Online Advisor
Timothy W. Tuttle &
Associates
Volume 16
Edition 11 Please email comments to newsletter@tuttlefirm.com
Nov 2019
Major Events This Month:
For November
2019
This month:
November 11 - Veterans Day
November 28 - Thanksgiving
November 29 - Black Friday (shopping deals
day)
Reminder - Conduct year-end tax and
financial planning
2020 is coming quick — are you prepared?
Take stock now and learn about the year-end moves that'll help you save. Plus,
consider how the 2020 Social Security changes will affect your plans. And make
sure you're hitting the employment tax deadlines.
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.
Save
Money with These Year-End Ideas
There's still time to reduce your potential tax
obligation and save money this year (and next). Here are some ideas to
consider:
- Estimate your
2019 and 2020 taxable income. With these estimates you can determine
which year receives the greatest benefit from a reduction in income. By
understanding what the tax rate will be for your next dollar earned, you
can understand the tax benefit of reducing income this year AND next year.
- Fund
tax-deferred retirement accounts. An easy way to reduce your taxable
income is to fully fund retirement accounts that have tax-deferred status.
The most common accounts are 401(k)s, 403(b)s and various IRAs
(traditional, SEP and SIMPLE).
- Take your
required minimum distributions (RMDs). If you are 70½ or older, you need to
take required RMDs from your retirement accounts by Dec. 31. Don't forget
to make all RMDs because the fines are hefty if you don't — 50 percent of
the amount you should have withdrawn.
Keep in mind, even if you don't have RMDs yet, removing a planned amount
from your retirement accounts each year may be more tax efficient than
waiting until you are required to do so.
- Manage your
gains and losses. Rebalance your investment portfolio and take
any final investment gains and losses. When you have more losses than
gains, up to $3,000 can be used to reduce your ordinary income. With
careful planning, you can take advantage of this loss amount each year.
- Finalize your
gift-giving strategy. Each year you may gift up to $15,000 without
tax reporting consequences to as many individuals as you choose. Consider
any gift-giving you wish to make up to the annual limit. This could
include gifts of cash or property, and investments.
- Donate to
charities. Consider making end-of-year donations to eligible charities.
Donations of property in good or better condition and your charitable
mileage are also deductible. Receiving proper documentation that
acknowledges your contributions is important to ensure you obtain the full
deduction. Have a plan by knowing your total deductions for the year to
help you decide how much and when to donate. Pulling some donations
planned for 2020 into 2019 may be a good strategy.
- Review your
automated billing transactions. This is a good time to identify what
automatic monthly expenses should be reviewed for reduction or elimination.
You may also discover billing for services you thought were canceled. This
specific review often catches errors that a simple account reconciliation
may be missing.
- Organize records
now. Start collecting and organizing your tax records to avoid the
scramble come tax season.
- Develop your own
list. Use these ideas as a jumping off point to create your own list of
annual review items. It might also include reviewing college savings
accounts, beneficiaries, insurance needs, wills, and going through an
aging parent's financial accounts.
Questions about the most effective money-saving moves
for your situation? Call today.
2020
Social Security Benefits
Take a look at how Social Security benefits have
changed. Use this infographic to help you plan for the coming year, and to
learn a little more about retirement benefits and taxes.
Your 2020 Social Security Benefits: Find out how your benefits have changed
Estimated average Social Security retirement benefits
starting January 2020
- All retired
workers in 2019 $1,479/mo
- All retired
workers in 2020 $1,503/mo
Did you know? You can increase your Social
Security retirement benefits by 5-8% when you delay applying until you’re age
70. 1.6% cost of living adjustment for Social Security retirement benefits and
SSI payments begins with the December 2019 benefits (payable in January 2020). The
2020 maximum Social Security retirement benefits a worker retiring at full retirement
age is $3,011/mo.
Did you know…
87% of Baby Boomers are expecting Social Security to be
a source of their retirement income. 1-3 people expect it to be their
primary source of income. Social Security pays benefits to more than 67 million
people including retirees, children and surviving spouses.
