Timothy W. Tuttle &
Edition 11 †††††† Please
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Major Events This Month:
†- Veterans Day
†- Black Friday
†- Conduct year-end
tax and financial planning
Time is running out to minimize your tax obligation
before the end of the year! This monthís newsletter features several tax moves
to consider making by December 31st to lessen the amount of money you owe the
Review the Social Security benefits and their recent
changes, plus learn about the greatest, unreported theft in America - and you
are a victim! All this and ideas for your business are outlined in this month's
Please call if you would like to discuss how this
information could impact your situation. If you know someone who could benefit
from this newsletter, feel free to send it to them.
Moves to Make Before Year-End
There are always moves you can make to reduce your
taxable income. Some of these tax-saving moves, however, must be completed by
December 31. Here are several to consider:
loss harvesting. If you own stock in a taxable account
that is not in a tax-deferred retirement plan, you can sell your
underperforming stocks by December 31 and use these losses to reduce any
taxable capital gains. If your net capital losses exceed your gains, you
can even net up to $3,000 against other income such as wages. Losses over
$3,000 can be used in future years. Just be sure you do not repurchase the
same stock within 30 days, or the loss will be deferred.
a peek at your estimated 2022 income. If you have
appreciated assets that you plan on selling in the near future, estimate
your 2022 taxable income and compare it to your 2021 taxable income. If
your 2022 income looks like it may be significantly higher than 2021, you
may be able to sell your appreciated assets in 2021 to take advantage of a
lower tax rate. The opposite also holds true. If your estimated 2022
taxable income looks like it may be significantly lower than your 2021 taxable
income, lower tax rates may apply if you wait to sell your assets in 2022.
out pre-tax retirement savings. The deadline to
contribute to a 401(k) plan and be able to reduce your taxable income on
your 2021 tax return is December 31. See if you can earmark a little more
money from each of your paychecks through the end of the year to transfer
into your retirement savings accounts. For 2021, you can contribute up to
$19,500 to a 401(k), plus another $6,500 if you're age 50 or older. Even
better, you have until April 18, 2022, to contribute to a traditional IRA
and be able to reduce your taxable income on your 2021 tax return.
cash charitable contributions. If you're like 90% of
all taxpayers, you get no tax benefit from charitable contributions because
you don't itemize your personal deductions. On your 2021 tax return,
however, you may contribute up to $300 in cash to a qualified charity and
deduct the amount whether or not you itemize your deductions. Married
taxpayers who file jointly may contribute $600. You can make your
contribution by check, credit card, or debit card. Remember that this
above-the-line deduction is for cash contributions only. It does not apply
to non-cash contributions.
deductions so you can itemize. Are your personal
deductions near the amount of the standard deduction for 2021: $12,550 for
singles, $18,800 for head of household and $25,100 for married filing
jointly? If so, consider bunching your personal deductions into 2021 so
you can itemize this year. For most, the easiest way is to bunch two years
of charitable contributions into a single year. These can include gifts of
appreciated stock where you get to deduct the fair market value without
paying capital gains tax.
Security Announces 2022 Adjustments
YOUR 2022 SOCIAL SECURITY
benefits have changed
AVERAGE RETIREMENT BENEFITS
Starting January 2022
workers in 2021: $1,565/mo
workers in 2022: $1,657/mo
2022 maximum Social Security retirement benefits a worker retiring at full
retirement age: $3,345/mo
DID YOU KNOW ...
of U.S. citizens over age 60 either receive Social
Security or will receive it.
in 4 seniors expect it to be their primary source of
Security pays benefits to more than 70 million people including
retirees, children and surviving spouses.
2022 SOCIAL SECURITY AND MEDICARE TAX RATES
If you work for someone else...
employer pays 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 may pay in Social Security taxes
Maximum earnings amount Social Security will tax at
million people work and pay Social Security
- Social Security
has provided financial protection for Americans since 1935
SOCIAL SECURITY PAYMENTS EXPLAINED
Security retirement benefits are for people who
have paid into the Social Security system through taxable income.
Security Disability (SSD or SSDI) benefits are for
people who have disabilities but have paid into the Social Security the
system through taxable income.
Security Income benefits are for adults and children
who have disabilities, plus limited income and resources.
MAXIMUM SSI PAYMENTS
HOW DOES SOCIAL SECURITY WORK?
- When you work,
you pay taxes into Social Security.
- The Social
Security Administration uses your tax money to pay benefits to people
- Any unused money
goes into Social Security trust funds and is borrowed by the government to
pay for other programs.
