IRS audits of higher income taxpayers increase The IRS audited one in eight individuals with incomes over $1
million in fiscal year (FY) 2011. While the overall audit coverage
rate for individuals remained steady at just over one percent, the
a...
Tax gap grows to $450 billion; compliance rate holds steady The "gross tax gap," or the amount of tax owed to the U.S.
government that is not paid on time, climbed from $345 billion in
Tax Year (TY) 2001 to $450 billion in TY 2006, the IRS has
reported. (Be...
OH - InvestOhio program registration period begins The Ohio Department of Development reminds taxpayers that
registration for the InvestOhio program, which provides for a
personal income tax credit for eligible investors, begins No...
There are two new amnesty programs, the Use Tax Amnesty Program and the General Tax Amnesty Program. Use tax is a tax on the use, storage, or consumption of tangible personal property and the receipt of certain taxable services. It is a tax that many businesses may be subject to without realizing it, which is why the state has created the amnesty program.
Ohio business owners should have recently received a letter from the Ohio Department of Taxation regarding the Business Tax Amnesty Programs. There are two new amnesty programs, the Use Tax Amnesty Program and the General Tax Amnesty Program. The Use Tax Amnesty Program is effective from October 1, 2011 through May 1, 2013. The General Tax Amnesty Program is effective from May 1, 2011 through June 15, 2012.
Use tax is a tax on the use, storage, or consumption of tangible personal property and the receipt of certain taxable services. It is similar to the state sales tax, but is only due when the proper sales tax was not paid upon the purchase. This most frequently occurs when a business purchases goods for use in Ohio from an out-of-state vendor or over the internet. If you purchased a taxable item or service to be used in Ohio and paid Ohio sales tax on the purchase, you do not owe use tax.
If you are subject to use tax and did not have a use tax account as of June 1, 2011, you are eligible for the Use Tax Amnesty Program. The program provides for all tax liabilities for periods prior to January 1, 2009 to be waived. Eligible taxpayers can voluntarily file a use tax return and pay the tax due for the period January 1, 2009 to present with all penalties and interest waived. A payment plan is also available for businesses whose use tax liability exceeds $1,000.
The state is stepping up enforcement of use tax and will begin to find non-compliant businesses and issue assessments for estimated use tax liabilities. These assessments will include penalties and interest and may go back as far as January 1, 2008. Voluntary participation in the Use Tax Amnesty Program, if you are subject to use tax, is encouraged to avoid these penalties.
The Ohio Department of Taxation has a website explaining the Use Tax Amnesty Program, as well as fact sheets related to Ohio Use Tax and particular businesses. Please visit http://tax.ohio.gov/divisions/sales_and_use/index_use.stm for this information.
If you have any questions about these programs or would like our assistance in filing any tax returns, please contact our office at (419) 756-3211.
There has been much misinterpretation and misinformation floating around the internet regarding some sections of the Patient Protection and Affordable Care Act. Most notable is Section 9002. Beginning in 2011, employers will be required to disclose the value of the benefit provided by the employer for each employees health insurance coverage on their W-2’s. This amount will not be added into their gross earnings to be taxed but will simply be disclosed, most likely in box 14.
There has been much misinterpretation and misinformation floating around the internet regarding some sections of the Patient Protection and Affordable Care Act. Most notable is Section 9002. Beginning in 2011, employers will be required to disclose the value of the benefit provided by the employer for each employees health insurance coverage on their W-2’s. This amount will not be added into their gross earnings to be taxed but will simply be disclosed, most likely in box 14.
On March 2, 2010, President Obama extended the period for qualifying for COBRA assistance under the American Recovery and Reinvestment Act of 2009 to March 31, 2010. The original ending date for this assistance was February 28, 2010.
On March 2, 2010, President Obama extended the period for qualifying for COBRA assistance under the American Recovery and Reinvestment Act of 2009 to March 31, 2010. The original ending date for this assistance was February 28, 2010.
Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enabled into law on March 18, 2010.
Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enabled into law on March 18, 2010.
These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses should keep these benefits in mind as they plan for the year ahead. Both tax benefits are described below:
1)Employers who hire unemployed workers this year (after 2/3/10 and before 1/1/11) may qualify for a 6.2 percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax reduction will have no effect on the employee’s future Social Security taxes. The new law requires that employers get a signed statement (Form W-11) from each eligible new hire certifying that he or she was unemployed during the 60 days prior to beginning work or, alternatively, worked less than a total of 40 hours for someone else during the 60-day period.
2)Business Tax Credit – In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. This business tax credit amount is the lesser of $1,000 or 6.2% of the wages paid to the qualified individual during the year. The business tax credit and the social security tax relief are separate, and employers can claim both of them for the same employees.
It is imperative that you, the employer, submit Form W-11 to your payroll specialist with the New Hire information. The payroll tax exemption will be recorded on Form 941 for the respective quarter. Additional information on the HIRE Act can be found at www.irs.gov.
The Internal Revenue Service released new detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.
The IRS unveiled new information on IRS.gov, that includes an extensive set of questions and answers for employers. In addition, the Web site contains a revised version of the quarterly payroll tax return that employers will use to claim credit for the COBRA medical premiums they pay for their former employees.
Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.
The American Recovery and Reinvestment Act of 2009 includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. The new law will affect former employees and their families, employers and others involved in providing COBRA coverage.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.
Employers must maintain supporting documentation for the credit claimed. This includes:
Documentation of receipt of the employee’s 35 percent share of the premium.
In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
Declaration of the former employee’s involuntary termination.
COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. It does not apply to churches and certain religious organizations. The new COBRA subsidy provisions also apply to insurers required to offer continuation coverage under state law similar to the federal COBRA.
More information about COBRA payments and the new law is available on www.dol.gov
For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns.
For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns.
This tax credit will be calculated at a rate of 6.2% of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes in early spring. These changes may result in an increase in take-home pay. The amount of the credit must be reported on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income. Publication 919 provides additional guidance for tax withholding.
The IRS asks that employers begin using the new tables in lieu of the applicable previously published tables as soon as possible, but no later than April 1, 2009.
