Timothy W. Tuttle &
Volume 15 Edition 09
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Major Events This Month:
For September 2019
- Labor Day
- 3rd quarter estimated tax
- Filing deadline for 2018 S
corp. and partnership returns that received extension
- SIMPLE IRA plan
Welcome, fall! Pumpkin spice
lattes arenít the only thing you should be focusing on this season. For
instance, do you know what to do if you receive an IRS letter in the mail? In
this issue, youíll find tips about handling this situation. Thereís also advice
for business owners about selecting the right employee health insurance, plus a
list of ways to help older adults avoid scams. And a few key reasons why you
should never skip the fine print when agreeing to terms and conditions.
Call if you would like to
discuss how this information relates to you. If you know someone who can benefit
from this newsletter, feel free to send it to them.
The IRS Is Not Always Right
A letter in the mailbox with
the IRS as the return address is sure to raise your blood pressure. Here are
some tips for handling the situation if this happens to you:
- Stay calm. Try not
to overreact to the correspondence. They are often in error. This is easier
said than done, but remember the IRS sends out millions of notices each year.
The vast majority of them correct simple oversights or common filing errors.
- Open the envelope.
You would be surprised at how often people are so stressed by receiving a
letter from the IRS that they cannot bear to open the envelope. If you fall
into this category, try to remember that the first step in making the problem
go away is to simply open the correspondence.
- Carefully review the
letter. Understand exactly what the IRS thinks needs to be changed and
determine whether or not you agree with its findings. Unfortunately, the IRS
rarely sends correspondence to correct an oversight in your favor, but its
assessment of your situation is often wrong.
- Respond timely. The
correspondence should be very clear about what action the IRS believes you
should take and within what timeframe. Delays in responses could generate
penalties and additional interest payments.
- Get help. You are
not alone. Getting assistance from someone who deals with this all the time
makes going through the process much smoother.
- Correct the IRS error.
Once the problem is understood, a clearly written response with copies of
documentation will cure most of these IRS correspondence errors. Often the
error is due to the inability of the IRS computers to conduct a simple
reporting match. Pointing the information out on your tax return might be all
it takes to solve the problem.
- Use certified mail.
Any responses to the IRS should be sent via certified mail. This will provide
proof of your timely correspondence. Lost mail can lead to delays, penalties
and additional interest on your tax bill.
- Don't assume it will go
away. Until a definitive confirmation that the problem has been resolved
is received, you need to assume the IRS still thinks you owe the money. If no
correspondence confirming the correction is received, a written follow-up will
Select the Right Health
Insurance for Your Business
If you have employees, you
know how important health insurance is for your benefits package. It also takes
a big bite out of your budget. Selecting the right insurance for your company is
extremely important for employee retention and maintaining your bottom line.
Here are tips to help you find the best health insurance for your business:
- Know the size of the
network. A popular way to lower insurance costs is opting for a smaller
network of health care providers. Known as narrow provider networks, coverage
is limited to a much smaller group of clinics and hospitals than traditional
plans. But while the cost savings are nice, employee satisfaction is likely to
decline as some of them will have to change doctors to stay in network. When
researching insurance options, be sure to compare the network size to industry
- Watch for coverage
limits. Lifetime and annual dollar limits for essential health benefits
were banned in 2014, but limits still appear in other ways. Dental services,
for example, are exempt from the dollar limits and often have annual and
lifetime coverage limits. Another way insurance providers hedge their risk is
by limiting the number of a certain type of visits, like for chiropractic care
or physical therapy.
- Donít forget
prescription coverage. Many health insurance programs donít include full
coverage for prescription drugs, so you may need to add supplemental
insurance. Pay special attention to the coverage differences between brand
name and generic drugs. Also review any deductibles and other limits. Another
type of coverage available is a prescription discount program. Discount plans
simply charge you a subscription cost that allows you to use a contracted
- Understand what isnít
covered. When trying to sell you on their plan, insurance providers do a
good job showing you what they cover. What can be harder to figure out is what
they donít cover. Some of the types of services that may not be covered are
vision care, nursing home care, cosmetic surgery, alternative therapies like
massage therapy or acupuncture, and weight-loss procedures.
