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What's New in Taxes
More wages subject to social security tax in 2007
The Social Security Administration has published the maximum amount of earnings that will be subject to social
security taxes next year. The amount increases to $97,500, up from $94,200 for 2006.
Two 2006 laws may offer new tax planning opportunities
If you can name the two new tax bills passed by Congress this year, you might be a master of trivia. But there
is nothing trivial about the Tax Increase Prevention and Reconciliation Act and the Pension Protection Act. These
laws could have an impact on your taxes.
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IRS announces mileage rates for 2007
The IRS has issued the 2007 standard mileage rate that businesses can use to calculate the deductible costs
of driving an automobile for business.
Don’t overlook these business tax deductions
As a small business owner, you probably don’t need one more thing to do during the busy holiday season. But before
you say goodbye to 2006, consider adding this: a search for missing business tax deductions. Finding one of these
deductions might give you real tax savings.
Smart Business
Using credit may be getting too easy
If you’re concerned about your financial well-being, you should probably think twice about using your credit card
for purchases under $25.
Give financial gifts this holiday season
When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings.
Consider financial gifts that can bestow benefits for many years to come.
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Keep up to date with important tax deadlines
What's New in Taxes
Telephone tax to be refunded with your 2006 tax filing
Did you know you may qualify for an extra refund when you file your 2006 taxes? And if you qualify, you can claim
the refund by filling out just one extra line on your 2006 tax return.
Let the tax man help with child care costs
Are you a working parent looking for ways to ease the burden of child care expenses? There are several tax-saving
strategies available to you.
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Note these changes on your 2007 business calendar
Daylight saving time for 2006 just ended on October 29. And that brings to mind the changes made to daylight saving
time next year by the energy law passed in 2005.
Do a year-end tax-cutting review for your business
Many small businesses and self-employed business owners make the mistake of not thinking about taxes until it's
time to file their returns. That's simply too late — most moves must be made before year-end. Here are a few tax-cutting
ideas that could help you reduce your 2006 business taxes.
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Stock market hits new high
The big news for stock investors came October 19, 2006, when the Dow closed at 12,000 for the first time in history.
The Dow is comprised of 30 major companies and is generally seen as one measure of market activity.
Couples: Take these six steps to financial harmony
Most people need help from time to time with their finances, and this can be especially true for couples. Partners
often struggle with differing perspectives about money, and these differences can affect spending, saving, budgeting,
and other financial decisions.
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Keep up to date with important tax deadlines
What's New in Taxes
IRS begins using private collection agencies
A 2004 tax law authorized the Internal Revenue Service to use private collection agencies to assist with the
collection of taxes due the government. By the end of this year the IRS will have turned over about 40,000 taxpayer
files for such collection.
Know the rules for claiming dependents
You are allowed a tax deduction of $3,300 for each dependent this year. Therefore, knowing who qualifies as your
dependent could cut your tax bill.
Focus on healthy habits to cut health care costs
The rising cost of health care is a major concern to most businesses. As insurance premiums and the price tag
for medical services increase every year, your company may want to pay more attention to your employees' fitness
and eating habits.
Is your business paying phony invoices?
Businesses are cheated out of millions of dollars every year with invoices for goods or services that were
never delivered. Phony invoices once paid often will be followed by additional billings for publications, services,
or supplies not delivered.
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New pension law eases rules on inherited retirement plans
If you inherit a retirement account from someone other than your spouse, you will soon be able to roll over
the account to an IRA, an option that can save significant taxes. Prior to the recently enacted Pension Protection
Act of 2006, rollovers of inherited retirement funds were permitted only for spouses.
Invest with an eye on inflation
Like the boy who cried "wolf," experts' warnings of inflation have been largely ignored over the last
decade. Inflation, even at modest levels, can seriously reduce real investment return. Is your portfolio structured
to succeed in periods of inflation? Consider these fresh ways to combat an old foe.
New pension law changes some tax rules
In early August, Congress passed a major new law on pension plans. But buried in the fine print were some unexpected
tax provisions. Some could affect your ability to claim deductions for charitable contributions. And others change
the tax rules for retirement savings.