If your organization has deferred compensation plans, severance type plans, stock plans, bonus plans or employment agreements with provisions for deferred payouts, they should be reviewed for compliance with Internal Revenue Code 409A prior to December 31, 2008. Starting January 1, 2009, plans must be in writing and comply with certain payout events. Written elections for deferrals and payouts need to be established prior to January 1, 2009. Absent compliance, executives and owners can be taxed on these arrangements or lose the benefit of tax deferral and pay excise taxes.
If your organization has deferred compensation plans, severance type plans, stock plans, bonus plans or employment agreements with provisions for deferred payouts, they should be reviewed for compliance with Internal Revenue Code 409A prior to December 31, 2008. Starting January 1, 2009, plans must be in writing and comply with certain payout events. Written elections for deferrals and payouts need to be established prior to January 1, 2009. Absent compliance, executives and owners can be taxed on these arrangements or lose the benefit of tax deferral and pay excise taxes.
If you organization sponsors retirement plan under Internal Revenue Code 403(b), there is a new requirement that it be formalized in writing by December 31, 2008. In addition, a number of provided contracts will require review for new regulations.
If you organization sponsors retirement plan under Internal Revenue Code 403(b), there is a new requirement that it be formalized in writing by December 31, 2008. In addition, a number of provided contracts will require review for new regulations.
Tax qualified retirement plans such as 401(k), profit sharing and defined benefit pension plans must be reviewed for required updates. Updates can include plan design changes, required amendments and restatements or amendments to conform with regulations. In addition, a number of annual notices and information regarding investments and fees are distributed at year-end.
Tax qualified retirement plans such as 401(k), profit sharing and defined benefit pension plans must be reviewed for required updates. Updates can include plan design changes, required amendments and restatements or amendments to conform with regulations. In addition, a number of annual notices and information regarding investments and fees are distributed at year-end.
The way businesses file sales tax returns in Ohio is changing. Starting in 2009, all vendors – regardless of sales volume – will be required to file electronically rather than on paper.
The first mandatory electronic return is due Feb. 23, 2009 for monthly filers and on July 23, 2009 for semi-annual filers. Businesses can get a head start by choosing to file electronically now.
The way businesses file sales tax returns in Ohio is changing. Starting in 2009, all vendors – regardless of sales volume – will be required to file electronically rather than on paper.
The first mandatory electronic return is due Feb. 23, 2009 for monthly filers and on July 23, 2009 for semi-annual filers. Businesses can get a head start by choosing to file electronically now.
The Ohio Department of Taxation now offers three ways to file a sales tax return electronically. See below for the option that best suits the needs of your business.
1. Ohio Business Gateway. Ohio Business Gateway is a one-stop shop for common state government transactions including the filing of sales tax returns. The Business Gateway empowers business owners by permitting electronic check and credit card transactions to be post dated until payment is actually due. And to make the filing of sales tax returns more efficient for businesses and practitioners, the Ohio Business Gateway is adding new file upload and full UST-1 filing capabilities that will cut down or eliminate on-line data entry. 2. eForms. Through the Department of Taxation's innovative eForms technology, business operators can complete Adobe Acrobat versions of Ohio's universal sales and use tax forms, much as they would on paper. By using eForms, taxpayers have the option of making payment by credit card, electronic check, or paper check. 3. Touch-tone telephone. If you are a small business owner with a regular (single) county vendor's license, Ohio's TeleFile system may be for you. TeleFile users may remit payment by credit card or electronic check. To access the sales tax TeleFile system, call (800) 697-0440.
Employers may qualify for a tax credit known as the work opportunity tax credit that is worth as much as $2,400 for each eligible employee ($4,800 for certain veterans and $9,000 for employees who are “long-term family assistance recipients”). The credit is generally limited to eligible employees who begin work for the employer before Sept. 1, 2011. The credit is available on an elective basis for employers hiring individuals from one or more of nine targeted groups. The amount of the credit available to an employer is determined by the amount of qualified wages paid by the employer. Generally, qualified wages consist of wages attributable to service rendered by a member of a targeted group during the one-year period beginning with the day the individual begins work for the employer (two years in the case of an individual in the long-term family assistance recipient category).
Employers may qualify for a tax credit known as the work opportunity tax credit that is worth as much as $2,400 for each eligible employee ($4,800 for certain veterans and $9,000 for employees who are “long-term family assistance recipients”). The credit is generally limited to eligible employees who begin work for the employer before Sept. 1, 2011. The credit is available on an elective basis for employers hiring individuals from one or more of nine targeted groups. The amount of the credit available to an employer is determined by the amount of qualified wages paid by the employer. Generally, qualified wages consist of wages attributable to service rendered by a member of a targeted group during the one-year period beginning with the day the individual begins work for the employer (two years in the case of an individual in the long-term family assistance recipient category).
Generally, an employer is eligible for the credit only for qualified wages paid to members of a targeted group. These groups are: (1) qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program, (2) qualified veterans, (3) qualified ex-felons, (4) designated community residents (Crawford, Monroe, Paulding, Seneca and Van Wert), (5) vocational rehabilitation referrals, (6) qualified summer youth employees, (7) qualified members of families receiving Food Stamp assistance, (8) qualified Supplemental Security Income recipients, and (9) long-term family assistance recipients.
For each employee, there is also a minimum requirement that the employee has completed at least 120 hours of service for the employer.
Also, the credit isn't available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (e.g., working as a maid in the employer's home).
Additionally, the credit generally isn't available for employees who have previously worked for the employer.
For employees other than summer youth employees, the credit amount is determined under the following rules. The employer can take into account up to $6,000 ($10,000 for each employee who is a “long-term family assistance recipient”; $12,000 for certain veterans) of first year wages per employee. If the employee has completed at least 120 hours but less than 400 hours of service for the employer, the wages taken into account are multiplied by 25%. If the employee has completed 400 or more hours, all of the wages taken into account are multiplied by 40%. Thus, under the above rules, the maximum credit available is $2,400 ($6,000 × 40%) per employee ($4,800 for certain veterans; $4,000 for a “long-term family assistance recipient,” for whom a 50% credit for up to $10,000 of second-year wages is also available). The “first year” referred to above is the year-long period which begins with the employee's first day of work.
