Major Tax Deadlines

For January 2007

January 16 – Final 2006 individual estimated tax payment is due, unless 2006 tax return is filed and taxes are paid in full by January 31, 2007.

January 31 – Employers must provide 2006 W-2 statements to employees.

January 31 – Payers must provide 2006 Form 1099s to payees.

January 31 – Employers must generally file Form 941 for the fourth quarter of 2006 and pay any tax due.

January 31 – Employers must generally file 2006 federal unemployment tax returns and pay any tax due.

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 semi-weekly 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 liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semi-weekly 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.

Where’s My Refund: IRS has 95,746 undeliverable tax refunds

Are you still waiting for your tax refund? If so, you may be one of the 95,746 taxpayers to whom the IRS has been unable to deliver a refund check. The refunds total $92.2 million.

Every year there are taxpayers who don’t update the IRS or the U.S. Postal Service when they move or change their mailing address. Checks are mailed to the last known address for taxpayers, and when the address isn’t current, the checks are returned as undeliverable.

To check on a missing refund, you can go to the IRS Web site at www.irs.gov and type “Where’s My Refund?” in the search box. To check on a refund by phone, call 1-800-829-1954.

Your 2007 income tax checklist

Gather the tax documents needed for filing your 2006 tax return — the W-2s, 1099s, and other information forms you receive from your employer, broker, bank, etc. If you detect errors, notify the sender and ask for a corrected copy.

* Get the substantiation you’ll need for charitable contributions of $250 or more that you made last year. A cancelled check isn’t enough; you need a written receipt from the charity in order to take a tax deduction.

If you received something from the charity in return for your contribution, a written statement is required on gifts of more than $75.

If you donated a vehicle, boat, or airplane to a charity, your deduction will be limited to what the charity sold your item for. The charity should give you Copy B or C of IRS Form 1098-C to substantiate your deduction.

* Check your children’s need to file a 2006 return. Generally, your child must file a 2006 tax return if he or she had wages of more than $5,150, self-employment earnings over $400, or investment income (such as interest, dividends, or capital gains) over $850. If your child had both earned and investment income, other thresholds apply. Also, your child must file a return to receive a refund if one is due.

* Make your 2007 IRA contributions as early in the year as possible to maximize tax-deferred growth.

* There is still time to make 2006 contributions. If your 2006 IRA wasn’t fully funded by December 31, 2006, and you make any IRA contributions prior to April 16, 2007, designate to the bank or trustee that these 2007 contributions are for 2006 (up to the maximum allowed). You can then deduct these amounts on your 2006 return for a quicker tax benefit.

* If you’re among the many taxpayers who get a large tax refund this year, do yourself two favors: (1) invest the refund instead of spending it, and (2) adjust your withholding for 2007 so your money can be invested for you rather than the government.

* File business returns on time. The deadline for filing partnership returns is April 16, 2007. Calendar-year corporation tax returns are due by March 15, 2007.

New for Business: IRS Formula for telephone tax refund is announced

After losing several court challenges to charging an excise tax on long-distance telephone service, the IRS is no longer assessing the tax. In May of 2006, the IRS announced that it will refund the tax paid by individuals, businesses, and tax-exempt organizations during the 41 months from March 2003 through July 2006.

Individuals can claim their refunds by calculating the actual tax they paid, or they can take a standard refund amount based on the number of personal exemptions they claim on their 2006 tax returns.

The IRS has also provided businesses and tax-exempt organizations with a formula to estimate the amount of refund to which they’re entitled. The formula can be used by those who don’t want the bother of going through 41 months of phone bills to calculate the exact taxes paid.

To claim their refunds, businesses (including sole proprietors, corporations, and partnerships) and tax-exempts are to complete Form 8913 (Credit for Federal Telephone Excise Tax Paid) and attach the form to their regular 2006 income tax return or, in the case of tax-exempt organizations, to Form 990-T. The form allows taxpayers to either claim the actual amount of refundable long-distance telephone excise taxes paid during the 41-month period or to use the IRS simplified formula to figure the refund.

Build solid relationships with your customers

Customers are just like you. They have wants, desires, and needs. They appreciate being valued, respected, and treated fairly. Are you making the most of the potential relationship?

Here are a few suggestions that can enrich and enhance the customer bond while growing your business.

