Online Advisor
Timothy W. Tuttle & Associates
 


Volume 18 Edition 7           Please email comments to newsletter@tuttlefirm.com                  July 2022


Major Events This Month:

Upcoming dates:

July 17

 - National Ice Cream Day

July 24

 - Parents' Day

 

The recent run of inflation is causing many people to rethink how to save and where to spend. In this month’s newsletter, there is a recap of the traditional role of how your bank accounts work together to provide a valued resource to handle your funds. There's also a great article on how to identify and manage against shrinkflation.

Plus there are a couple of timely tax articles including a review of common tax surprises and suggestions on making sure you get the most out of the recently increase standard mileage rates recently announced by the IRS.

Please feel free to forward the information to someone who may be interested in a topic and call with any questions you may have.

 

Layering Your Bank Accounts

Time for the classic banking approach to make a comeback?

For years, savings and checking accounts provided very little in the way of interest income. In our current inflationary times, however, interest rates are on the rise. What is also on the rise is the comeback of traditional banking products. Here is a review of how your bank accounts traditionally work together as a team to provide you the best security and value for your money.

The checking account: 30 days of funds

Basic savings account: 2 to 6 months of funds

Higher-interest bank accounts: Lots of choices

When you're trying to decide where to keep your money, there are also tax ramifications to consider. So keep this in mind as you review how your bank accounts work together as a team.

 

Watch for These Tax Surprises

Our tax code contains plenty of opportunities to cut your taxes. There are also plenty of places in the tax code that could create a surprising tax bill. Here are some of the more common traps.

Please call to schedule a tax planning session so you can be prepared to navigate around any potential tax surprises you may encounter on your 2022 tax return.

 

Shrinkflation is Upon Us!

Be aware, be prepared

Inflation is upon us, and a hidden gem used by companies to combat price increases is often hidden from the unaware. It's called shrinkflation. Here's what you need to know about this hidden price hike and what you can do to cope with its effects.

Defining shrinkflation

Shrinkflation is the technique of downsizing a product or ingredients to lower costs. In many cases the retail price of something will not change, but the amount of product in the package is lowered. Common techniques include putting less in a package or changing the amount of a high-cost ingredient in the product.

And the changes are often subtle. Would you realize the amount in a box is lowered by 1/2-an-ounce if the box stays the same size? Or that your cereal has fewer raisins in it than a month ago?

Edgar Dworsky, a former assistant attorney general in Massachusetts, recently spoke with the Consumer Federation of America about changes he's been tracking in grocery isles. Here are some recent examples of shrinkflation:

Knowledge is key

While many manufacturers are transparent about these changes as they combat inflation, it is not as apparent to spot when you are shopping. Here some are suggestions to help you identify and combat shrinkflation.

Remember, inflation is here and everyone needs to cope with it, including manufacturers. But by being aware, you can retain some control to reduce inflation's impact on you and your family.

 

Your Business Mileage Deduction Just Became More Valuable

Your business mileage tax deduction just became more valuable for the rest of 2022 after a recent announcement by the IRS.

Starting July 1st, the IRS's business mileage rate is increasing by 4 cents, to 62.5 cents per mile, while the medical and moving mileage is also increasing by 4 cents, to 22 cents per mile. The previous mileage rates still apply through June 30th.

Here are some tips to make the most of your business's vehicle expense deduction.

Please call if you have any questions about maximizing your business’s vehicle expense deduction.

 

The IRS Announces Tax Scams

Compiled annually, the IRS lists a variety of common scams that taxpayers can encounter. This year's list includes the following four categories.

What you can do

If you discover that you’re a victim of identity theft, consider taking the following action:

 

Understanding Tax Credits Versus Deductions

Tax credits are some of the most valuable tools around to help cut your tax bill. But figuring out how to use these credits on your tax return can get complicated very quickly. Here's what you need to know.

Understanding the difference

To help illustrate the difference between a credit and a deduction, here is an example of a single taxpayer making $50,000 in 2022.

In this example, your tax credit is five times as valuable as a tax deduction.

Too good to be true?

Credits are generally worth much more than deductions. However there are several hurdles you have to clear before being able to take advantage of a credit.

To illustrate, consider the popular child tax credit.

Hurdle #1: Meet basic qualifications

You can claim a $2,000 tax credit for each qualifying child you have on your 2022 tax return. The good news is that the IRS's definition of qualifying child is fairly broad, but there are enough nuances to the definition that Hurdle #1 could get complicated. And then to make matters more complicated...

Hurdle #2: Meet income qualifications

If you make too much money, you can't claim the credit. If you're single, head of household or married filing separately, the child tax credit completely goes away if you exceed $240,000 of taxable income. If you're married filing jointly, the credit disappears above $440,000 of income. And then to make matters more complicated...

Hurdle #3: Meet income tax qualifications

To claim the entire $2,000 child tax credit, you must owe at least $2,000 of income tax. For example, if you owe $3,000 in taxes and have one child that qualifies for the credit, you can claim the entire $2,000 credit. But if you only owe $1,000 in taxes, the maximum amount of the child tax credit you could claim is $1,400.

Take the tax credit...but get help!

The bottom line is that tax credits are usually more valuable than tax deductions. But tax credits also come with lots of rules that can be confusing. Please call to schedule a tax planning session to make sure you make the most of the available tax credits for your situation.

 

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