For summer youth employees, the rules in the preceding paragraph apply, except that the employer can only take into account up to $3,000 of wages, and the wages must be paid for services performed during any 90-day period between May 1 and Sept. 15. Thus, for summer youth employees, the maximum credit available is $1,200 ($3,000 × 40%) per employee.
You should be aware that (1) no deduction is allowed for the portion of wages equal to the amount of the work opportunity credit determined for the tax year, (2) wages taken into account for the work opportunity credit can't be taken into account for (and reduce the limit on the amount of wages that can be taken into account for) the empowerment zone employment credit or the renewal community employment credit and (3) the credit is subject to the overall limitations on the amount of business credits that can be taken in any tax year, but a 1-year carry back and 20-year carry forward of unused business credits is allowed. Because of these three rules, there may be circumstances in which the employer might, under an available election, elect not to have the work opportunity credit apply.
You should also be aware that there are some additional rules that, in limited circumstances, prohibit the credit or require an allocation of the credit.
We welcome your questions about any of the above discussion, and, should you be interested, we would be pleased to work with you on the application of the credit to your situation.
Bonus first year depreciation was first allowed following the terrorist attacks of 2001 but generally isn't available for property acquired after 2004. (There are some exceptions, such as for qualified GO Zone property generally placed in service before 2008.)
Bonus first year depreciation was first allowed following the terrorist attacks of 2001 but generally isn't available for property acquired after 2004. (There are some exceptions, such as for qualified GO Zone property generally placed in service before 2008.)
The Economic Stimulus Act provides for bonus (accelerated) depreciation by allowing a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service after Dec. 31, 2007, and, generally, before Jan. 1, 2009. The basis of the property and the depreciation allowances in the year the property is placed in service and later years are appropriately adjusted to reflect the additional first-year depreciation deduction. The amount of the additional first-year depreciation deduction is not affected by a short taxable year. The taxpayer may elect out of additional first-year depreciation for any class of property for any taxable year.
The interaction of the additional first-year depreciation allowance with the otherwise applicable depreciation allowance may be illustrated as follows. Assume that in 2008 a taxpayer purchases new depreciable property and places it in service. The property's cost is $1,000 and it is 5-year property subject to the half-year convention. The amount of additional first-year depreciation allowed under the provision is $500. The remaining $500 of the cost of the property is deductible under the rules applicable to 5-year property. Thus, 20 percent, or $100, is also allowed as a depreciation deduction in 2008. Accordingly, the total depreciation deduction with respect to the property for 2008 is $600. The remaining $400 cost of the property is recovered under otherwise applicable rules for computing depreciation.
Bonus depreciation is allowed for AMT purposes as well as for regular tax purposes. Additionally, bonus depreciation is permitted only for: (1) property to which MACRS applies that has an applicable recovery period of 20 years or less, (2) water utility property, (3) non-custom-made computer software, and (4) qualified leasehold improvement property. Original use of the property must begin with the taxpayer after Dec. 31, 2007. Additionally, the placed-in-service cutoff date is extended for an additional year (i.e., before Jan. 1, 2010) for certain property with a recovery period of ten years or longer and certain transportation and aircraft property.
Section 179 Deduction -
A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property.
Section 179 Deduction - A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property.
The Hiring Incentives to Restore Employment (HIRE) Act of 2010 extends the dates of the IRC Section 179 temporary increase in limitations on expensing of depreciable business assets.
Under HIRE, qualifying businesses can continue to expense up to $250,000 of section 179 property for the 2010 tax year. Without HIRE, the 2010 expensing limit for section 179 property would have been $125,000. The $250,000 amount provided under the new law is reduced, but not below zero, if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.
2009 - Section 179 limits. - The maximum section 179 expense deduction you can elect for qualified section 179 property you placed in service in tax years that begin in 2009 remains at $250,000 ($285,000 for qualified enterprise zone property and qualified renewal community property). This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $800,000.
Depreciation limits on business vehicles. - The total depreciation deduction (including the section 179 expense deduction) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2009 is $2,960 ($10,960 for automobiles for which the special depreciation allowance applies). The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2009 is $3,060 ($11,060 for trucks or vans for which the special depreciation allowance applies).
Caution. - These limits are reduced if the business use of the vehicle is less than 100%.
The Commercial Activity Tax (CAT) is a business privilege tax measured by a business’ gross receipts. The CAT is being phased-in over a five year period starting with tax year 2005. The CAT replaces the corporate franchise and tangible personal property taxes.
The Commercial Activity Tax (CAT) is a business privilege tax measured by a business’ gross receipts. The CAT is being phased-in over a five year period starting with tax year 2005. The CAT replaces the corporate franchise and tangible personal property taxes.
Taxable gross receipts means gross receipts sitused (sourced) to Ohio, based on the following:
• Gross rents and royalties from real property located in Ohio ; • Gross rents and royalties from personal property in Ohio to the extent the personal property is located or used in Ohio; • Gross receipts from the sale of electricity and electric transmission and distribution services in the manner provided under section 5733.059 of the Revised Code; • Gross receipts from the sale of real property located in Ohio; • Gross receipts from the sale of personal property if the property is received in Ohio by the purchaser. In the case of delivery of personal property, the place at which such property is ultimately received after all transportation has been completed shall be considered the place where the purchaser receives the property. Direct delivery in this state, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this state, and direct delivery outside this state to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes or other conditions of sale; • Gross receipts from the sale, exchange, disposition, or other grant of the right to use trademarks, trade names, patents, copyrights, and similar intellectual property to the extent that the receipts are based on the amount of use of the property in this state; • Gross receipts from the sale of transportation services by a common or contract carrier in proportion to the mileage traveled by the carrier during the tax period in this state to the mileage traveled by the carrier everywhere; • Gross receipts from the sale of all other services, and all other gross receipts not otherwise addressed in the proportion that the purchaser's benefit in this state with respect to what was purchased bears to the purchaser's benefit everywhere with respect to what was purchased.
