Monthly Archives: January 2012

2012 January Tax Update

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Jan, 2012 Newsletter

JANUARY 2012 TAX UPDATE BUSINESS OWNERS IMPORTANT !!

This January newsletter contains important information for all business owners including corporate, partnership and sole proprietorships (Schedule C filers).

IRS just released in its 2011 final tax return drafts with new checkboxes that require an answer to file:

  • Did you make any payments in 2011 that would require you to file form(s) 1099?
  • If “Yes”, did you or will you file all required forms 1099?

Consequently, if a taxpayer has a labor or subcontractor expense IRS will be looking for forms 1099 and could possibly be programming computers for automatic audit selection if certain criteria are met.

Of course, I always want everyone to follow the proper procedures regardless of the IRS checks. This year please remember the 1099 rules are expected to be fully enforced by IRS. These rules for payments do not apply if the one you are paying is a corporation (for 2012 only at this time).

These 1099 forms are generally due by January 31. If you have not prepared to process these, we can do them for you, or you can purchase a 1099 “kit” from most office supply stores.

IRS guidelines for issuing 1099-MISC forms are below (courtesy of our dear friends at the US Treasury):

What to Report: For 2011 for payment made to a “non-corporation” vendor or subcontractor:

  • Payments for rental property expenses.
  • Payments to a physician, physicians’ corporation, or other supplier of health and medical services. Issued mainly by medical assistance programs or health and accident insurance plans.
  • Payments for services performed for a trade or business by people not treated as its employees. Examples: fees to subcontractors or directors and golden parachute payments
  • Fish purchases paid in cash for resale.
  • Crop insurance proceeds.
  • Gross proceeds paid to attorneys. (Due to IRS February 15th)
  • Amounts to Report: $600 or more

What to Report:

  • Payments to crew members by owners or operators of fishing boats including payments of proceeds from sale of catch.
  • Section 409A income from nonqualified deferred compensation plans (NQDCs).
  • Amounts to Report: All Amounts

What to Report: Substitute dividends and tax-exempt interest payments reportable by brokers Amounts to Report: $10 or more (Due to Recipients by February 15th**

Due Date to IRS (unless indicated otherwise): February 28th*Due Date to Recipient (unless indicated otherwise): January 31**

Payment Types: (most common are underlined)

  • Attorney, fees and gross proceeds
  • Auto reimbursements, nonemployee
  • Awards, nonemployee
  • Bonuses, nonemployee
  • Car expense, nonemployee
  • Commissions, nonemployee
  • Compensation, nonemployee
  • Crop insurance proceeds Damages
  • Direct sales of consumer products for resale
  • Directors’ fees
  • Fees, nonemployee
  • Fishing boat crew members proceeds
  • Fish purchases for cash
  • Golden parachute, nonemployee
  • Health care services
  • Indian gaming profits paid to tribal members
  • Medical service
  • Nonemployee compensation
  • Nonemployee prizes
  • Nonemployee punitive damages
  • Rental Expense or Income
  • Vacation allowance, nonemployee
  • Royalties
  • Substitute payments in lieu of dividends or tax-exempt interest

OTHER TAX MATTERS

For businesses, starting next year IRS will require a list of income sources (cash or check, credit card and other electronic payments such as PayPal and Google). I am mentioning this now so clients may adjust their bookkeeping system to identify and group sources of income (how paid). The big change is credit card and electronic payments. Anyone who accepts these forms of payment should expect to receive a 1099-K from their bank or merchant processor for 2011 payments. IRS will not match these for now, but will for the 2012 tax year. INDIVIDUALS Schedule D (capital gains) has up to three additional forms to prepare since cost basis along with gain/loss will be reported on the 1099-B from your brokerage house.

Mortgage interest deductions are subject to more scrutiny. There are limits in place based on the original purchase price of your home/building plus improvements. We may have to perform calculations to report the correct deduction for you.

Reminder: If you desire an appointment with me and have not booked your appointment for 2012, kindly do so as soon as possible. The schedule is filling up rapidly!

Effective January 9, 2012 our office is open extended hours through April 17 (deadline for individuals).

Very truly yours,

Henry

HENRY C KULIK, JR.
CERTIFIED PUBLIC ACCOUNTANT,LLC
114 Merriam Ave; Suite 201
Leominster, MA 01453
978-514-8829
www.henrykulik.com