- Be prepared to provide
employee data. The process of obtaining a quote for health insurance can
be an overwhelming task. Health insurance companies will want, at a minimum, a
list of employees with some pertinent details like age, sex, coverage details
(self, spouse and other dependents), and home zip code. They will want the
forms filled out by all employees, even those that are opting out of insurance
coverage. If you are working with a benefits broker, they can help you prepare
what will be needed in advance to speed up the process.
Shopping for health insurance
for your business is complicated. Taking the appropriate time to understand each
coverage option and the associated costs will benefit both your business and
your employees' well being.
Help Older Adults Stand Up
The Consumer Financial
Protection Bureau recently reported in financial exploitation cases that older
adults lost an average of $34,200. Unfortunately, these funds are often never
recovered. You can ensure this doesn't happen by learning more about scams and
how to protect yourself. Here are some tips:
- Recognize the scams.
The best way to protect yourself from a scam is to understand what they
look and sound like. Here are a few key elements to look for when identifying
a scam: Did you know? IRS impersonation scams are the No. 1 scam
targeting older adults, according to the Treasury Inspector General for Tax
Administration, with more than 2.4 million Americans targeted.
- You are promised a great
offer or benefits
- You are forced to make
- You are pressured to
provide financial and/or personal information
- You are threatened
- Know why you are a
target. You and other older adults may be targeted because you own a home,
and have retirement savings and exceptional credit ó a treasure trove for con
artists to pillage. Scammers take advantage of trusting older adults because
theyíre less likely to say no and sometimes have cognitive issues that affect
decision-making skills. In other cases, family members and non-related
caregivers may have easier access to their funds, making them more susceptible
- Keep your personal and
financial information safe. Keep your bank information, Social Security
card and other finances stored somewhere secure in your home. Think twice
about what you are sharing on Facebook, and donít give out your Social
Security or account numbers without vetting the person or company asking you
for it. Con artists find useful information on social media sites about your
family members and then pretend to be a relative who asks for money, or they
could directly ask you for sensitive information over the phone or via email.
- Hang up if you feel
uncomfortable. Donít worry about being impolite if someone on the phone is
pressuring you into sharing sensitive information. Hang up. If the call comes
from a company you trust, you can call back and ask for the department that
handles your account to determine if the call is for a legitimate reason.
- Turn down unsolicited
offers. If you receive a call or an in-person visit from someone you donít
know selling you a product or service you didnít request, turn it down or tell
them youíll decide at a later time. If the service or product interests you,
conduct independent research on three suppliers. Proactively contact all three
and determine the best offer. Include a trusted family member in the
decision-making process. Doing this can effectively eliminate most scams.
- Use direct deposit.
You can avoid having your checks stolen when you arrange for your checks to be
directly deposited into your bank account. Ask your bank to show you how.
- Speak up if you think
youíre a scam victim. Thereís no need to feel embarrassed or ashamed if
you think youíve been scammed. Instead, let people know right away.
- Call your bank and/or
credit card companies.
- Reset your account
- Call the police to
report stolen property.
- Submit a consumer
complaint using the FTC consumer Complaint Assistant.
- Report the scam by
calling the United States Senate Special Committee on Aging Fraud Hotline at
- If you suspect elder
abuse is also involved, contact adult protective services.