Taxable gross receipts only include gross receipts sitused (sourced) to Ohio. Sales of tangible personal property shipped outside Ohio are not subject to the CAT because such gross receipts would be sitused (sourced) outside Ohio.
If the situsing provisions do not fairly represent the extent of a person's activity in this state, the person may request, or the tax commissioner may require or permit, an alternative method. Such request by a person must be made within the applicable statute of limitations set forth in this chapter.
Cautionary note: gross receipts received from sales to nonprofit organizations in this state or from this state, its agencies, its instrumentalities, and its political subdivisions are taxable gross receipts.
As we approach year end, we felt it necessary to discuss the required tax treatment of health care premiums and HSA payments for 2009. Shareholders of an S Corporation with a 2% or greater interest must add their health care premiums and HSA contributions (if any) to their W-2 wages. This includes HSA payments provided by the Company for their benefit. The premium will then be deducted from their total income on page one of their Form 1040 prior to the calculation of their AGI (adjusted gross income).
As we approach year end, we felt it necessary to discuss the required tax treatment of health care premiums and HSA payments for 2009. Shareholders of an S Corporation with a 2% or greater interest must add their health care premiums and HSA contributions (if any) to their W-2 wages. This includes HSA payments provided by the Company for their benefit. The premium will then be deducted from their total income on page one of their Form 1040 prior to the calculation of their AGI (adjusted gross income).
HSA payments on behalf of employees by the Company are not taxable to the employee; however, these contributions need to be disclosed on their W-2. If we are involved in assisting you in the preparation of your payroll tax returns and W-2’s, please provide us with this information no later than December 31, 2009. Shareholders (>2%): Health Care Premiums HSA Contributions Non Shareholder Employees: Health Care Premiums HSA Contributions If you have any questions regarding this required tax treatment, please do not hesitate to call our office at (419) 756-3211.
In order to ensure collection of revenue, the Internal Revenue Service requires that taxpayers pay their anticipated tax liability as it accrues by use of the withholding system, payment of estimated tax throughout the year, or by a combination of withholding and estimated taxes. Failure to do so may result in penalties.
In order to ensure collection of revenue, the Internal Revenue Service requires that taxpayers pay their anticipated tax liability as it accrues by use of the withholding system, payment of estimated tax throughout the year, or by a combination of withholding and estimated taxes. Failure to do so may result in penalties.
Estimated tax payments are used to pay tax on income that is not subject to withholding, such as income from self-employment, prizes, interest and dividends, alimony, rent, S Corporation, partnership, or where withholding is inadequate for some reason. Payments are used to pay both income tax and self-employment tax, as well as other taxes that are reported on Form 1040 U.S. Individual Income Tax Return.
Generally, individuals must pay estimated tax if they anticipate that after subtracting withholding and credits, they will owe, at least $1,000 in taxes and they expect their withholding and credits to be less than the smaller of (1) 90 percent of the tax that will be shown on the return for the current year, or (2) 100 percent of the tax that was shown on the preceding year’s return (safe harbor).
The preceding year’s safe harbor percentage for high income taxpayers is higher than 100 percent. For 2008, the percentage is 110 percent. A person is considered high income if adjusted gross income for the prior year exceeds $150,000 ($75,000 for married filing separately).
No estimated tax payments are required when the taxpayer does not have any tax liability for the present tax year, provided that the taxpayer is a citizen of the United States during the year.
As a reminder, the Internal Revenue Service has expanded the availability of credit card payments to estimated tax payments. The Internal Revenue Service’s pay-by-phone system (1-888-2pay-tax) is available for charging tax payments and will accept payments charged to American Express, Discover, Master Card and VISA accounts. You can also pay online at www.officialpayments.com. You will not be required to file the related paper voucher if you use this system.
We wanted to take this opportunity to remind you of some tax saving strategies relating to shifting income to family members. It is not too late to take advantage of certain income shifting opportunities that can generate worthwhile tax savings in 2009.
We wanted to take this opportunity to remind you of some tax saving strategies relating to shifting income to family members. It is not too late to take advantage of certain income shifting opportunities that can generate worthwhile tax savings in 2009.
Each spouse should have at least $500 or more in taxable earned income. Earned income does not include income from interest, dividends, royalties, rents, capital gains and income tax refunds. Ohio allows a joint filing credit of up to $650 for qualifying taxpayers, of which the earned income test is the main hurdle to overcome.
Pay your children for work performed in your business. The standard deductions for an individual for whom a dependency exemption is allowable is the sum of $300 plus the child’s earned income up to the standard deduction of $5,700. Taxpayers who previously lost their exemption (phased out between $250,000 and $372,700) will retain an exemption amount of $4,667. Shifting the dependency exemption to the child could shield up to $4,683 of taxable income per child. However, you would incur social security and medicare tax on the child’s wages when working for your corporation. The earned income will also allow your child the opportunity to fund a Roth IRA.
Parents should consider shifting capital gains to children eighteen (18) years old and older. With the new lower tax rate schedule, this income shift strategy affords even greater benefits this year. Single individuals with taxable income below $33,950 pay capital gains tax at a 5% rate compared to the 15% rate for higher tax bracket taxpayers. Keep in mind that gifts to children, with spousal consent, can be made for up to $24,000 annually without incurring gift tax.
