Friday, December 23, 2011

WHAT A MESS – PAYROLL TAX DEBATE

The debate of the month is the extension of the 3% payroll tax extension. Let’s see how that will impact a taxpayer. If you were to make $40,000 per year this means about $46 per paycheck. Supposedly that will help stimulate the economy and create jobs, but don’t forget the money comes out of the Social Security Trust Fund.

But here is the problem. In just a few days you we will writing the first 2012 paychecks and we don’t know how much we are going to withhold. The IRS publications are out without the cut and I am sure that the computer programmers are going to be burning the midnight oil once Congress and the President act. There is also a chance that the extension of the law may occur early in 2012 and be retroactive to January 1, 2012. We hope that this does not happen, but recent history shows there is a good chance of it occurring.

The primary issue for our employers is whether the payroll tax software that they use is timely updated for these changes. If a new law is passed either at the end of the this month or early next month, the software may not get updated for your first payroll. This may cause it to be wrong and changes will need to be performed to get the right amount of pay to your employees and report the right taxes on your form 943 at year-end or form 941 for the first quarter.

We will keep you posted.

CLAM IT WHILE YOU CAN

Year-end tax planning: claim the non-business energy property credit while you can...

Of the many energy-saving provisions in the Code, few are more accessible to ordinary taxpayers than the $500 credit for non-business energy property. The credit can apply to relatively inexpensive, easy-to-do (perhaps even do-it-yourself) items—the installation of insulation (e.g., exterior caulking and weather-stripping), doors, and windows—as well as slightly more expensive but standard items such as central air conditioning and heat pumps. However, currently this credit only applies through 2011, and the prospects for an extension are uncertain. As a result, homeowners should consider accelerating energy-saving home improvements into this year if doing so will generate a credit.

Summary of the credit. The non-business energy property credit, as most recently extended, applies only through Dec. 31, 2011. A taxpayer can claim a credit on Form 5695 equal to 10% of the cost of: (1) qualified energy efficiency improvements, and (2) residential energy property expenditures. There is a lifetime credit limit of $500 (with no more than $200 due to windows and skylights) over the total credits allowed to the taxpayer for all earlier tax years ending after 2005. (The expenses must be for property originally placed in service by the taxpayer and made on or in connection with a dwelling unit located in the U.S., and owned and used by taxpayer as his principal residence at the time of installation.

Qualified energy efficiency improvements are energy efficient building envelope components, such as (a) insulation materials or systems specifically and primarily designed to reduce heat loss/gain that meet criteria set by the International Energy Conservation Code (IECC); or (b) exterior windows, skylights or doors, or any metal roof with pigmented coating or asphalt roof with cooling granules specifically designed to reduce heat gain, installed on a dwelling unit that meet Energy Star program requirements. The component must be expected to last for at least five years This requirement is met if the manufacturer offers a two-year warranty to repair or replace at no extra charge.

Residential energy property expenses are expenses for qualified energy property (including labor costs for onsite preparation, assembly, or original installation) that meets specific standards
. The credit allowed for energy property expenditures can't exceed:
... $300 for any energy-efficient building property (electric heat pump water heater, electric heat pump; central air conditioner; natural gas, propane or oil water heater; or a stove burning biomass fuel to heat or provide hot water to a taxpayer's residence in the U.S.) that meets specific energy efficiency standards;
... $150 for a qualified natural gas, propane, or oil furnace; or qualified natural gas, propane, or oil hot water boiler; or
... $50 for an advanced main air circulating fan.

Wednesday, December 21, 2011

6 YEAR-END TIPS TO REDUCE 2011 TAXES

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.


CLICK HERE to read the 6 tips!

DETASSELERS WORRIED- CHILD LABOR RULES

We reached out to a local detasseling company and here is her response: "If this would happen, we would lose 85% of our workers. This would be a great detriment to not only us, but the seed companies, the kids, and the state of NE. as a whole. There is no way the seed industry can stay where it is if this changes. Seems silly to me that you can get a school permit when you are 14 and drive to school. But you can't walk in a corn field for two more years." We agree completely!

