IRS has stated during its Nov. 10 payroll industry conference call that it is unlikely that any 2011 withholding tables will be issued this month. The percentage method withholding tables are usually issued in November to give payroll professionals sufficient time to get the tables into their computer systems before the new rates go into effect in January.
However, this year the tables will not be issued until Congress decides whether to adjust the tax rates.
Thursday, November 18, 2010
Tuesday, November 16, 2010
CHECK YOUR EMPLOYEE HEALTH PLAN
Firms face a stiff penalty if their insured health plans are discriminatory. You will owe a $100-a-day excise tax for each person discriminated against. In the past, only self-insured medical plans were subject to nondiscrimination rules, but the health reform law expanded the rules reach to insured group health plans.
Generally, plans must benefit 70% or more of employees, not counting workers with fewer than three years of service and those under age 25 and part-time workers. Additionally benefits for highly compensated workers,...one of the five highest paid officers, the top 25% of paid workers or owners of over 10% of the firm...must also be given to the rank and file.
The rules are effective for plan years beginning after September 22, 2010. Existing plans are protected unless they are changed significantly, such as by raising the percentage of medical bills that employees are responsible for or boosting deductibles by more than 15% plus the rate of inflation for health care.
All insured health arrangements should be checked in light of these rules, including employment and severance agreements giving execs special health benefits.
Generally, plans must benefit 70% or more of employees, not counting workers with fewer than three years of service and those under age 25 and part-time workers. Additionally benefits for highly compensated workers,...one of the five highest paid officers, the top 25% of paid workers or owners of over 10% of the firm...must also be given to the rank and file.
The rules are effective for plan years beginning after September 22, 2010. Existing plans are protected unless they are changed significantly, such as by raising the percentage of medical bills that employees are responsible for or boosting deductibles by more than 15% plus the rate of inflation for health care.
All insured health arrangements should be checked in light of these rules, including employment and severance agreements giving execs special health benefits.
Friday, November 5, 2010
HERE ARE MY THOUGHTS ON THE TAX RAMIFICATIONS OF THE ELECTION
It's finally official. The Republicans have taken over the House of Representatives and clawed away much of the Democrats' edge in the Senate. As I gaze into my crystal ball, here are my latest thoughts on what we can expect from the new Congress. But don’t take this to the bank… remember I was the guy that said the Congress would never allow the estate tax to lapse in 2010. Boy was I wrong. Here are my thoughts:
• Most tax accountants have been skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts (even just for those earning under $250,000) in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all. http://www.cnbc.com/id/40007621
• Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.
Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. We have been doing several pre tax appointments and so far, if they do not do the patch, we only had one client that was not paying the additional Alternative Minimum Tax. It could get ugly.
• The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.
• Republican leaders insist they plan to repeal the Legislation that Washington refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically; the requirement that all business file 1099s for all purchases over $600.
Some clients are breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. Don’t bury your heads in the sand. Recognize this economic inevitability and realize that continued gridlock means uncertainty — and even mere uncertainty not only makes it hard to tax plan but impacts the economy.
• Most tax accountants have been skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts (even just for those earning under $250,000) in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all. http://www.cnbc.com/id/40007621
• Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.
Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. We have been doing several pre tax appointments and so far, if they do not do the patch, we only had one client that was not paying the additional Alternative Minimum Tax. It could get ugly.
• The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.
• Republican leaders insist they plan to repeal the Legislation that Washington refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically; the requirement that all business file 1099s for all purchases over $600.
Some clients are breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. Don’t bury your heads in the sand. Recognize this economic inevitability and realize that continued gridlock means uncertainty — and even mere uncertainty not only makes it hard to tax plan but impacts the economy.
Wednesday, November 3, 2010
JUST BECAUSE YOU ARE DEAD DOESN'T MEAN THAT THE GOVERNMENT WON'T SEND YOU A CHECK
Last Sunday was Halloween and for some reason we had an exorbitant number of kids dressed up as zombies. It felt like the night of the living dead, which for some reason made me think about taxes and the federal government. You see the federal government does not apparently believe in death. For some reason they keep sending money to dead people. Maybe that's why we had so many zombies at our door begging for candy. Here is proof that the government does not believe that people die.
