please feel free to call.
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Timothy W. Tuttle & Associates