(Lincoln Journal Star) -- JournalStar.com reports that "the first proposed changes to federal child labor laws involving agriculture since the 1970s could threaten the summer detasseling jobs of thousands of Nebraska teenagers in cornfields." According to the story, the U.S. Department of Labor is trying to upgrade regulations on agriculture workers under age 18. U.S. Senator Mike Johanns of Nebraska said of the proposed rules: "While I believe agricultural workers and their employers need to take proper precautions to encourage workplace safety, this proposed rule raises serious questions about the administration's understanding of the agricultural economy."


More of the story: DETASSELERS

Tuesday, December 20, 2011

CHILD LABOR CHANGES AND FARMERS

'Nebraska Farmers Concerned About Child Labor Changes'

(KETV, Omaha) -- KETV.com reports that the U.S. Department of Labor is now considering targeting family farms across the country for possible violations of child labor laws. "The new rules would prohibit children younger 16 from driving most power-driven machinery. Kids also would not be able to work around breeding stock," the story notes. Jordan Dux of the Nebraska Farm Bureau said: "I think this is a direct attack on trying to interest folks in agriculture and it's going to cause some problems." Public comment period ends on Dec. 1, according to the article.

To read more on the article: KETV

Friday, December 16, 2011

FARMERS WORRY

(AP/GrantTribune.com) -- The AP reports that many teens won't be allowed to do to perform basic farm or ranch chores "if the U.S. Labor Department approves new rules on children working in agriculture." The story notes that "the proposed rules would prohibit most children under age 16 from driving tractors, using power equipment, working with livestock in certain circumstances and doing work at heights over 6 feet." Many farmers told the AP that Washington bureaucrats cannot possibly understand the agricultural work or the lifestyle that it promotes, and "major agriculture groups have organized to oppose the proposed rules."

To read more: CLICK HERE

Thursday, December 15, 2011

1099 FORM LETTER TO YOUR VENDORS

We thought it might be helpful if you had a ‘form’ letter in which you could send to your vendors. Please feel free to copy and paste this into a word doc and send it out. Click on the link below the letter to obtain the W-9.

Dear Vendor,


IRS regulation requires that we issue 1099 forms to certain companies and individuals. In order to accurately prepare these forms, IRS requires that we obtain and maintain form W-9 for all of our vendors.

Therefore, in order to ensure our reporting accuracy, please complete the enclosed form W-9 and return to us by mail or fax.

Thank you for your immediate attention to this matter.

Sincerely,

W-9 LINK

Wednesday, December 14, 2011

W-9 WHAT ABOUT SENDING TO….

Q. I read your business blog and saw the topic on ‘Issuing 1099-MISC’s’: I own an Electrical company and wondered if I need to send a w-9 to our vendors for the Electrical Co. & the Construction Co.? And then send 1099’s to them if required. ~ Thanks for your help.

A. I would advise getting W-9’s from them. This will assure that you were not required to do backup withholding. The IRS has not been penalizing companies that do not have W-9’s but it technically is required. My guess is that someday this will be an issue. You just as well get ahead of the curve.

If they are not a corporation and they are providing services then a 1099 is in order. If they are just your supplier and you buy inventory, hard goods etc. then you do not need to do a 1099. Some taxpayers are unsure of the form of business of the companies that they are dealing with. The W-9 will solve that problem. At the same time if you are not sure there form of business it is okay to send a 1099. There is no penalty for sending to a corp.

Monday, December 12, 2011

IRS OFFERS TIPS FOR YEAR-END GIVING

If you itemize your deductions (long form), you can deduct charitable contributions. The IRS just published Tips for Year-End Giving that you might want to review.