Why You Need to Read the Fine
According to a recent
Deloitte survey, 91 percent of people agree to terms and conditions without
reading the legal agreement. While reading through the legally complex language
may be slow and painful, itís more important than you think. Here are four
reasons why reading entire legal agreements make sense:
- You miss a major
technicality. Many agreements have an exit penalty that requires you to
pay for a period of time after you terminate an agreement. Others
automatically renew your agreement for a year with exit penalties unless you
tell them in writing you do not wish to renew prior to a key date. In a recent
example of missing a legal technicality, eight teachers claimed the Department
of Education (DOE) mishandled a debt forgiveness program that promised to
reduce student loans after 10 years of public service. In most of the cases,
the teacherís application was denied because, according to the DOE, they were
in the wrong type of loan or payment program.
- You give something
away. With extensive agreement documents (PayPalís user agreement is over
50 pages long!), itís easy for a company to add language that grants itself
rights to something thatís yours. Here are some examples:
- Your identity.
Companies like Facebook grant itself rights to use your likeness and
personal information for targeted advertising unless you catch the clause
and take action.
- Your work. If you
create a presentation using some online tools, the agreement might allow the
site to use the presentation without your permission.
- Your location.
Most navigation software tracks your location even when not using their
application. The same is true with most newer vehicles. The only way to
catch these tracking rights is to read the clause in the agreement.
- You're not comfortable
with the risks. Data breaches are occurring more often and are hard to
prevent. To reduce their exposure to litigation, businesses are continuing to
add language to agreements to protect themselves. Your job, as the consumer,
is to know these risks when signing up for a new service. The more personal
information you provide, the more important it is to understand your legal
recourse if the supplier of your service is hacked.
- You miss something
good. Reading an agreement to the end may pay off. A woman in Georgia won
$10,000 just by reading her travel insurance agreement. The company,
Squaremouth, had a Pays to Read program that awarded a cash prize to the first
person to read the clause with a cash prize. For most people, itís more likely
youíll find additional benefits that come with the agreement or laugh at some
humor injected by the company. Here is an example from social media company,
Tumblr: "You have to be at least 13 years old to use Tumblr. Weíre serious:
itís a hard rule, based on U.S. federal and state legislation. ďBut Iím, like,
12.9 years old!Ē you plead. Nope, sorry. If youíre younger than 13, donít use
Tumblr. Ask your parents for a Playstation 4, or try books."
Consider the Tax BEFORE You
Multiple tax rates
hold the key
In times of market volatility
or when a financial need arises, it is only natural to consider selling some
investments. Understanding the tax consequences is key to making an informed and
planned decision. Here is what you need to know BEFORE you sell:
Investment Tax Rates
Retirement Accounts: 401(k),
403(b), traditional IRA, SEP IRA, SIMPLE IRA
Ordinary income (when funds are
withdrawn from the account)
Determined by the account type
(usually withdrawals after age 59 1/2)
0% up to 37%*
There is not a tax event when an
investment is sold within your account. The tax rate depends on your annual
income at time of fund withdrawal
Retirement Accounts: Roth IRA and Roth 401(k)
No tax on withdrawals
5 years and 59 1/2 years old or older
Earnings are not taxed as long as rules are followed
Short Term Capital Gains (STCG)
1 year or less
0% up to 37%*
For investment sales such as
stocks and bonds
Long-term Capital Gains (LTCG)
More than 1 year
0% up to 20%
For investment sales such as stocks and bonds
When you sell property that has
been depreciated in prior years, part of your sale price may be taxed as a
recapture of this prior period depreciation
A special tax rate applies to gains on the sale of items you collect (like
coins and baseball cards)
Offset benefit: 0% up to 37%
Losses can offset ordinary income
up to $3,000 each year
* a 3.8% net investment
income tax may also apply to these earnings.
As the above tax rate chart
suggests, understanding the tax consequence of selling an investment can be
complicated. Your tax obligation could be subject to no tax or up to 37 percent
plus an additional 3.8 percent for the net investment income tax. Here are some
ideas to consider:
Within retirement accounts
- Generally not taxable.
