HAEFELE
FLANAGAN
CERTIFIED PUBLIC ACCOUNTANTS AND
CONSULTANTS
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Payroll Tax Highlights
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Services Tax
Tips Record Retention Career Opportunities The Buzz 2011 Mileage Rate Change Effective
July 1, 2011, the standard mileage rate will increase to 55.5 cents. The Internal Revenue Service is revising
the optional standard mileage rates for computing the deductible costs of operating
an automobile for business, medical, or moving expense purposes and for
determining the reimbursed amount of these expenses that is deemed
substantiated. This modification results from recent increases in the
price of fuel. The revised standard mileage rates are 55.5 cents per
mile for business use of an automobile and 23.5 cents for use of an
automobile as a medical or moving expense. The mileage rate for use of
an automobile as a charitable contribution is fixed by statute and remains 14
cents. The revised standard mileage rates apply to deductible
transportation expenses paid or incurred for business, medical, or moving
expense purposes on or after July 1, 2011, and to mileage allowances that are
paid both (1) to an employee on or after July 1, 2011, and (2) for
transportation expenses an employee pays or incurs on or after July 1,
2011. Health Care Act Update Tax Free Employer Provided Health Coverage Available for Children
under Age 27 As a result of changes made by the Affordable Care Act, health
coverage provided for an employee's children under 27 years of age is now
generally tax-free to the employee, effective March 30, 2010. These changes
immediately allow employers with cafeteria plans to permit employees to amend
their deferral elections and begin making pre-tax contributions to pay for
their children who are under age 27. On January
1, 2009, IRS Regulation 7216 came into effect. The regulation updates the rules regarding the
disclosure and use of tax return information by tax return preparers. It is intended to protect confidential
financial or contact information from being given out to and used by third
parties. Accordingly, we are not
permitted to transfer that data to a third party without obtaining the
express written consent of the taxpayer. Click here to obtain a copy of the Consent Form. Waiver of Required Minimum
Distributions for 2009 For 2009,
the required minimum distributions generally applicable to retirement plans
are suspended with respect to defined contribution arrangements, including
IRAs, (as added by the Worker, Retiree, and Employer Recovery Act of
2008). Thus, for 2009, the required
minimum distribution rules do not apply to any qualified defined contribution
plan (under Code Sec. 401(a)), any defined contribution qualified annuity
plan (under Code Sec. 403(a)) or tax-sheltered annuity plan (under Code Sec.
403(b)), any defined contribution plan that is an eligible deferred
compensation plan of a government employer (under Code Sec. 457(b)), or any
traditional or Roth IRA (under Code Sec. 408 and Code Sec. 408A). As a result, plan participants and
beneficiaries will not be required by law to take required minimum distributions
for 2009.
NJ Paid Family Leave – Get Your Posters Now For employers in To help explain the program, and educate employees as to their
new rights, the New Jersey Department of Labor and Workforce Development has
just proposed extensive regulatory guidance on its website at http://lwd.dol.state.nj.us/labor/fli/fliindex.html.
A mandatory poster also has been developed (you can find it at http://lwd.dol.state.nj.us/labor/forms_pdfs/tdi/fli_poster.pdf.),
and must be posted by covered employers by December 15, 2008, and distributed
to all employees (in paper form or electronically), as well as to new hires
at the time of hire. Deduction: Health Insurance Premiums: S
Corporation: Two Percent Shareholder An S Corporation is a pass-through entity that is treated very
much like a partnership for federal income tax purposes. Because an S corporation has a unique tax
structure, it is important for S corporations and their shareholders to
understand how and when items of income and expenses are taxed. An important issue that is often overlooked
is reporting of health insurance premiums paid by S corporations on behalf of
more than two percent shareholder-employees. The IRS released special rules regarding the deduction by more
than two-percent shareholder-employees of S corporations of health insurance
premiums that are paid by or reimbursed by the S corporations and included in
the shareholders’ income. A more than
two-percent shareholder-employee may deduct amounts paid for insurance under
Code Sec. 162(l) if the insurance plan was established by the S
corporation. A plan is considered to
be established by the S corporation if the S corporation makes the premium
payments in the current tax year or the more than two-percent shareholder
makes the premium payments and is, then, reimbursed by the S corporation in
the current tax year. Payments, whether made directly by the S
corporation or reimbursed by the S corporation, must be included in the
shareholder’s wages and reported on the shareholder’s Form W-2, Wage and Tax
Statement. The shareholder reports
that amount as gross income on Form 1040 for 2008. The shareholder-employee can take a deduction in computing
adjusted gross income on line 29, Self-employed health insurance deduction,
of Form 1040 for amounts paid during the taxable year for insurance that
constitutes medical care for the taxpayer, his or her spouse, and dependents. New Jersey --Corporate Income
Tax: New Jersey eliminates the "throwout" rule for
corporation business tax apportionment purposes. The removal ("throwout") of sales assigned to states
where the corporation is not subject to tax from the denominator of the sales
fraction increases the fraction, which increases the portion of the entire
net income of a corporation apportioned to §
Allow businesses to carry forward net
operating tax losses for up to 20 years for net operating losses (currently,
New Jersey allows net operating loss carryforwards for seven years) for
periods ending after 6/30/09. Website Taxpayer
Identification Number (TIN) Matching TIN
Matching is part of a suite of internet based pre-filing e-services that
allow “authorized payers” the opportunity to match 1099 payee
information against IRS records prior to filing information returns. An
authorized payer is one who has filed information returns with the IRS in at
least one of the two past tax years. Interactive TIN Matching will accept
up to 25 payee TIN/Name combinations on-screen while Bulk TIN Matching will
allow up to 100,000 payee TIN/Name combinations to be matched via a text file
submission. Both
programs will:
The
TIN Matching system is accessible 24 hours a day, 7 days a week.