Parents should utilize strategies to preserve education tax credits. The Hope Scholarship Credit allows taxpayers a 100% credit per eligible student for the first $2,000 of tuition expenses and 25% credit for the second $2,000. The lifetime credit allows taxpayers to claim 20% of the first $10,000 of tuition. The allowable amount of credit is reduced for taxpayers with modified adjusted gross income of $50,000 ($100,000 on joint returns). The credits are completely phased out with modified adjusted gross income of $60,000 ($120,000 for joint filers). A student could have a gross income of $28,800 and pay no federal income tax as illustrated below:
Gross income$ 28,800 Standard deduction (5,700) Exemption (3,650) Total Taxable income$ 19,450 Computed tax$ 2,500 Hope Credit (2,500) Total Net tax due$ -0-
Consider shifting income to retired parents with significant medical expenses. Medical expense deductions are limited to 7.5% of your adjusted gross income. The following demonstrates the significant effects of “lost deductions”, assuming a parent incurs medical expenses of $40,000:
Adjusted Gross Income$ 20,000 Exemptions (3,650 x 2) (7,300) Excess medical expenses (40,000 less deduction floor of 1,500) (38,500) Total Taxable income$(25,800)
Shifting $20,000 of taxable income to a parent would accomplish the following:
Adjusted Gross Income$ 40,000 Exemptions (7,300) Excess medical (40,000 less deduction floor of 3,000)(37,000) Total Taxable income$ (4,300)
By shifting income of $20,000, we have effectively utilized the medical expense deductions previously lost, and saved the “family group” approximately $3,000 in tax (assuming a shift of capital gain income).
Please note that if the parent is receiving social security benefits and has adjusted gross income of $25,000 for a single taxpayer and $32,000 for joint filers, excess income shifting could make a portion of a taxpayer’s social security benefits taxable.
Retirees with large medical expenses should first review any income that can be generated through withdrawal of pension or individual retirement account (IRA) balances. Retirement funds may be taxable in a descendant’s estate and would also be subject to tax when beneficiaries receive the retirement proceeds. Frequently, the beneficiaries are in a higher tax bracket than the descendant, which undermines the tax benefits received when contributions were initially made.
Section 529 plans are widely available now, with all 50 states offering their own plan or designing a qualified tuition program. The Ohio plan allows tax deductible contributions and tax-free withdrawals when figuring your Ohio income tax. The plans have also added flexibility, including rollovers to other state plans, transferability among family members, and more favorable terms for non-education withdrawals.
The planning opportunities relative to income shifting to family members may have negative repercussions in non-financial areas such as family health insurance coverage. If you have any questions regarding strategies addressed above, please do not hesitate to call.
Respectfully submitted,
KLESHINSKI, MORRISON & MORRIS, LLP Certified Public Accountants
1) You may have recently received a 2012 contribution rate determination from the Ohio Department of Job and Family Services. A voluntary payment submitted by December 31, 2011 may reduce your 2012 unemployment rate. Please forward this form to our office to enable a review of the payment amount required compared with the potential reduction in tax based on the rate change.
2) You also should have received from the Internal Revenue Service your Company’s 2012 federal tax deposit requirements. If you would like, our office will review the established tax deposit requirement for your company.
3) The FTD coupon system was eliminated in 2011 which means that all payroll related Federal Tax Deposits of the following taxes are required to be made by EFTP:
FICA taxes and withheld income taxes
FUTA taxes
Listed below are some other payroll related items to be considered:
2012
2011
FICA limit
$ 110,100
$ 106,800
State unemployment limit
9,000
9,000
Federal unemployment limit
7,000
7,000
401(k) withholding limit
17,000
16,500
401(k) catch-up contribution limit (age 50+)
5,500
5,500
Simple plan
11,500
11,500
Simple catch-up contribution limit
2,500
2,500
Medicare limit
Unlimited
Unlimited
HSA (Health Savings Account) Single Policy
3,100
3,050
HSA (Health Savings Account) Family Policy
6,250
6,150
HSA (Health Savings Account) Catch-up (age 55+)
1,000
1,000
Workers’ compensation limit
*
*
* Officers “active” in the business are subject to the minimum and maximum reporting requirements as set forth by the Ohio Bureau of Workers’ Compensation. Minimum and maximum amounts will change each calendar year. Please verify on the back of the semi-annual payroll report.
4) The state of Ohio requires that all Ohio employers, both public and private, report all newly hired, rehired or returning to work employees to the state of Ohio within 20 days of hire or rehire date. If you need further information on this or request our services to complete this new hire reporting, please call our office.
5) Workers’ compensation is limited for officers only. These officers must be elected by board action and documented in the corporate minutes.
If you are not currently in a group for workers’ compensation, you should check with your trade organization, Chamber of Commerce, or contact our office. We will be glad to supply you with a list of workers’ compensation consultants that administer group rating programs.
6) Note that the 2011 FICA tax rate is 4.2% for employees and 6.2% for employers under the Tax Relief Act of 2010. The rate is scheduled to be 6.2% for both employees and employers in 2012. However, bills currently being considered in Congress may change this.
7) 2012 Ohio Minimum Wage Increase
Non-Tipped Employees - $7.70 per hour
“Non-Tipped Employees” includes any employee who does not engage in an occupation he/she customarily and regularly receives more than thirty dollars ($30.00) per month in tips from patrons or others.
“Employers” who gross under $283,000 shall pay their employees no less than the current Federal Minimum wage rate.
“Current Federal Minimum Wage” is $7.25 per hour
Tipped Employees - $3.85 per hour Plus Tips
“Tipped Employees” includes any employee who engages in an occupation customarily and regularly receives more than thirty dollars ($30.00) per month in tips from patrons or others.
The Ohio Division of Unclaimed Funds requires that businesses file an annual unclaimed funds report. The form(s) are due on November 1, 2010 with an extension available up to March 1, 2011. You are required to file form OUF-1 even if you have no unclaimed funds to report. You can fax form OUF-1 to (614) 728-9769 or file your negative (none) report on-line at www.business.ohio.gov instead of mailing the form. The penalties for failure to file can be $100 per day and additionally, civil and criminal penalties of up to $500 per day plus interest can be imposed.
The Ohio Division of Unclaimed Funds requires that businesses file an annual unclaimed funds report. The form(s) are due on November 1, 2010 with an extension available up to March 1, 2011. You are required to file form OUF-1 even if you have no unclaimed funds to report. You can fax form OUF-1 to (614) 728-9769 or file your negative (none) report on-line at www.business.ohio.gov instead of mailing the form. The penalties for failure to file can be $100 per day and additionally, civil and criminal penalties of up to $500 per day plus interest can be imposed.
The tracking period for determining unclaimed funds is on a fiscal year basis. Checks written during the period July 1, 2008 through June 30, 2009 and have been dormant for one year as of June 30, 2010.