* Make customers feel special. Tell them you appreciate their patronage, and then tell them again. Send them a note or make a phone call to say thank you and make sure they are happy and beyond just satisfied. Remember the times when you felt treated special and do the same for your customers.

* Develop relationships first and sales second. Relationship marketing where customers know you truly understand and care about them is a powerful force. Do the right things and then be patient. Business will flow naturally.

* Anticipate their needs. Can you suggest products or services before your customers realize they need them? If you have a truly collaborative relationship, you can.

* Don’t make customers adversaries. Think through your customer policies. Do your policies improve or deteriorate customer loyalty? Ask your customers what they think and how they feel about your existing policies.

* Make customers your collaborators. Listen attentively to what your customers have to say. They are the best source for ideas on how to improve your products or service. Ask what else you can do to increase their satisfaction with your company. Their responses might surprise you.

* Earn and seek referrals. Look for the movers and shakers who have a built-in network of influence. Savor these customers, for they can greatly impact your business. Make them delighted customers and they will give you referrals.

Build customer relationships, and your business growth will follow.

The Latest in Finances: Mutual fund investments reach $10 trillion mark

According to the Investment Company Institute, investment in mutual funds hit the $10 trillion mark in October 2006, just about the time the U.S. population hit the 300,000,000 mark.

Mutual funds are popular investments for retirement accounts. Corporate 401(k) plans have 47 million participants, and mutual funds make up 45% of 40l(k) investments.

Mutual fund investments hit the $1 trillion mark in 1990, and it’s estimated that they could pass the $20 trillion mark within the next decade.

What you need to know in order to simplify your recordkeeping

Deciding which records to keep and for how long can be a confusing process. A well-organized system will help you retain important paperwork and minimize the clutter. Use legal requirements and your common sense as guidelines for how long to hold on to records.

* Tax records. You should keep tax records for at least as long as it is possible for tax authorities to audit your return. Generally, the IRS has three years after the return is due or filed, whichever is later, to examine your return and assess additional tax. This is called the “statute of limitations.” If you’ve made a major error on your return (defined as omitting more than 25% of your gross income), the IRS has six years to examine your return. There is no statute of limitation for fraudulent filing or for returns that are not filed at all.

To be on the safe side, keep your tax records for seven years after a tax return is filed.

The IRS does not require that you keep your records in any particular way. The only requirement is that your records allow you and the IRS to determine your correct tax liability. Keep checks, receipts, and other records that document the income and deductions you report on your tax return. Copies of tax returns themselves should be retained permanently.

* Home. Expenditures for your home fall into two categories: “repairs” (such as routine yard maintenance and painting) and “improvements” (usually big-ticket items such as room additions).

Discard repair receipts once the warranty period expires, but keep receipts for improvements indefinitely. Improvements add to the tax basis of your property. Despite the $250,000 capital gain exclusion amount ($500,000 for joint filers), substantial increases in market value could make you liable for capital gains tax when you sell your home. Complete records of your home’s original cost plus improvements will help reduce any taxes due.

* Investment records. Investment records generally should be kept until the investment is totally liquidated, plus a period of seven years. Keep any records for taxable accounts that show reinvested dividends. You can usually toss monthly or quarterly investment statements if you receive a comprehensive annual statement.

* Investment real estate. Keep all documents relating to purchases of property, along with substantiation for improvements made to the property. Keep written appraisals and tax depreciation schedules.

* Individual retirement accounts. Keep copies of Forms 5498, 8606, and 1099R until all money has been withdrawn from your IRAs. Good records are necessary so that you aren’t taxed on non-taxable withdrawals.

* Insurance. Keep your current policies and 12 months’ worth of cancelled checks and statements. Ask your insurance agent about discarding expired policies. Your liability for prior years can vary.

* Estate planning documents. In your home, keep a copy of your current will, any trusts, and any special directives. Give the originals to your attorney, and consult your attorney about destroying all out-of-date documents.

* Keep it simple. In most cases, you don’t need an elaborate recordkeeping system to keep your affairs in order. File tax returns separately by year, and file investment records by broker. For expenses, even an accordion file tabbed by category works wonders.

If you have any questions or need assistance in setting up a recordkeeping system, give us a call.

That’s Interesting

Did you know…

Armored knights raised their visors briefly to identify themselves when riding past the king. This custom was the basis for the military salute of today.

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 the ONLINE ADVISOR, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.

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