Support services include an on-line tutorial to assist customers with the
registration, application and TIN Matching process. E-services customer
assistors are also available toll-free at 1-866-255-0654, 8:30 a.m. to 7:00
p.m., EST, Monday through Friday. E-services users must register to have access to products such as
TIN Matching. To get started using TIN Matching, please visit our e-services. Social Security Number
Verification Service There are two Internet verification options you can use to verify
that your employee names and Social Security numbers match Social Security’s
records. Verify up to 10 names and SSNs (per screen) online and receive
immediate results. This option is
ideal to verify new hires. Upload overnight files of up to 250,000 names and SSNs and
usually receive results the next government business day. This option is ideal if you want to verify
an entire payroll database or if you hire a large number of workers at a
time. While the service is available to all employers and third-party
submitters, it can only be used to verify current or former employees and
only for wage reporting (W-2) purposes. The website for the Social Security Number Verification Service
is – www.socialsecurity.gov/employer/ssnv.htm IRS Reminds Taxpayers
About Hobby Loss Rule The IRS has released a fact sheet (FS-2008-23) to help taxpayers
determine whether an activity is engaged in for profit or merely as a hobby. The
fact sheet discusses the hobby loss rules and lists several non-inclusive
factors to be considered when making this determination, including: §
Does the time and effort put into the
activity indicate an intention to make a profit? §
Do you depend on income from the activity? §
If there are losses, are they due to
circumstances beyond your control or did they occur in the start-up phase of
the business? §
Have you changed methods of operation to
improve profitability? §
Do you have the knowledge needed to carry on
the activity as a successful business? §
Have you made a profit in similar activities
in the past? §
Does the activity make a profit in some
years? §
Do you expect to make a profit in the future
from the appreciation of assets used in the activity? If an activity is not for profit, losses from that activity may
not be used to offset other income and deductions cannot exceed the gross
receipts from the not for profit activity. New IRS Regulations –
Deemed Election to Amortize Start-up Expenses & Organizational Costs The IRS has issued final, temporary and proposed regulations that
eliminate the requirement to file an election statement in order to deduct
start-up and organizational expenses. Effective for expenses paid or incurred after September 6, 2008,
taxpayers are not required to file a separate election statement to deduct
costs under IRC § 195, IRC § 248, or IRC § 709. Instead, taxpayers are deemed to have made
the appropriate election for the year in which the active trade or business
begins, or the year in which the corporation or partnership begins business. A taxpayer may irrevocably choose to forgo the deemed election by
clearly electing to capitalize its start-up or organizational expenses on a
timely-filed Federal income tax return (including extensions) for the tax
year in which the active trade or business begins. IRS issues temporary
regulations that reduce the extension period The IRS has issued temporary regulations that reduce, from six
months to five months, the automatic extension period for partnerships filing
Form 1065, U.S. Partnership Return of Income, or Form 8804, Annual Return for
Partnership Withholding Tax, and estates and trusts filing Form 1041, U.S.
Income Tax Return for Estates and Trusts.
This one-month reduction in the six-month extension period is
effective for returns due on or after January 1, 2009. Save Those Receipts – New
rules for Charitable Donations It has always been a good idea to keep proper documentation of
tax deductible expenses, and now Congress has added a new motivator. New rules were added by the Pension
Protection Act of 2006 for individuals making charitable contributions in tax
years beginning with 2007. Any
taxpayer claiming such deductions must now be prepared to prove that the
contributions were actually made, in the amounts claimed on the tax return. <read more> Caution: Beware of the Kiddie Tax! The Small Business and Work Opportunity Tax Act of 2007 (2007 Small
Business Act) includes a provision that raises the "kiddie tax" age
from under 18 to under 19 (or under age 24, for students) after 2007. <read more> Increased Password Complexity for EFTPS As an additional
security measure, EFTPS online will increase the complexity of passwords
beginning February 7, 2008. Passwords must be 8 to 12 characters long,
composed of the following character types: ·
Uppercase Alpha (A, B, C, etc.) ·
Lowercase Alpha (a, b, c, etc) ·
Numeric (1,2,3, etc) or the following
Special Characters (!, @, #, $, *, +, -). Each
password must contain UPPERCASE AND LOWERCASE ALPHA CHARACTERS at least one
character that is either a numeric or a Special Character. For more
information go to www.eftps.com New Federal Wage Posting
Requirements Effective
July 24, 2007, the Department of Labor requires all employers, regardless of
size to post the most recent Minimum Wage poster, even if your state's
minimum wage differs. Find more information and a copy of the poster at
www.dol.gov/elaws/posters.htm
Pennsylvania residents -
Federal Posting Notice For All Employers For more information about the Uniformed Services Employment and Reemployment Act (USERRA) Notification Requirement click here
Changes in filing New Jersey Annual Report New Jersey is mandating electronic filing of Form CAR-100 for corporations, limited liability companies, limited liability partnerships and limited partners click here for more info
Flexible Spending Accounts IRS extends use it or lose it deadline for Employees' Flexible Spending Accounts - click here for details
Qualified Retirement Plan Alert Employers who sponsor qualified retirement plans, such as 401(k) or profit sharing plans, should be aware of a new requirement concerning automatic distribution of account balances click here to learn more
New Banking Legislation Alert Congress passed the Check 21 Act, allowing banks to transfer funds using electronic facsimiles of checks. To learn more about the Check 21 Act - click here
U.S. Supreme Court Allows IRS to Use Aggregate Method to
Determine FICA Tax Liability on Tip Income As a result of a recent United States Supreme Court case, many employers
who include income from tips in their FICA tax calculation may be
significantly understating their FICA tax liability. For the full story click here |