Selling investments within your retirement accounts is not usually a taxable
event. The potential tax event occurs when you take the funds out of your
account either by a withdrawal or occasionally as a rollover into another
- Follow the account
rules. Each of your retirement accounts has its own set of rules. If you
follow them, you can avoid early withdrawal penalties. Following the holding
period rules within Roth accounts can also make your withdrawals tax-free.
Gains and losses outside of
- Losses. Your losses
are first used to offset any investment gains. Any excess losses can offset
your ordinary income up to $3,000 per year. So the benefit of losses can be
worth next to nothing or up to 37 percent if it offsets ordinary income.
- Non-investment losses.
Unfortunately, individuals may not offset losses on the sale of non-investment
property. So if you sell a car and make money, you need to report the gain. If
you sell the car and lose money, there is no deductible loss unless it is part
of a business transaction.
- Long-term better than
short-term. Holding an investment for longer than one year is key if you
want to minimize your tax obligation. Short-term gains are taxed the same as
Remember your investment
decisions can often have quite different tax consequences. The best suggestion
is to seek advice BEFORE you sell.
How to Handle Negative Reviews
With all the rating services
on sites like Amazon and Yelp, it's not a question of whether your business will
receive a negative review, only when. Every business or service must know how to
handle these negative reviews. Here are some hints:
The best defense is a
You don't have to address
negative reviews if you never have them in the first place. Proactively identify
possible negative experiences and encourage customers to respond directly to you
to resolve their issues. Here are some suggestions:
- Manage expectations up
front. If you communicate that it takes two weeks to complete something, make
sure it's done in less time.
- Actively communicate your
contact information at the time of ordering to make it easy to contact you
directly to answer questions and fix problems.
- Contact customers within
24 hours after a sale or service to see if they have questions or concerns.
FIRST fix the problem
When you get a negative
review, try to identify the customer and contact them directly. Then work with
them to solve their problem. If a solution is not possible, be willing to cancel
their service or refund their money. A disgruntled customer that hasn't been
hurt financially quickly becomes a toothless monster. Once this is done, try to
have the customer remove their review if they are satisfied. OR even better, try
to get them to rave about how you solved their problem!
Know your dissatisfied
Conduct research on the
customer. Are they habitual complainers or bullies? The current public feedback
forums have created many of these types. On the other hand, people easily get
frustrated with poor service and are simply at their witís end. It's important
to know the difference.
Problems are opportunities
Inside every negative review
is an opportunity to be better at what you do. Even with the review bullies,
there is an element of truth to most reviews. Try to get past the emotional
impact of the negative review and think of it as a gift to make your service
better than everyone elseís.
Writing the response: FREE
Youíve fixed the problem.
Youíve researched the customer. Youíve looked for opportunities to be better at
what you do. Now you are ready to publicly respond to the negative review. But ó
and this is important ó you are not responding to the complainer. You are
responding to future readers of the complaint! The formula of a great response
- Acknowledge the customerís
- Restate the problem.
- Tell EVERYONE how you
solved the problem.
- Encourage the complainer
to contact you directly in the future so you can handle their issue more
effectively than through a public forum.
- Tone is critical. The
reviewer will likely be angry and frustrated. Use this to your advantage. Your
tone must sound reasonable with a rational approach. When contrasting the two
styles, readers will automatically see your business in a positive light, even
when you make a mistake.
- DO NOT:
- Act defensive
- Act like a victim by
- Talk down to the
- Make the customer appear
or seem stupid
- Tell everyone how
irrational this guy is ... let readers figure this out on their own
- Get into a back and
Time is of the essence
Try to complete your contact
and response within 24 hours. This speed will impress all future readers. A lot
must be done to reach this goal, but if you assign someone to monitor review
services for you, and they are empowered to solve problems, you can accomplish
Todayís review systems give
entirely too much power to a few complainers. Your goal should be to use these
systems to your advantage to build your brand and find new buyers.
As always, should you have
any questions or concerns regarding your tax situation please feel free to call.
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Timothy W. Tuttle & Associates