- Later on when
you retire, you receive benefits.
HEREíS HOW YOU QUALIFY FOR RETIREMENT
When you work and pay Social Security taxes, you earn
credits toward benefits. The number of credits you need to earn retirement
benefits depends on when you were born.
you were born in 1929 or later, you need 40 credits (10
years of work) to receive retirement benefits
earnings needed to a credit in 2022 is $1,510
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 donít have an account, youíll 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
- If it doesnít
show earnings from a state or local government employer, contact them. The
work may not be covered within Social Security.
Greatest Theft in America
And you are a victim!
For generations weíve been taught by our parents to save.
Save for a bicycle. Save for college. Save for retirement. And then, in
retirement, you could count on this savings to earn interest. Millions of
Americans used Certificates of Deposits (CDs) and low risk bonds to ensure they
could retire without worry. Think about this...$50,000 in CDs in 1990 earned 8%
interest, or $4,164, each year. And a $10,000 balance in your savings account
earned 5.5% interest, or $565, each year.
Today that $50,000 earns 0.6% interest, or $301. The
other $3,863 is no longer yours! And your bank now only needs $50 to pay you
for the use of the $10,000 in your savings account. Where did that money go?
Who took it and why arenít you upset about it?
Your interest income now benefits someone
The simple truth is your savings interest is being given
to those borrowing money in the form of lower interest rates on their loans.
You lose your interest income and pave the way so someone can buy a home for
lower interest, a business can buy equipment at lower financing rates or so the
government can pay low interest rates on their spending in excess of their tax
In fact, the governmentís spending is the elephant in the
room. The government cannot afford to pay high interest on their excess
spending, so there is tremendous pressure to keep interest rates on these
borrowings as low as possible. This policy reverberates through the banks who
price their lending on low fed rates.
The message being given
The inadvertent message to savers? Stop saving! Yes, we
are taking your money and lending it to someone else. But since our loan rates
are so low, we cannot pay you much of anything for the use of your money. So
stop saving and go into debt. The interest is so low!
Yes, you are a victim of interest income theft. It is
being given to borrowers, especially the government. Here are some ideas to
reduce the cost of being a victim of this theft:
the debt urge. While the message is screaming to
borrow money and go into debt, only do so if it makes financial sense.
for returns. While savings rates are all below the
rate of inflation, you still need to work to find the best rate for your
money. Fight the urge to be passive with your savings, and constantly shop
for better rates. Also look to lower your own debt costs, so explore
refinancing your mortgage or other loans.
a direct lender. There are now services that let you
lend money directly to borrowers. If exploring this route, do your homework
and diversify as much as possible as there is additional risk to this
other uses for your money. The value of your cash
is actually losing money against inflation. Consider moving some of your
savings into assets that appreciate in value. This could be a home, a
business, or yourself!
vocal. It is one thing to spend more than you
earn or receive. But it is quite another to overspend with no regard of
the impact. So lend your voice to bring back some common sense to the
governmentís spending habits. Money does not grow on trees. It needs to
come from someplace. That place, however, should not be from savers.
Source: Bankrate historic rates for CDís and
deposit account in 1990 and in August 2021, as well as The Buffalo News, April
Tax Planning Ideas for Your Business
Here are some ideas to lower your business taxes, get organized,
and to prepare for filing your 2021 tax return.
As 2021 winds down, here are some ideas to consider in
order to help manage your small business and prepare for filing your upcoming
all vendors who require a 1099-MISC and a 1099-NEC. Obtain tax
identification numbers (TIN) for each of these vendors.
if you qualify for the Paycheck Protection Program (PPP) safe harbor
threshold that allows you to deduct certain 2020 expenses on your 2021 tax
accelerating income or deferring earnings, based on profit projections.
179, or bonus depreciation expensing versus traditional depreciation, is a
great planning tool. If using Section 179, the qualified assets must be
placed in service prior to year-end.
meals are 100% deductible in 2021 if certain qualifications are met.
Retain the necessary receipts and documentation that note when the meal
took place, who attended and the business purpose of the meal on each
any last-minute deductible charitable giving including long-term capital
your inventory for proper counts and remove obsolete or worthless
products. Keep track of the obsolete and worthless amounts for a potential
up separate business bank accounts. Co-mingling business and personal
expenses in one account is not recommended.
expense reports. Having expense reports with supporting invoices will help
substantiate your tax deductions in the event of an audit.
your records by major categories of income, expenses and fixed assets
purchased to make tax return filing easier.
your receivables. Focus on collection activities and review your
uncollectable accounts for possible write-offs.
your 2021 fourth-quarter estimated tax payment by January 18, 2022.