Take action now to trim 2006 taxes
The end of the year will be here before you know it. That means you should put some tax planning on your agenda
now. Here are some ideas you might consider to trim your 2006 taxes.
Roth IRA change important for your company's 40l(k) plan
A new rule in 2006 lets 40l(k) plans offer employees the option of designating plan contributions as Roth IRA
contributions. The benefit of a Roth is that, though the contribution isn't tax-deductible, qualifying distributions
are completely tax-free.
What benefits does your company offer?
To motivate or reward your employees, consider giving them a tax-free benefit. The cost of certain benefits can
be nontaxable to employees and tax-deductible to your business. Offering as many tax-free benefits as your business
can afford might also help you hire and retain the workers you need.
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No estate tax change yet
The latest attempt to modify the law on estate taxes failed to pass Congress last month. In an effort to make the
bill more acceptable, Congress had included an increase in the minimum wage and extension of several expired and
expiring tax breaks. Despite these "sweeteners," the bill failed to attract the needed votes.
Are you too invested in your company?
It seems that the recent failure of Enron and other corporations did not teach workers the primary rule of investing:
diversify your investments. A recent study revealed that workers still hold too much of their company's stock in
their retirement accounts.
IRS concedes defeat on telephone tax
After numerous losses in court, the IRS is admitting defeat on the issue of telephone excise taxes. The Service
will no longer collect the 3% excise tax on long-distance telephone services.
Consider the tax benefits of annual gifts
Did you know that this year you can give gifts of up to $12,000 to as many individuals as you want without
being liable for gift tax?
Paperless payroll can cut business costs
Companies looking for ways to cut costs might want to consider this new idea: Instead of issuing paper paychecks,
pay employees with payroll “plastic cards” or with direct deposit to the employee’s bank account.
Consider cross-training your employees
Have you considered cross-training your employees? Cross-training, or job rotation as it’s sometimes called,
can be a win-win situation for you and your employees.
Smart Business
Nearly half of Americans aren’t saving enough
A new study done by the Center for Retirement Research at Boston College revealed that 43% of working Americans
are probably not going to have enough retirement funds to maintain their current standard of living.
Don't cash out the equity in your home just because it's there
With today's low interest rates, homeowners have been flocking to refinance their mortgages. But instead of
reducing their payment by the maximum amount, many have increased the size of their mortgage to tap into the home's
equity.
Manage your income to maximize tax benefits
What do the following have in common: itemized deductions, personal exemptions, child tax credits, student
loan interest deductions, and Roth IRA contributions? The answer is that they're all reduced or eliminated when
your adjusted gross income (AGI) reaches certain levels.
Cell phones: A business benefit or liability?
Cell phones have made it easier for business people to communicate, but they are not always a plus in the work
environment.
Map out a plan before opening for business
Taking a trip without a map may get you lost, and trying to run a business without a plan is likely to have
the same result.
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50-year mortgages? That's a l-o-n-g time
The high price of homes and rising interest rates have brought a new financing option to the marketplace -
the 50-year mortgage. Available currently from only a few lenders, the 50-year mortgage is intended to help those
who otherwise could not afford to buy a home because of high monthly payments.
Will mistakes reduce your nest egg to small change?
There are a number of pitfalls that you'll need to avoid in order to enjoy a financially comfortable retirement.
Some of these mistakes take place while you're planning for retirement, and some take place after you actually
retire. Here are seven of the most common mistakes.
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What's New in Taxes
“Buyer beware” warnings are issued by the IRS
A 2005 law requires anyone filing for bankruptcy to first seek counseling from a credit counseling agency.
$70 billion tax cut signed by Bush
Congress finally passed a bill that provides for $70 billion in tax relief for American taxpayers. President
Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 on May 17, 2006.
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Sample plan amendment for Roth 401(k)s now available
This year employers can offer a Roth option within their 40l(k) plans. The IRS recently issued a sample plan
amendment providing language employers can use to amend their existing 40l(k)s to allow employees to designate
their contributions as Roth contributions.