Remember those $250 stimulus checks? An investigation found that $18 million of those checks were sent to 71,688 deceased individuals. While some percentage of those checks were mailed out because SSA had not been informed that the taxpayers had died, an alarming number of the beneficiaries were actually accurately reported as deceased. In fact, in 2008, SSA paid deceased beneficiaries a whopping $40.3 million in benefits even after being notified of those deaths.
The beleaguered Department of Housing and Urban Development paid out more than $15.2 million in to households in 2008 to program households containing at least one deceased tenant. This included $7 million sent to single-member households whose only “family” was a deceased individual.
Scary, huh? The report goes on to cite examples of poor oversight and waste in other programs, including Medicare and Medicaid.
You can find the report on Senator Coburns oversight link below.
http://coburn.senate.gov/public/?p=OversightAction
Remember those $250 stimulus checks? An investigation found that $18 million of those checks were sent to 71,688 deceased individuals. While some percentage of those checks were mailed out because SSA had not been informed that the taxpayers had died, an alarming number of the beneficiaries were actually accurately reported as deceased. In fact, in 2008, SSA paid deceased beneficiaries a whopping $40.3 million in benefits even after being notified of those deaths.
The beleaguered Department of Housing and Urban Development paid out more than $15.2 million in to households in 2008 to program households containing at least one deceased tenant. This included $7 million sent to single-member households whose only “family” was a deceased individual.
Scary, huh? The report goes on to cite examples of poor oversight and waste in other programs, including Medicare and Medicaid.
You can find the report on Senator Coburns oversight link below.
http://coburn.senate.gov/public/?p=OversightAction
THE IRS STILL WON'T ANSWER QUESITONS ABOUT THE NEW 1099 RULES
The IRS remains unclear about 1099 reporting implementation. The Internal Revenue Service is still avoiding questions about how it will implement the controversial 1099 reporting rule, a provision of the health care reform law that requires a business to file a 1099 when a vendor is paid more than $600. IRS Commissioner Douglas Shulman has declined to provide information on the rule after requests for clarity, says Rep. Sam Graves, R-Mo. See the article and comments from The Hill.
http://r.smartbrief.com/resp/zpzgvscgyzecybBoajaoyAalxeEw?format=standard
http://r.smartbrief.com/resp/zpzgvscgyzecybBoajaoyAalxeEw?format=standard
Tuesday, November 2, 2010
NEW DEPRECIATION RULES CAN SLASH TAXES
Congress passed new legislation which was signed into law September 27, 2010 that gives them talking points for their reelection campaigns for the current elections. While these changes are intended to incite businesses to spend money on capital improvements, it becomes challenging for taxpayers to stay in tune to the latest depreciation rules in effect for the current year.
For those taxpayers that have profited even with the weak economy, these expanded depreciation incentives will enable taxpayers to plan their 2010 and 2011 capital expenditures and obtain very attractive tax results, thus helping to offset some of the taxable income.
Background
This legislation brings the second change of rules we have for depreciation for 2010. The changes enacted by the HIRE Act signed in to law on March 18, 2010 are no longer valid. The Section 179 level for 2010 started off at $134,000 and then went to $250,000 with the passage of the HIRE Act. Until now, 50% bonus depreciation had terminated for asset purchases after December 31, 2009. But that is now all changed.
Here is the New Stuff - Section 179 Allowance for 2010 and 2011
The Small Business legislation enacted in September 2010 increased the Section 179 expensing allowance to $500,000 for taxable years beginning in 2010 and 2011. The expensing allowance phase-out threshold has also been increased for qualifying property additions in the range of $2,000,000 to $2,500,000. The definition of qualified property under Sec. 179 remains virtually unchanged from prior law.
However, IRC Sec. 179(f) now allows Section 179 expensing (subject to a $250,000 expensing limit) for certain Qualified Real Property such as Qualified Leasehold Improvements, Qualified Restaurant Property, and Qualified Retail Improvement Property.
2007 $125,000
2008 $250,000
2009 $250,000
2010 $500,000 **
2011 $500,000 **
** $250,000 limit for Qualified Real Property
Congress has been using Section 179 expensing as a major stimulus provision for the past several years. So trying to guess what Section 179 limits will be in the future may be a futile activity, particularly with the recent tendency to enact these changes retroactively.
NOTE: For the record, IRC Sec. 179(b)(1)(C) now states that for tax years beginning after 2011, the Section 179 expensing limit is $25,000. This scheduled large reduction in the Section 179 level is actually designed to encourage capital investments in 2010 and 2011. If the large reduction actually occurs, it would be a major adjustment for many farm producers.