2020 Social Security and Medicare tax rates
If you work for someone else…
- your employer
pays 7.65%
- you pay 7.65%
If you’re self-employed…
Note: The above tax rates are a combination of 6.2%
Social Security and 1.45% for Medicare. There is also 0.9% Medicare wages
surtax for those with wages above $200,000 single ($250,000 joint filers) that
is not reflected in these figures.
|
Maximum
amount you can pay in Social Security taxes
|
|
2019:
$8,239.80
|
2020:
$8,537.40
|
165+ million people work and pay Social Security taxes.
Social Security has provided financial protection for
Americans since 1935.
|
Maximum
earnings amount Social Security will tax at 6.2%
|
|
2019:
$132,900
|
2020:
$137,700
|
How does Social Security work?
- When you work,
you pay taxes into Social Security.
- The Social
Security Administration used your tax money to pay benefits to people
right now.
- Any unused money
goes to the Social Security trust funds.
- Later on when you retire, you receive benefits.
Social Security payments explained
SS Social Security retirement benefits are for people
who have "paid into" the Social Security system through taxable
income.
SSD or SSDI Social Security Disability (SSD or SSDI)
benefits are for people who have disabilities but have "paid into"
the Social Security system through taxable income.
SSI Supplemental Security Income (SSI) benefits are for
adults and children who have disabilities, plus limited income and resources.
|
Maximum SSI payments
|
2019
|
2020
|
|
Individual
|
$771/mo
|
$783/mo
|
|
Couple
|
$1,157/mo
|
$1,175/mo
|
Here’s how to qualify for your
retirement benefits
When you work and pay Social Security taxes, you earn
“credits” toward Social Security benefits. The number of credits you need to
get retirement benefits depends on when you were born. If you were born in
1929 or later, you need 40 credits (10 years of work) to receive Social
Security retirement benefits. The earnings needed for
a credit in 2020 is $1,410. 4 credits maximum per year.
Did you know you can check your benefits status before
you retire?
You can check online by creating a “my Social Security”
account on the SSA website. If you don’t have an account, you’ll be mailed a
paper Social Security statement 3 months before your 61st birthday. It shows
your year-by-year earnings, and estimates of retirement, survivors and
disability benefits you and your family may be able to receive now and in the
future. If it doesn’t show earnings from a state or local government employer,
contact them. The work may not have been covered either by a Section 218
agreement or by federal law.
Sources:
SSA.gov, 17th Annual Retirement Survey, Transamerica Center for Retirement
Studies®
Reminder:
Major Employment Tax Deadlines
Handling employment taxes can be complicated,
especially when you’re required to file important tax documents throughout the
year. Here's a list of key forms and deadline dates to help keep you on track.
Form 941 — Employer's quarterly federal tax return
This form is used to report income tax withheld from employees' pay and both
the employer's and employees' share of Social Security and Medicare taxes.
Employers generally must deposit Form 941 payroll 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 payroll tax liability is $1,000 or less.
- Monthly depositors are
required to deposit payroll taxes accumulated within a calendar month by
the 15th of the following month.
- Semiweekly
depositors generally must deposit payroll taxes on Wednesdays or
Fridays, depending on when wages are paid.
Return filing deadlines:
- Jan. 31, 2020 – Due date for filing
Form 941 for the fourth quarter of 2019. If you deposited your taxes in
full and on time, you have until Feb. 10, 2020, to file this return.
- April 30, 2020 – Due date for filing
Form 941 for the first quarter. If you deposited your taxes in full and on
time, you have until May 11, 2020, to file this return.
- July 31, 2020 – Due date for filing
Form 941 for the second quarter. If you deposited your taxes in full and
on time, you have until Aug. 10, 2020, to file this return.
- Nov. 1, 2020 – Due date for filing
Form 941 for the third quarter. If you deposited your taxes in full and on
time, you have until Nov. 10 to file this return.
Form 940 — Employer's annual federal unemployment tax
return (FUTA)
This return is due annually. However, FUTA tax must generally be deposited once
a quarter if the accumulated tax exceeds $500.
- Jan. 31, 2020 – Due date for filing
2019 Form 940. If you deposited your taxes in full and on time, you have
until Feb. 10, 2020, to file this return. This day is also the deadline
for depositing federal unemployment tax for October, November and December
2019.