Starting a business? Follow these tips to grow a profitable company
Are you feeling stuck in your current job and looking for a change? Starting a new business could be your dream
come true. But what might begin as an idealistic vision can turn into a costly reality check. If entrepreneurship
is your goal, there are certain things you need to know.
Smart Business
Retirement accounts now insured up to $250,000
Federal Deposit Insurance Corporation (FDIC) insures a certain amount of bank deposits made by an individual.
If a bank fails, deposits up to $100,000 are insured by the federal government.
Help your children financially by teaching self-reliance
Today’s rising costs and stagnant earnings are especially hard on young people. Many recent college graduates
can’t even afford to leave home. Some are overburdened with student loan payments, car payments, and credit card
debt. When you factor in current housing costs, it’s easy to see why so many young adults need help from their
parents.
Major Tax Deadlines
Keep up to date with important tax deadlines
What's New in Taxes
IRS publishes credit amounts for hybrid vehicles
The Energy Policy Act of 2005 provided for tax credits of up to $3,400 to encourage taxpayers to buy fuel-efficient
vehicles. The IRS has calculated the following amounts of credit taxpayers can take this year for the purchase
of a new hybrid vehicle.
Get an early start on reducing your 2006 taxes
Maximize your tax savings this year by getting a jump-start on your planning. Here are a few tips that you
can use to reduce your 2006 taxes.
Smart Business
Savings rate hits lowest rate since 1933
According to the U.S. Commerce Department, American consumers spent more than they earned in 2005. Savings
as a percentage of income was a negative .5% last year - the first negative rate since the Great Depression.
Have a financial talk with your elderly parents
One day you may find yourself taking care of an elderly parent who is in declining physical or mental health. This
can be stressful, both emotionally and financially. On the financial side, there are steps you may want to take
to prepare for this situation.
Major Tax Deadlines
Keep up to date with important tax deadlines
What's New in Taxes
Good news from the IRS
If you can’t meet the April 17 filing deadline for your 2005 tax return, you can get a six-month extension.
That’s new this year.
Parents: Your children can be the source of tax breaks
Let’s talk about your kids — specifically, about the opportunities and issues involving your children and taxes.
You’ve probably heard of the “kiddie tax,” which kicks in when a child under age 14 has unearned income over a
specified amount ($1,700 in 2006). Income such as interest and dividends in excess of this amount will be taxed
not at your child’s tax rate, but at your highest rate.
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2005 inflation figures released
Inflation is a concern of every business, affecting both the costs of doing business and the prices the company
charges for its products or services.
Is it time to change your business entity?
As you review your business taxes for last year, there's one other issue to consider. That's your choice of
business entity. Should you be doing business as a sole proprietorship, a partnership, or some form of corporation?
It's a decision that you should revisit periodically.
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Don't neglect estate tax planning
Whether the estate tax - often referred to as the "death tax" - will actually be eliminated or not remains
an unanswered question. Under current law, the tax will end in 2010, but only for that one year. Unless Congress
acts before 2011, it will return that year at its 2001 exemption level and tax rates.
Dig for answers to these questions before you invest your money
Studies have reported that the average investor spends more time planning a vacation than investigating the
stock that he is about to purchase. While that might sound foolish, it's more fun to page through a brochure for
beachfront hotels in Aruba than to study an annual report. But not all of the research has to take considerable
time or effort. In fact, many of the questions that you should ask are relatively simple. Here are just a few.
Major Tax Deadlines
Keep up to date with important tax deadlines
What's New in Taxes
Should you pay taxes with a credit card?
More and more taxpayers are using their credit cards to pay the taxes they owe at tax filing time. This year,
credit card companies are trying to lure even more people to use credit cards to pay the IRS. Some card issuers
offer double award miles for every dollar of taxes paid with their credit cards.
April 3 is an important deadline for many
Retirement accounts grow tax-deferred until you need the funds. However, in most cases your money cannot remain
in these accounts forever. The IRS has rules that dictate when and how much you must withdraw from your retirement
accounts. The amount you must withdraw each year is called your required minimum distribution (RMD).
