Timothy W. Tuttle & Associates
Volume 1 Edition 12 Please email comments to email@example.com Nov. 2005
Major Tax Deadlines
For November 2005
During November: It's wise to estimate your 2005 income tax liability and review your options for minimizing your 2005 taxes. Call us if you would like to schedule a tax-planning session.
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, or if you owe $2,500 or less for the calendar quarter.
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.
For more information on tax deadlines that
apply to your business, contact our office.
What's New: IRS announces changes
* New form for vehicle contributions. The IRS has created Form 1098-C, a new form that is to be used by charities to report taxpayer contributions of vehicles, boats, and airplanes. Copy B or C of the form can be used to provide the taxpayer with substantiation of his donation to the charity.
* IRS interest rates increase. For the
final quarter of 2005, IRS interest rates will be 1% higher than third-quarter
rates. Interest charged on individual underpayments of tax and paid by the IRS
on tax overpayments will be 7%. Interest on corporate underpayments will also be
7%, though underpayments in excess of $100,000 will be charged 9%. The interest
rate on corporate overpayments is 6%; if the overpayment exceeds $10,000, the
interest rate paid is 4.5%.
Consider the tax issues in caring for elderly parents
As the population in the U.S. continues to age, more and more people will find themselves caring for their parents. Here are some of the tax breaks that caregivers should consider.
If you provide more than half of your parent’s support, you may be able to claim your parent as a dependent on your tax return. To be eligible, your parent can’t earn more than $3,200 (in 2005), excluding their nontaxable social security and disability income.
What if you and your siblings all pitch in to support a parent? Anyone who contributes at least 10% of the total support can be the one to claim the $3,200 exemption if all of you agree in a multiple support agreement.
Even if a parent’s income exceeds $3,200 this year, you can still deduct the medical expenses paid on the parent’s behalf, as long as you provide more than half of his or her support. Don’t forget to include health and long-term care insurance, nursing care, and certain medical related home improvements.
If you hire someone to take care of your parent while you work, you might qualify for a tax credit. Your parent must be physically or mentally incapable of caring for himself.
Unmarried individuals who support a parent can file their tax returns as “head of household.” To qualify, your parent doesn’t need to live with you. Instead, as long as you pay more than half of the cost of maintaining your parent’s main home, including a rest home or nursing facility, you qualify for this preferential tax treatment.
For more information about the tax issues
affecting caregivers and their parents, please give us a call.
New Business: New per diem rates issued
New per diem rates have been released, effective for business travel on or after October 1, 2005.
The new rate for high-cost localities increased
from $204 per day to $226, and the rate for all other U.S. localities increased
from $129 to $141. The meal and incidental expense rates increased to $58 for
high-cost areas and to $45 for other areas.
Be prepared: How to lessen the blow of a disaster
When recent hurricanes slammed into the Gulf Coast, many families and businesses found themselves woefully unprepared. Apart from the tragic loss of life, the hurricanes’ impact on individuals was also financial: lost personal and real property, lost records, lost funds. In addition, businesses couldn’t gain access to administrative offices and manufacturing facilities, inventories, computer files, or customer records.
How can you financially prepare your family or business for disaster? Here are some tips.
* Establish an emergency plan. Use the plan to evaluate areas of risk and prioritize business operations. What are the key functions that must continue to take place for the business to operate without interruption? The plan should also describe recovery strategies that will allow the business to operate if disaster strikes. Such strategies should address loss of premises, software and hardware, communications, machinery, and vital information. Finally, the plan should be periodically tested and reviewed. This could involve simulating disaster situations and talking with employees about how the plan should be implemented.
* Backup your day-to-day operational data. This can be done via computer tapes that are taken offsite, nightly backups sent to an Internet company, real-time backups while employees work, or any combination of these. The goal is to make sure your vital business information is protected and secure.
* Maintain commercial insurance. Visit your insurance agent periodically to ensure that your business has adequate coverage and can get needed funds in the event of disaster.
* Keep a small amount of cash on hand. If a disaster strikes, ATM machines may not be usable and businesses may not accept credit cards, so you’ll want to have enough currency to purchase necessities for a few days.
* Keep important documents in a safe and easily accessible place. Consider keeping important documents - including legal papers, insurance policies, birth certificates, and vehicle titles - in a small fireproof safe near your home’s most likely exit.
* Keep an up-to-date inventory of your household possessions. You can easily create such an inventory by walking through your house with a video camera and describing each item that comes into view. Such an inventory record will prove invaluable for insurance recovery.
* Keep backups of important documents and records. These could be paper copies or scanned electronic copies and should include financial data files. These records should be kept away from your home in a safety deposit box or other secure location.
As recent events have shown, advance
preparation for disasters can make the difference between inconvenience and
financial failure. If you need help preparing a disaster plan, give us a call.
What's New: Survey shows college costs increasing
The annual survey of college costs conducted by the College Board shows tuition and fees increased in the last year at twice the rate of inflation.
Tuition and fees at four-year public universities increased 7.1%, putting the average cost now at $5,491. With room and board added in, the cost of attending a public university averages $12,127 for one year.
Education at a private school averages $21,235
for one year’s tuition and fees, a 5.9% increase over the previous year. Room
and board brings the private school average cost to an annual $29,026.
Don’t put all your eggs in one basket
Even if you’re not an investment expert, you’re probably familiar with the term “diversification.” It means not putting all your eggs in one basket. Diversification calls for choosing the right mix of investments to keep a balance between risk and return.
* Choose the right investment mix. While there is no single asset mix appropriate for all investors, most people should have some combination of stocks, bonds, and cash in their portfolio. The right investment mix for you depends on your age, income, family responsibilities, and your tolerance for risk.
* Take a look at your mutual funds. Many mutual fund investors believe that they are well-diversified, even though they aren’t. For example, it’s possible that different mutual funds own many of the same stocks or similar stocks in the same industries. Whether you’re thinking about buying a fund for the first time or you already own several of them, it pays to do a little digging. All mutual funds are required to publish a list of their complete holdings at least twice a year. Get the most recent portfolio list for your funds and compare them for overlapping investments.
* Consider the big picture. When you review your portfolio for diversity, consider the investments both inside and outside your retirement accounts. They are parts of the same picture. Doubling up on the same investment in both types of accounts may decrease your diversification and increase your risk.
* Keep an eye on your 401(k). As a general rule, you should avoid being too heavily invested in any one company’s stock, including that of the company for which you work. If your employer matches your 401(k) contribution with company stock, consider other investments for your own 401(k) contributions and for the money you invest outside your 401(k) plan. When you’re allowed to do so, consider selling enough company stock to rebalance your 401(k).
Don’t risk your financial future by putting
too many eggs in one basket. If we can help evaluate your situation, give us
Take a break
Pay taxes with a smile
“It would be nice if we could all pay our taxes
with a smile, but normally cash is required.”
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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