Retroactive Extension of the 50% Bonus Depreciation
The 50% bonus depreciation deduction is retroactively restored for qualified property acquired and placed in service prior to January 1, 2011. This means that qualified property placed in service after December 31, 2007 and before January 1, 2011 is eligible for the bonus 50% depreciation.
The definition of qualified property for the 50% bonus remains the same as under the law in effect for 2008 and 2009. To qualify, the original use of the property must commence with the taxpayer (i.e., the asset must be new rather than used), and the asset must meet the qualified property definition.
For trades, 50% bonus depreciation may be claimed on the entire adjusted tax basis of the new asset.
As a reminder, the bonus 50% depreciation is mandatory. However, the taxpayer can decline to take the 50% bonus on a class by class basis. An election statement must be placed in the return stating which class lives are being elected out of 50% bonus.
50% Depreciation Available
2007 No
2008 Yes
2009 Yes
2010 Yes
2011 No
For those taxpayers that have profited even with the weak economy, these expanded depreciation incentives will enable taxpayers to plan their 2010 and 2011 capital expenditures and obtain very attractive tax results, thus helping to offset some of the taxable income.
Background
This legislation brings the second change of rules we have for depreciation for 2010. The changes enacted by the HIRE Act signed in to law on March 18, 2010 are no longer valid. The Section 179 level for 2010 started off at $134,000 and then went to $250,000 with the passage of the HIRE Act. Until now, 50% bonus depreciation had terminated for asset purchases after December 31, 2009. But that is now all changed.
Here is the New Stuff - Section 179 Allowance for 2010 and 2011
The Small Business legislation enacted in September 2010 increased the Section 179 expensing allowance to $500,000 for taxable years beginning in 2010 and 2011. The expensing allowance phase-out threshold has also been increased for qualifying property additions in the range of $2,000,000 to $2,500,000. The definition of qualified property under Sec. 179 remains virtually unchanged from prior law.
However, IRC Sec. 179(f) now allows Section 179 expensing (subject to a $250,000 expensing limit) for certain Qualified Real Property such as Qualified Leasehold Improvements, Qualified Restaurant Property, and Qualified Retail Improvement Property.
2007 $125,000
2008 $250,000
2009 $250,000
2010 $500,000 **
2011 $500,000 **
** $250,000 limit for Qualified Real Property
Congress has been using Section 179 expensing as a major stimulus provision for the past several years. So trying to guess what Section 179 limits will be in the future may be a futile activity, particularly with the recent tendency to enact these changes retroactively.
NOTE: For the record, IRC Sec. 179(b)(1)(C) now states that for tax years beginning after 2011, the Section 179 expensing limit is $25,000. This scheduled large reduction in the Section 179 level is actually designed to encourage capital investments in 2010 and 2011. If the large reduction actually occurs, it would be a major adjustment for many farm producers.
Retroactive Extension of the 50% Bonus Depreciation
The 50% bonus depreciation deduction is retroactively restored for qualified property acquired and placed in service prior to January 1, 2011. This means that qualified property placed in service after December 31, 2007 and before January 1, 2011 is eligible for the bonus 50% depreciation.
The definition of qualified property for the 50% bonus remains the same as under the law in effect for 2008 and 2009. To qualify, the original use of the property must commence with the taxpayer (i.e., the asset must be new rather than used), and the asset must meet the qualified property definition.
For trades, 50% bonus depreciation may be claimed on the entire adjusted tax basis of the new asset.
As a reminder, the bonus 50% depreciation is mandatory. However, the taxpayer can decline to take the 50% bonus on a class by class basis. An election statement must be placed in the return stating which class lives are being elected out of 50% bonus.
50% Depreciation Available
2007 No
2008 Yes
2009 Yes
2010 Yes
2011 No
CREDIT CARD DISCOUNTS
Below is a link to an article about offering discounts for people that use cash instead of credit cards. As you know credit card fees really eat into your bottom line. It is a good idea to remind the people collecting the money to ask if you would like to use debit or credit. Can save you a bunch.
http://journalstar.com/business/local/article_b1eb0758-d0c9-11df-8274-001cc4c002e0.html
http://journalstar.com/business/local/article_b1eb0758-d0c9-11df-8274-001cc4c002e0.html
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