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IRS to focus on employment tax issues to reduce tax gap
The IRS recently released new research data on the tax gap - the difference between what taxpayers should be paying
in taxes and what they actually pay. In order to reduce this tax gap, the IRS has announced some of the stiffer
enforcement measures it plans to use this year.
How to make business meetings worth the time
For most companies, business meetings are a fact of life. Although meetings sometimes are useful or necessary,
too many simply waste time, and some may even harm morale. Here are some ideas for improving or shortcutting the
meeting process.
Smart Business
Prepaid tuition plans now get equal treatment
“529 plans” are one way to set aside money for children’s college educations. These plans come in two varieties:
(1) prepaid tuition plans where you make a lump sum payment or make payments to lock in tuition for your child
when he or she is ready for college, and (2) college savings plans that allow you to put money into investments
and use this fund to pay for college expenses tax-free.
Are your beneficiary designations up to date?
Who have you designated as beneficiaries for your insurance policies and retirement accounts? If you can't remember,
you're not alone. But it's worth checking, and right now is the perfect time to do your review. If you make the
wrong decision, it could affect who inherits those assets. In some cases, it can change the future value and taxes
on the accounts.
Major Tax Deadlines
Keep up to date with important tax deadlines
What's New in Taxes
The early bird may get the new energy credit
If you’re thinking of buying a hybrid or alternative fuel vehicle this year, you may want to take action earlier
rather than later. The 2005 Energy Tax Incentives Act provided tax credits of up to $3,400 for the purchase of
a hybrid car or truck.
How long should you keep tax records?
How long should you keep your tax records? Unless fraud, evasion, or a substantial understatement of income
is involved, the IRS generally has only three years in which to question your return.
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Tax filing requirements simplified for small employers
The IRS hopes to reduce the tax filing burden for about 950,000 small businesses this year. Employers with estimated
annual employment tax liability of $1,000 or less will be able to file a new Form 944 (Employer’s Annual Federal
Tax Return) once a year rather than filing Form 941 (Employer’s Quarterly Federal Tax Return) four times a year.
Businesses: Tap into the benefits of a retirement plan
Does your business offer a retirement savings plan for employees? If not, consider setting one up. The tax
law makes plans attractive to both employers and employees. Contribution limits increase every year for many plans.
Plans for small businesses, including sole proprietors, can be set up with minimal cost and paperwork. There are
even tax credits available for small employers to help offset a portion of the plan’s set-up costs.
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Credit cards are requiring higher minimum payments
You may be seeing higher minimum payment amounts on your credit card bills. Banks are finally making changes
regulators urged three years ago, changes that would enable consumers to pay off debt “in a reasonable period of
time.”
Dollar-cost averaging can offer long-term benefits
In today’s rabbit-fast world, it pays to remember that the tortoise won the race. For investors, dollar-cost
averaging — a slow and steady investment plan — can be a winning strategy.
January
Use new tax numbers for your 2006 tax planning
The IRS adjusts many tax numbers for inflation each year. Other numbers change as a result of tax law revision.
As you begin your tax planning for 2006, here are some of the changes you’ll need to take into account.
Medical sticker shock? Consider a health savings account
If health care costs are starting to give you sticker shock, you might want to consider creating a health savings
account in 2006.
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New energy tax breaks available this year
Every business should be aware of the new energy tax credits and deductions that are available this year. President
Bush signed the Energy Policy Act of 2005 last August, but the tax breaks in the new law just went into effect
in January 2006.
Keep those payroll taxes paid
With rising energy prices, many business owners are facing increasing costs and deteriorating cash flows. Make
sure you avoid the temptation to borrow from the government. The IRS is a tough lender. Interest, penalties, and
other punitive measures can be severe and even threaten the very existence of your business.
Smart Business
A new retirement option debuts this year – the Roth 401(k)
Contributing to a 401(k) plan at work is a great way to build up your retirement nest egg. Setting aside money
in a Roth IRA is another option for building a retirement fund. Combine these two popular retirement savings opportunities,
and you end up with the new Roth 401(k).
Do a financial review at tax time
Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return
at this time. Why not take one more step and do something positive for your financial well-being?
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