HAEFELE
FLANAGAN
CERTIFIED PUBLIC ACCOUNTANTS AND
CONSULTANTS
|
Payroll Tax Highlights
|
About Us
Services Tax
Tips Record Retention Career Opportunities The Buzz City Update –
Philadelphia Wage Tax Rates to Decrease effective July 1 2010 The City of Philadelphia Department of Revenue has announced that
the wage tax rates are being reduced effective July 1, 2010 through December
31, 2010. As of July 1, 2010, the rate
for Philadelphia residents will decrease from 3.9296% to 3.928% and Philadelphia,
non-residents will decrease from 3.4997% to 3.4985%. Minimum Wage Is Going Up Effective July 24, 2009, the last of the scheduled increases to the
federal minimum wage will take effect. The federal minimum wage will increase
to $7.25 per hour. The City of Philadelphia
Wage Tax Rate is Reduced Effective July 1, 2009, the IRS Regulation 7216 – Consent to
Disclose Tax Return Information 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. The New Jersey Assembly passed proposed legislation that would
eliminate 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 Similar legislation was introduced in the state Senate on October
27, 2008. The elimination of the "throwout" rule was part of
the package proposed by Governor Corzine, which also includes the adoption of
combined reporting. New Jersey Governor Jon
Corzine has proposed an economic stimulus package to a joint session of the
Legislature that contains the following tax proposals: §
support for pending legislation to allow
businesses to carry forward net operating tax losses for up to 20 years
(currently, §
support for the elimination of the
"throw out" rule and the regular place of business designation; §
a move toward a single sales factor tax
computation; §
a two-year job creation incentive program
targeted at businesses with 500 or fewer employees. The proposal would
provide small to mid-size businesses in the state with a $3,000 incentive for
each new full-time job they create and retain for one year; §
a sales tax credit for qualifying capital
investments; and §
a change in the senior property tax freeze
program by increasing the income eligibility cap to $80,000 over the next
three years, up from the present ceiling of $53,000. 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. 2008
Economic Stimulus Payment Schedule The
IRS has announced that, starting May 2, it will begin sending more than 130
million taxpayers economic stimulus payments.
Payments will be deposited or mailed weekly through July 11. Taxpayers can determine the projected
amount of their payment by using a calculator located on the IRS website at irs.gov Economic Stimulus Act of 2008 President Bush has signed the
Economic Stimulus Act of 2008 (the Act) which is intended to infuse $152
billion into the economy to help the nation avoid sliding into recession.<read
more> 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. IRS Increases Mileage
Rates through December 31, 2008 On June 23, 2008 the Internal Revenue Service announced that it
would be increasing the standard mileage rate for the final six months of
2008. <read more> 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> Social Security
Administration Issues Incorrect 1099’s The Social Security Administration has informed the IRS that 2.5
million SSA 1099’s were issued in error and that corrected forms are
scheduled to be issued the week of January 25, 2008. 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
Increase in Federal Minimum Wage On May 25, President Bush signed a spending bill that, among other things, amended the Fair Labor Standards Act (FLSA) to increase the federal minimum wage in three steps: to $5.85 per hour effective July 24, 2007, $6.55 per hour effective July 24, 2008 and $7.25 per hour effective July 24, 2009.
In January, the Pennsylvania Department of Revenue mailed incorrect Forms 1099-G and 1099-INT that contained information for PA refunds and PA interest paid in 2005, rather than 2006. Corrected 1099-G and 1099-INT forms will be mailed by February 9, 2007
Pension Protection Act of 2006 This significant tax legislation was signed into law by the President on August 17, 2006. The new law is designed to not only strengthen traditional defined benefit pension plans, but also improve and extend many retirement plans, provided by IRA's, 401(k) and other defined contribution plans. click here for the full story.
President Bush Signs $70 Billion Tax Relief Reconciliation Bill The Tax Increase Prevention and Reconciliation Act (Tax Reconciliation Act), signed into law on 5/18/06, provide benefits to business, investors, and middle-class alternative minimum tax relief. click here for details.
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 for corporations, limited liability companies, limited liability partnerships and limited partners click here for more info
Important Information for S Corporations Beginning in late 2005, the IRS will introduce a study to evaluate the reporting compliance of S corporations. click here for details.
Increase in Effective October 1, 2005, the hourly minimum wage is $6.15 per hour. The next increase will be effective on October 1, 2006, when it will be raised to $7.15 per hour - click here for details.
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
The American Jobs Creation Act of 2004 President Bush has signed the American Jobs Creation Act. To find out how it affects you - click here
To find out about tax changes in
Governor Jim McGreevey approves decoupling NOL Changes - click here to find out more
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 |