Products (and Money!) Are Big Business
How to protect yourself from modern-day counterfeiters
Counterfeiters are getting better at tricking you. They
do this by using fake images, creating realistic websites and promising low
prices. According to the Organization for Economic Co-operation and Development
(OECD), fraudsters hold an estimated 3.3% of world trade, up from 2.5% in 2016.
Here are some commonly counterfeited items and what you need to know to protect
Commonly Counterfeited Items
The U.S. Treasury estimates that there are nearly $9 million of
counterfeit bills in circulation. While creating an excellent counterfeit
$100 bill would seem difficult, criminals can trick you if you arenít
& Clothing. Manufacturing a low-quality knock-off
and slapping a brand name label on a shirt or a pair of shoes is a tale as
old as time. Itís much harder to spot a fake through online pictures and
videos than seeing and touching it in person. With online purchases continuing
to increase, itís even easier to pull off this deception.
Trading cards and collecting memorabilia are gaining in popularity over
the past few years. People are willing to spend top dollar for a mint
condition Fernando Tatis, Jr. rookie card or boxing gloves autographed by
Mohammed Ali. Where thereís money, counterfeiters are looking to take
As technology continues to evolve, so does the ease of assembling
electronics. Using cheap components and labor, companies can slap together
their version of the real thing. This process cuts corners and sometimes
skirts safety procedures that can lead to knock-off electronic products
that can pose a hazard to your health.
How to Protect Yourself
the real thing. The best way to spot a fake is to know
the real thing inside and out. In the case of currency, the new $100 bills
have plenty of watermarks, different textures and a security ribbon that
make it difficult to fake. For products, do your research to know the
characteristics of the legitimate item before you buy. Clues often come
from irregularities in logos, colors and packaging.
from trusted sources. Shopping around for the lowest
price is a wise practice. Automatically going with the cheapest option is
not. If your purchase is important, stick to reputable vendors.
research, research. The more you know the product, the
less likely you will be tricked. Look at products from local stores and
read through reviews of online vendors. Conduct research on scams and
common tricks used by counterfeiters. Be wary of reviews from the website
you are thinking about making the purchase from. Instead, conduct a web
search of both the product and the vendor to see what people have to say.
skeptical. When conducting your research, have the
mindset that the product and company are fake until proven legitimate. If
it seems too good to be true, it probably is.
Power of Comparative Financial Statements
Your business has a story to tell. And one of the ways to
hear your businessís story is by reading through comparative financial
The importance of comparative financial
An up-to-date balance sheet, income statement and
statement of cash flows are essential financial reports you should consistently
analyze. But these financial statements by themselves donít tell the whole
story about your business. Consider the following:
XYZ: The most current balance sheet shows $1 million in
liquid assets with zero liabilities.
ABC: The most current income statement has a net profit
margin of 35%.
123: The statement of cash flows shows that the company
has consistently brought in more cash than it has spent over the past
And hereís the rest of the story:
XYZ: Liquid assets decreased from $5 million to $1
million over the past 12 months.
ABC: Net profit margin is typically around 20% for this
company. However, a recent round of layoffs temporarily pushed total
salaries and wages lower, while pushing the net profit margin much higher.
123: There has been a steady decline in positive cash
flow over the past three years.
These examples show the importance of analyzing your
financial statements in comparison with something else. Reading through the
first list of bullet points only tells part of the story.
What you can do
Here are several types of comparative financial statements
you can create for your business and some tips for getting the most out of
period vs. Prior period. Compare this month to
the same month one year prior (October 2021 vs. October 2020) or compare
by year (2021 Year-to-Date vs. 2020 Year-to-Date).
period vs. Current period forecast. This is known as a
variance analysis. You compare what you think was going to occur during a
particular period to what actually happened. This report can also be done
either by month [October 2021 (actual) vs. October 2021 (forecast)] or by
year [2021 Year-to-Date (actual) vs. 2021 Year-to-Date (forecast)]
both absolute figure and percentages. Percentages
allow you to quickly see the degree of change between the two periods that
are being compared. Here's an example of what this could look like:
for help! Please call if you would like help
creating or analyzing comparative financial statements for your business.
As always, should you have any questions or concerns
regarding your tax situation please feel free to call.
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contained in this newsletter is of a general nature and should not be acted
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assistance. For more information on anything in ONLINE ADVISOR, or for
assistance with any of your tax, business, or financial strategy concerns,
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Timothy W. Tuttle & Associates