The areas that will impact most businesses are payroll and payable checks to individuals that have not been cashed and no contact has been made with that individual for one year. Business-to-business transactions are exempt. However, even if you do not have dormant funds, you are still required to file Form OUF-1 annually by November 1st.
Payors are required to send an OUF-8 Notice of Unclaimed Funds, or a similar notice that meets statutory requirements, to the last known address of owner or beneficiary of dormant accounts with a balance of $50.00 and less than $1,000.00 via first class mail. Payors are required to provide the mandatory notice of unclaimed funds to the owner or beneficiary of accounts with a value of $1,000.00 or more by certified mail, return receipt requested. The payor is authorized to charge up to $20.00 against each account subject to the mailing to reimburse themselves for the certified mail cost. Allow a minimum of thirty (30) days for the owner or beneficiary to respond to the notice prior to reporting their funds as unclaimed.
You should have received a postcard from the Ohio Division of Unclaimed Funds titled "Annual Report of Unclaimed Funds 2010". The postcard directs you to their website, www.com.state.oh.us/unfd, where you will find the forms necessary to file your unclaimed funds report.
If you would like our office to prepare the form(s), please supply us with the information (see the attached list) before October 15, 2010. If you choose to file them yourself we can assist you with any questions you have. Once your form has been submitted with the state, please forward a copy of the completed form to our office for our files.
If you have any questions or need our assistance with these filings please call our office at (419) 756-3211 at your earliest convenience or contact the Division directly at (614) 644-7281.
Thank you, KM&M
Information needed to prepare Unclaimed Funds Reports:
1. Listing of all checks to individuals dormant for at least one year (issued on or before June 30, 2009). Include the following for each check: a. Owner's name b. Last known address c. Social security number d. Date of transaction (check date) e. Identifying number (check number, account number, etc.) f. Type of fund (payroll, account payable) g. Amount of check
The IRS has released much-anticipated temporary and proposed regulations on the capitalization of costs incurred for tangible property. They impact how virtually any business writes off costs that repair, maintain, improve or replace any tangible property used in the business, from office furniture to roof repairs to photocopy maintenance and everything in between. They apply immediately, to tax years beginning on or after January 1, 2012.
The IRS has released much-anticipated temporary and proposed regulations on the capitalization of costs incurred for tangible property. They impact how virtually any business writes off costs that repair, maintain, improve or replace any tangible property used in the business, from office furniture to roof repairs to photocopy maintenance and everything in between. They apply immediately, to tax years beginning on or after January 1, 2012.
These so-called “repair regulations” are broad and comprehensive. They apply not only to repairs, but to the capitalization of amounts paid to acquire, produce or improve tangible property. They are intended to clarify and expand existing regulations, set out some bright-line tests, and provide some safe harbors for deducting payments.
The regulations are an ambitious effort to address capitalization of specific expenses associated with tangible property. The regulations affect manufacturers, wholesalers, distributors, and retailers—everyone who uses tangible property, whether the property is owned or leased. The rules provide a more defined framework for determining capital expenditures.
Most taxpayers will have to make changes to their method of accounting to comply with the temporary regulations and will need to file Form 3115. Taxpayers who filed for a change of accounting method following the issuance of the 2008 proposed regulations will probably have to change their accounting method again.
The IRS has promised to issue two revenue procedures that will provide transition rules for taxpayers changing their method of accounting, including the granting of automatic consent to make the change. The regulations require taxpayers to make a Code Sec. 481(a) adjustment; this means that taxpayers will have to apply the regulations to costs incurred both prior to and after the effective date of the regulations.
The new regulations provide rules for materials and supplies that can be deducted, rather than capitalized. The rules provide several methods of accounting for rotable and temporary spare parts, and allow taxpayers to apply a de minimis rule so that they can deduct materials and supplies when they are purchased, not when they are consumed.
Costs to acquire, produce or improve tangible property must be capitalized. The regulations address moving and reinstallation costs, work performed prior to placing property into service, and transaction costs. Generally, costs of simply removing property can be deducted, but costs of moving and then reinstalling property may have to be capitalized.
To determine whether a cost incurred for property is an improvement, it is necessary to determine the unit of property. Generally, the larger the unit of property, the easier it is to deduct expenses, rather than have to capitalize them. The regulations provide detailed rules for determining the unit of property for buildings and for non-building tangible property. For buildings, the IRS identified eight component systems as separate units of property, requiring more costs to be capitalized. However, the new rules also provide for deducting the costs of property taken out of service, by treating the retirement as a disposition.
The new regulations require virtually every business to review how repairs, maintenance, improvements and replacements are handled for tax purposes, with both mandatory and optional adjustments made to past treatment as appropriate.
Please feel free to call this office for a more targeted explanation of how these new regulations impact your business operations.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The fate of the employee-side payroll tax cut along with a host of tax extenders and other expired provisions could be decided in coming weeks. A conference committee of House and Senate members is negotiating a full-year extension of the payroll tax cut and could add some or all of the tax extenders to a final package. Lawmakers also could extend the payroll tax cut without acting on any tax incentives.
The fate of the employee-side payroll tax cut along with a host of tax extenders and other expired provisions could be decided in coming weeks. A conference committee of House and Senate members is negotiating a full-year extension of the payroll tax cut and could add some or all of the tax extenders to a final package. Lawmakers also could extend the payroll tax cut without acting on any tax incentives.
Payroll tax cut
The Temporary Payroll Tax Cut Continuation Act of 2011 extended the employee-side OASDI tax cut through the end of February 2012. The employee-share of OASDI taxes is 4.2 percent for the two-month period, rather than 6.2 percent. The employer-share of OASDI taxes remains at 6.2 percent for the two month period. Self-employed individuals also benefit from a two percentage point reduction in OASDI taxes.
Unless extended, the employee-share of OASDI taxes is scheduled to revert to 6.2 percent after February 29, 2012. The White House and the leaders of the two parties in Congress agree that the payroll tax cut should be extended a full-year. They disagree, however, how to pay for the extension; even if it should be paid for at all.