- April 30, 2020 – Deadline for depositing
federal unemployment tax for January, February and March 2020.
- July 31, 2020 – Deadline for depositing
federal unemployment tax for April, May and June 2020.
- Nov. 1, 2020 – Deadline for depositing
federal unemployment tax for July, August and September 2020.
Form W-2 — Wage and tax statement
Employers are required to send this document to each employee and the IRS at
the end of the year. It reports employee annual wages and taxes withheld from
paychecks.
- Jan. 31, 2020 – Due date for
employers to provide 2019 Forms W-2 to employees, and for employers to
send copies of 2019 W-2s to the Social Security Administration, whether
filing electronically or with paper forms.
Tax deadline extensions for disaster areas
For taxpayers living in designated disaster areas, the IRS extends certain
filing and tax payment dates. Taxpayers living in the affected areas (and those
whose tax professionals are located in those areas) have relief from penalties
for filing under the new extended dates. These filing and payment extensions
are also available to some relief workers.
Visit the IRS's Disaster
Assistance and Emergency Relief for Individuals and Businesses page
for up-to-date information.
Please call for help with specific details about your filing requirements and
for more information on tax deadlines that apply to your business.
The
Power of Cultivating Gratitude
Tips on
how to be thankful
It costs nothing to say thank you. Yet cultivating
gratitude in your life may be one of the most rewarding moves you can make. Not
only does it invoke warm fuzzies in everyone involved, expressing your
appreciation may actually improve your health and well-being.
A landmark study by gratitude researcher Robert A.
Emmons has shown that gratitude can reduce physical illness symptoms and toxic
emotions. It can even help you sleep better and longer, according to a study
published in Applied Psychology: Health and Well-Being.
So
what are some ways you can make gratitude part of your everyday life? Here are
a few tips to help you get started:
- Write it out. Write out what
you’re thankful for in your life. This may mean making a nightly habit of
writing in a journal or jotting down a message to a loved one and giving
it to them. You could also make some sticky note reminders of what you’re
grateful for and hang them on your mirror to read each morning.
- Share a good
memory. Reminiscing often stirs up feelings of gratitude. For instance, think
about the time you first met a close friend in grade school. Contact them
and tell them how grateful you are that it happened. Send a photo of that
family vacation when you all shared a common experience like learning to
water ski. When you think about it, you will quickly discover happy
memories to share with loved ones.
- Offer your
service. Show your gratitude through your actions. If you appreciate your
community, join a group to clean up the park and streets. Provide a
positive online review for your favorite local café. Or volunteer at a
Veterans Affairs hospital.
- Lend an ear. Some of the
most meaningful moments involve simply being heard. Return the favor. If
your sister is usually the one who lets you ramble on about work
grievances and family drama, it’s time to give her a turn. Let her know
you’re there and ready to listen. Maybe you avoid your chatty (albeit
helpful) coworker. When you see them next, give them 5 minutes of your
time.
- Pay it
forward. Did your neighbor share a gutter-cleaning hack with you? Next time
you see someone on your street cleaning their gutters, offer to lend a
hand. See a mom digging for spare change at a check out register? Pay it
for her. Let the appreciation of your good deed change someone else’s
outlook for the day. When they offer to pay you back, just tell them to
pay it forward.
There are opportunities to cultivate gratitude all
around us. Refocusing on what you appreciate on regular basis can help you live
a healthier, more satisfying life.
Tips to
Improve Your Credit Score
Your credit score is more important than ever. Once
viewed as a necessity when applying for a mortgage, it now factors into renting
an apartment, paying for utilities, buying a cell phone, and determining the
amount you pay for home and auto insurance! Here are tips to help you improve
and maintain a good credit score:
- Know which bills
must be paid on time. One bill that goes more than 30 days past its
due date can drop your credit score 40 points and can stay on your credit
report for seven years! If you are in a cash pinch and can’t pay all your
bills on time, prioritize mortgage, car loan and credit card bills that
report late payments to credit agencies. Utilities and medical
organizations generally don’t report a delinquency until your account is
sent to a collection agency.
