June, 2011 Newsletter
Hello everyone and happy summer!
A few things have happened since tax season:
President Obama has signed the law that removes the new 1099 filing requirement I spoke of in earlier newsletters. This law would have been a burden on small business, forcing everyone to 1099 Staples, Home Depot, etc. Now, the old law remains which states that a 1099-MISC must be issued to anyone that is not a corporation if they are paid $600 or more in a calendar year.
Tax deadlines: Estimated tax payments- bothFederal and MA are due June 15, 2011 (2nd quarterly); Corporate and Partnership tax returns on extension are due September 15; Trust and Individual tax returns are due October 15, 2011.
Business automobile mileage: The IRS recently stated that the rate will remain unchanged at 51 cents per mile for 2011. IRS is keeping an eye on this, however.
Gift tax return enforcement: A gift tax return is due to be filed if amounts over the annual exclusion ($13,000 for 2011) are gifted to anyone other than a spouse or charity. IRS is now looking closely at inter-family real estate transactions for $1 or little/no consideration. Less than Fair Market Value could establish a “gift”; also looking at those who give super generously to political organizations that quietly purchase political TV ads and such.
Subcontractor or employee? If the IRS forces a reclassification from a 1099 subcontractor to W2 employee many things could follow.
A) Any SEP contributions are retroactively disallowed that the employee made, plus penalties, excise tax for over-contributing (since $0 was allowed) and interest compounded daily.
B) IRS can retroactively make the “employer” pay all the federal income tax that should have been withheld and both sides (employee/employer) of the FICA tax (15.3%) plus of course a 100% penalty and interest! A link to the IRS guide “Independent Contractor or Employee?” Is below. If you have any questions, or need help getting payroll prepared, please contact the office. We do not prepare payroll in-house, but we have several fantastic Payroll Service providers that prepare payroll for any company, any size and prepare all of those ugly reports for you! Link is: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
Federal health care law: After 2013, if an individual does not have health insurance but is deemed able to afford it, a tax penalty of $95 to $285 will be assessed. We do not yet know if this is in addition to the current Massachusetts penalty but there also is an employer penalty if health insurance is not offered.
New tax: To help “pay” for the health insurance laws, a “surtax” of 3.8% will apply to all income (including capital gains) if your income is $200,000 or greater. IRS is getting ready for another tax of 40% if you are self insured and your plan costs too much. More on that later…
“Ebay tax”; This year (2011=NOW) Ebay/Paypal sellers who have over 200 transactions and sell in excess of $20,000 this year will receive a 1099 from Paypal/Ebay. This can make tax returns more complicated as some people sell off old household items, while others are involved in an active business. Starting in 2012 (about 6 months away) if you have more than 200 transactions, you will be required to give your social security or tax identification number to the person paying you or Paypal. If you don’t, a 28% federal tax withholding is mandated. Credit card companies must also withhold if you do not provide them a valid tax ID. They want the number so you can receive a 1099!
New IRS audit targets and projects: Next time you meet with me, I will let you know who the latest targets are. Please use checks or credit cards to purchase your deductible items so we can prove it if necessary. Receipts should be kept filed by the year.
If you have any questions, please call the office and/or schedule an appointment.
HENRY C KULIK, JR.
CERTIFIED PUBLIC ACCOUNTANT,LLC
114 Merriam Ave; Suite 201
Leominster, MA 01453