Congress could extend the two-month payroll tax cut through the end of 2012 without paying for it. The 2011 payroll tax cut was unfunded. Congress appropriated to the Social Security trust funds amounts equal to the reduction in payroll tax revenues. The 2011 payroll tax cut was estimated by the Congressional Budget Office cost approximately $111 billion. Extending it through the end of 2012 is estimated to cost just as much if not more.
House Republicans reportedly have proposed a number of revenue raisers to offset the cost of extending the payroll tax cut through the end of 2012. One GOP proposal would extend the current pay freeze for employees of the federal government. Another GOP proposal would require higher-income individuals to pay increased Medicare premiums.
One possible revenue raiser, increasingly under discussion by Democrats, is a change in the taxation of so-called carried interest. Current law generally taxes carried interest as capital gains and not as ordinary income. Past efforts to change the tax treatment of carried interest have failed to pass Congress.
Extenders
The so-called tax extenders, popular but temporary tax provisions, expired at the end of 2011. Many taxpayers are surprised to learn that their particular tax break, whether it be the state or local sales tax deduction, the teachers’ classroom expense deduction, or the research tax credit, are temporary. The extenders have been routinely revived many times in the past. This year, however, could be different. Faced with record federal budget deficits, lawmakers may decide to extend only some of the expired provisions.
President Obama’s FY 2013 proposals
President Obama is expected to release his fiscal year (FY) 2013 federal budget proposals in early February, which will reignite debate over the Bush-era tax cuts. President Obama is expected to urge Congress to allow the Bush-era tax cuts to expire after 2012 for higher-income taxpayers, which President Obama defines as individuals earning more than $200,000 or families earning more than $250,000. In recent weeks, there has been speculation that President Obama may revisit those definitions in his FY 2013 budget, possibly raising the amounts.
Few Capitol Hill observers expect Congress to take any action on the Bush-era tax cuts before the November elections. Instead, Congress may take up some of President Obama’s other proposals. As in past budgets, President Obama will likely propose to extend some energy tax breaks for individuals and businesses, extend tax incentives for education and provide some targeted-tax breaks to businesses. President Obama has also promised to introduce proposals to encourage U.S. companies to “insource” jobs at home.
On some issues, such as energy and education, lawmakers may find common ground but negotiations are likely to go down to the wire. Our office will keep you posted of developments.
If you have any questions about the payroll tax cut, tax extenders or the various tax proposals under discussion, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The IRS reopened its offshore voluntary disclosure program in early 2012 in response to what the government described as strong interest among taxpayers. The reopened program, the third of its type in recent years, encourages taxpayers with unreported foreign accounts to make full disclosures in exchange for a reduced penalty framework. Like its predecessors, the terms and conditions of the reopened program are very complex. The IRS has promised to provide more details. In the meantime, the prior offshore disclosure programs are guides to how the IRS intends to implement the third, reopened program.
The IRS reopened its offshore voluntary disclosure program in early 2012 in response to what the government described as strong interest among taxpayers. The reopened program, the third of its type in recent years, encourages taxpayers with unreported foreign accounts to make full disclosures in exchange for a reduced penalty framework. Like its predecessors, the terms and conditions of the reopened program are very complex. The IRS has promised to provide more details. In the meantime, the prior offshore disclosure programs are guides to how the IRS intends to implement the third, reopened program.
Previous disclosure programs
The IRS launched two previous offshore disclosure initiatives: one in 2009 and another in 2011. Both programs offered reduced penalties in exchange for full disclosure. In early 2012, the IRS reported it received 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. The government has collected over $4.4 billion from the 2009 and 2011 programs. The IRS predicted it will collect more revenue as it continues to work cases.
Reopened program
The reopened program operates very similarly to the 2009 and 2011 programs but with some key differences. The previous programs were temporary. The 2011 program ended in mid-September 2011. The reopened program has no set end date. The IRS cautioned, however, that it could close the program at some future date. The decision to end the program is solely at the discretion of the IRS.
The reopened program requires taxpayers to file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties. Additionally, taxpayers must pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. In comparison, the highest penalty in the 2011 program was 25 percent. IRS officials have said that the penalty was increased because the agency does not want to reward taxpayers who did not participate in the 2009 or 2011 disclosure programs because they anticipated that a future penalty would be lower.
In limited circumstances, taxpayers may qualify for a 12.5 percent penalty or a five percent penalty. Generally, taxpayers whose offshore accounts or assets did not surpass $75,000 in any calendar year may qualify for the 12.5 percent penalty.
The requirements for the five percent penalty are very narrow. The IRS has explained that taxpayers must meet four conditions: (1) The taxpayer did not open or cause the account to be opened; (2) the taxpayer exercised minimal, infrequent contact with the account, for example, to request the account balance, or update account holder information such as a change in address, contact person, or email address; (3) except for a withdrawal closing the account and transferring the funds to an account in the United States, the taxpayer did not withdraw more than $1,000 from the account in any year for which the taxpayer was non-compliant; and (4) the taxpayer can show that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation).
The penalty amounts in the reopened program are not set in stone, the IRS cautioned. It may eventually increase penalties in the program for all or some taxpayers or defined classes of taxpayers.
Quiet disclosures
One goal of the three programs is to caution taxpayers against so-called “quiet disclosures.” A quiet disclosure occurs when a taxpayer files an amended return and pays any tax delinquency without making a formal voluntary disclosure. The IRS warned taxpayers making quiet disclosures that they risked being sanctioned to the fullest extent allowed by law.
Critics
The offshore disclosure programs were not without their critics. The National Taxpayer Advocate recently told Congress that the IRS should streamline what is a very complicated process. The National Taxpayer Advocate also reported that IRS examiners were assuming that all violations were willful unless a taxpayer presented evidence to the contrary. It is possible that the IRS may revisit some of the terms and conditions of the reopened program in light of the National Taxpayer Advocate’s report.