- Watch revolving
credit balances. Each credit card has a credit ceiling. This credit limit is
compared to how much of it you use. The higher amount of the credit limit
you use, the lower your credit score. Even if you pay the bill in full
each month! Ideally, try to keep the spending balance less than 20 percent
of your credit limit. If your routine spending is higher than this,
consider requesting a higher line of credit, but do not use it. The sole purpose
of this request is to create a higher credit score.
- Pay off debt. Current debt
balances account for as much as 30 percent of your credit score. When you
consider this and the high interest rates that come with debt, it’s
important to get those balances to zero as soon as possible. Your
debt-to-income ratio (total debt divided by your total income) doesn’t
directly affect your credit score, but it’s a key metric used by
underwriters when determining loan eligibility and interest rates.
- Add new debt only
when necessary. Adding new debt can reduce your credit score
in a few different ways: your debt profile increases, your debt-to-income
ratio rises, and even the credit inquiry itself can take a chunk out of
your score. If you have a relatively short credit history, too many credit inquires will affect you even more.
- Consider keeping
dormant credit cards open. Have an open
credit card that you’ve paid off or have never used? Your instinct might
tell you to close the account, but keeping it
open may actually help your credit score. An active credit card in good
standing for a long period of time helps your credit score. Plus, the
additional unused credit limit on your books lowers the ratio of spending
to total credit limit and improves your score.
- Actively monitor
your credit reports. You can get a free credit report from
each reporting agency every 12 months on the Annual Credit
Report website. These reports tell you everything you need to know
about items impacting your credit score. Reviewing these items on a
routine basis is an important exercise to ensure a correct report. If you
find a mistake, you can work to get it removed and improve your score.
Your credit score is too important to ignore. Taking an
active role by implementing some of these smart tactics is a great way to
improve your score and overall credit health.
6 Ways
to Cut Your Everyday Expenses
Many people dream of making more money,
but cutting expenses can have the same effect. Identify unnecessary
expenses with these six money-saving ideas and help free up some cash:
- Eliminate late
fees. Most late fees are the result of being too busy, traveling or
simply forgetting. Fortunately, late fees are almost entirely avoidable if
you have a plan. A lot of people only think of credit card late fees, but
they can also show up in many places including utility bills, subscriptions
and registration fees. Take a look at your bills and identify the kinds of
charges you're getting. Scheduling automatic payments should help you
avoid late fees going forward. And if you get one, call and try to get it
canceled. It just might work!
- Cancel
unnecessary subscriptions. Subscriptions are popping up
everywhere. They include everything from weekly shaving products to video
and music streaming services. With so many options, it’s easy to double up
on services or forget to cancel one that you were planning to use for just
a short time. Review all your monthly subscriptions and cancel the ones
that are no longer providing value.
- Minimize
interest expense. Paying for day-to-day expenses with a credit
card to rack up points to use for airfare or other perks is a great cash
management tool, but the interest that builds up if you don’t pay it off
every month negates the perks and creates an extra expense. If you find
yourself in a situation with multiple credit card balances, consider a
consolidation loan with a lower interest rate.
- Be selective
with protection plans. With virtually every purchase, the store
or website offers to sell you insurance in the form of a protection plan.
And for good reason — they’re profitable to them and not you! Insurance
should be reserved for things you can’t live without like your health and
your home. Pass on the protection plan for your toaster.
- Review your
deductibles. A deductible is a set amount you pay before
your insurance kicks in to cover the cost of a claim. The higher the
deductible, the lower your monthly premium. If you have enough in savings
to cover a higher deductible when disaster strikes, raising the deductible
may save you some money on a month-to-month basis.
- Try a little
DIY. If you own a house, you know it’s just a matter of time before
something breaks or stops working. When it happens, don’t instantly reach
for the phone to call a repairman. Repair videos are in endless supply
online. Often, an easy fix will do the job. Simple fixes can lead to big
savings, especially since repair services charge minimums and fuel
surcharges.
While
some ideas take a little more analysis to understand the true benefits, many
are just the result of paying attention. Taking a proactive approach can
provide a big boost to your budget.
As
always, should you have any questions or concerns regarding your tax 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