CLICK HERE

Friday, December 9, 2011

WHO MUST ISSUE 1099 MISCs

Here is some basic information about 1099-MISC:

First of all you just need to do a 1099 for certain business expenses.

o For example, someone paints your personal residence and charges you $1,100 you do not have to give that person a 1099. On the other hand if that person should paint your business property and charged you $1,100 you would give that person a 1099 for $1,100

You just have to issue a 1099 for services, not for tangible business purchases
o If the painter gives you a bill for painting and the bill includes labor and the cost of paint you would still give the painter a 1099 for the whole purchase

You do not need to give a 1099 to a corporation
o Both C corporation and S corporations qualify
o You must give a 1099 to LLC’s and partnerships

You just need to give a 1099 if you pay over $600 during the year
o For example the painter paints your business in January and charges you $400 then later in the year you bring them back and he does another $500 of painting. The total is over $600 so you must give the person a 1099


There is no penalty for sending a 1099 to a corporation so if in doubt play it safe and send. Of course there are more rules but these are the basics ones.

Thursday, December 8, 2011

ONLY IN AMERICA

A fugitive who took a Kansas couple hostage in their home is suing them for $235,000. Accused murderer Jesse Dimmick claims Jared and Lindsay Rowley accepted his knifepoint offer of money to hide in their house. But the Rowleys later breached their "oral contract" by escaping as he slept, Dimmick says, "resulting in my being shot in the back by authorities."

Wow only in America!

Wednesday, December 7, 2011

CLEAN OUT THE CLOSETS

AND GET A TAX DEDUCTION

If you itemize deductions (the long form) you not only can deduct your cash contributions but you can also deduct your non cash contributions. What we are talking about here is items given to the Salvation Army and the like. Remember the key is Documentation, Documentation, Documentation!

Here are the rules for non cash contributions:

First, make sure that this is a qualified charity. If in doubt ask to see their 501(c) approval.

Remember, no matter how charitable a contribution to an individual may be, contributions to individuals are not deductible.

If the contribution of goods is less than $250 you should have either a written acknowledgment from the charity of some other reliable list.

If the goods have a value between $250 and $500 then you need a written acknowledgement and, of course a list.

If between $500 and $5,000 then written acknowledgement; your list and a file a Form 8283 with the return.

If over $5,000 all of the above and you must file an appraisal with the return.

Monday, December 5, 2011

2012 STANDARD MILEAGE RATES

The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
~55.5 cents per mile for business miles driven
~23 cents per mile driven for medical or moving purposes
~14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

You do have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

Saturday, December 3, 2011

HARSH 1099 PENALTIES

The IRS wants everyone to issue 1099's so that they can spot unreported income. This year the penalty for failure to file a 1099 is $250 per form with an addition $250 per form if you did not act in good faith.

I can guarantee you that one of the first things that the IRS looks at during the audit is 1099's. It is easy money for them if you did not file.

Think about it. If you missed 10 forms for three years the penalty would be $7,500 minimum with it possibly going to $15,000. That is on just 10 missed forms. Do the math. Make sure you issue 1099's.

Friday, December 2, 2011

CHECKLIST FOR FAMILY EMPLOYEE BENEFIT PROGRAM

We know that business owners employing and providing benefits to family members will receive a great deal of scrutiny in the event of an audit. The easiest way for the IRS to prevail is to challenge the legitimacy of the employer-employee relationship.

The following is the best way to "audit proof" your return.

Is the compensation payed to the family member:
Reasonable based on fair market value?
Is there a written check or documentations?
For medical expense deducted in the year reimbursed ?
Not deposited in the business checking account?

Is there documentation of the benefit plan such as:
Written employee benefit pan?
Employee time records?
Employment contracts?
Job description?
Filed payroll tax returns?
Having the medical insurance plan in the name of the employee?
Premiums paid by the business or employee not the owner?

Other items:
Is money paid by the employee spouse for medical expenses?
Is money paid to the spouse as a reimbursement or directly?
Is the insurance in the employee spouse's name?