If you have any questions about the reopened offshore voluntary disclosure program, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
Taxpayers with children should be aware of the numerous tax breaks for which they may qualify. Among them are: the dependency exemption, child tax credit, child care credit, and adoption credit. As they get older, education tax credits for higher education may be available; as is a new tax code requirement for employer-sponsored health care to cover young adults up to age 26. Employers of parents with young children may also qualify for the child care assistance credit.
Taxpayers with children should be aware of the numerous tax breaks for which they may qualify. Among them are: the dependency exemption, child tax credit, child care credit, and adoption credit. As they get older, education tax credits for higher education may be available; as is a new tax code requirement for employer-sponsored health care to cover young adults up to age 26. Employers of parents with young children may also qualify for the child care assistance credit.
Dependency Exemption
In addition to the personal exemption an individual taxpayer may take for him or herself to reduce taxable income (Line 42 on Form 1040), that taxpayer may also take an exemption for each qualifying dependent who has lived with the taxpayer for more than half of the tax year. A dependent may be a natural child, step-child, step-sibling, half-sibling, adopted child, eligible foster child, or grandchild, and generally must be under age 19, a full-time student under age 24, or have special needs. The amount of the exemption is the same as the taxpayer’s personal exemption, $3,700 for the 2011 tax year and $3,800 for the 2012 tax year.
Child Tax Credit
Parents of children who are under age 17 at the end of the tax year may qualify for a refundable $1,000 tax credit. The credit is a dollar-for-dollar reduction of tax liability, and may be listed on Line 51 of Form 1040. For every $1,000 of adjusted gross income above the threshold limit ($110,000 for married joint filers; $75,000 for single filers), the amount of the credit decreases by $50.
Child and Dependent Care Credit
If a taxpayer must pay for childcare for a child under age 13 in order to pursue or maintain gainful employment, he or she may claim up to $3,000 of his or her eligible expenses for dependent care. If one parent stays home full-time, however, no child care costs are eligible for the credit.
Adoption Credit
Taxpayers who have incurred qualified adoption expenses in 2011 may claim either a $13,360 credit against tax owed or a $13,360 income exclusion if the taxpayer has received payments or reimbursements from his or her employer for adoption expenses. For 2012, the amount of the credit will decrease to $12,650, and in 2013 to $5,000.
Higher Education Credits
There are two education-related credits available for 2012: the American Opportunity credit and the lifetime learning credit. The American Opportunity credit amount is the sum of 100 percent of the first $2,000 of qualified tuition and related expenses plus 25 percent of the next $2,000 of qualified tuition and related expenses, for a total maximum credit of $2,500 per eligible student per year. The credit is available for the first four years of a student's post-secondary education. The credit amount phases out ratably for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for joint filers). The lifetime learning credit is equal to 20 percent of the amount of qualified tuition expenses paid on the first $10,000 of tuition per family. The phaseout for 2012 ranges from $52,000 to $62,000 ($104,000 to $124,000 for joint filers). Parents also find tax relief in saving for college though Coverdell accounts, section 529 plans and specified U.S.. savings bonds.
Extended Health Care Coverage
Effective since September 23, 2010, the new health care law requires plans to provide coverage for children until they attain age 26. Further, effective on or after March 30, 2010, children under the age of 27 are considered dependents of a taxpayer for purposes of the general exclusion from income for reimbursements for medical care expenses of an employee, spouse, and dependents under an employer-provided accident or health plan. Therefore, a plan must provide coverage to a child who is still a dependent up to age 26; but can do so up to age 27 without income tax consequences. A child includes a son, daughter, stepson, or stepdaughter of the taxpayer; a foster child placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction; and a legally adopted child of the taxpayer or a child who has been lawfully placed with the taxpayer for legal adoption.
Child Care Assistance Credit (for businesses)
Employers may take up to $150,000 of the eligible costs of providing employees with child care assistance as tax credit. These costs may include a portion of the costs of acquiring, constructing, improving, and operating a child care facility.
If you have any questions about these provisions and how they may benefit you, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The Treasury Department is authorized to offset a taxpayer’s tax refund to satisfy certain debts. A spouse who believes that his or her portion of the refund should not be used to offset the debt that the other spouse owes may request a refund from the IRS.
The Treasury Department is authorized to offset a taxpayer’s tax refund to satisfy certain debts. A spouse who believes that his or her portion of the refund should not be used to offset the debt that the other spouse owes may request a refund from the IRS.
Offset
If an individual owes money to the federal government because of a delinquent debt, the Treasury Department’s Financial Management Service (FMS) can offset that individual's tax refund (and certain other federal payments) to satisfy the debt. The debtor will be notified in advance of the offset.
A taxpayer’s refund may be reduced by FMS and offset to pay:
Past-due child support
Federal agency non-tax debts
State income tax obligations, or
Certain unemployment compensation debts owed a state.
FMS advises taxpayers by written notice of an offset. FMS has explained that the notice will reflect the original refund amount, the taxpayer’s offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund.
Form 8379
If a taxpayer filed a joint return and is not responsible for the debt of his or her spouse, the taxpayer may request his or her portion of the refund by filing Form 8379, Injured Spouse Allocation, with the IRS. Form 8379 may be filed with the original return or by itself after the taxpayer is aware of the offset.
The IRS has instructed taxpayers filing Form 8379 by itself to attach a copy of all Forms W-2 and W-2G for both spouses, and any Forms 1099 showing federal income tax withholding to Form 8379. Failure to attach these items may result in a delay in processing by the IRS.
The IRS has reported on its website that it generally processes Forms 8379 that are filed after a joint return has been filed in approximately eight weeks. The timeframe for processing a Form 8379 that is attached to a joint return is approximately 11 weeks (14 weeks if the joint return is filed on paper).
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2012.
As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2012.
February 1
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 25–27.
February 3
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 28–31.
February 8
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 1–3.
February 10
Employees who work for tips. Employees who received $20 or more in tips during November must report them to their employer using Form 4070.
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 4–7.
February 15
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 8–10.
Monthly depositors. Monthly depositors must deposit employment taxes for payments in January.
February 17
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 11–14.
February 23
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 15–17.
February 24
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 18–21.
February 29
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 22–24.
March 2
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 25–28.
March 7
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 29–March 2.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
