08.13.13 - Louisiana Offers "Fresh Start" Program to Help Those With Back State Taxes
Louisiana Offers "Fresh Start" Program to Help Those With Back State Taxes
Aug. 13, 2013
Are you behind on Louisiana taxes? If so, you should try to take advantage of a new "Fresh Start" program to be offered by the state. Louisiana will forgive penalties under this new amnesty program starting September 23, 2013. The amnesty program will expire November 23, 2013, so you will need to act quickly. Please call us if we can help. (337-625-5054.)
07.03.13 - Obama Administration Delays Employer Health-Care Mandate for One Year
Obama Administration Delays Employer Health-Care Mandate for One Year
Jul. 03, 2013
WASHINGTON — Implementation of the employer health-care mandate, one of the most vaunted provisions in President Obama's health care law, will be put off for a full year, the administration said today.
In passing the Affordable Care Act, Democrats included — and promoted — the requirement that companies with 50 or more employees will have to provide health coverage to their employees, or face fines. That was supposed to begin in 2014, but the U.S. Treasury announced today that the requirement won't be implemented until 2015.
Assistant Treasury Secretary for Tax Policy Mark Mazur wrote today on the Treasury's website:
The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. Within the next week, we will publish formal guidance describing this transition. Just like the Administration's effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.
Businesses had voiced "concerns about the complexity of the requirements and the need for more time to implement them effectively," Mazur wrote, and the administration is giving them another year in response to those concerns.
The delay will likely fuel criticism of the Affordable Care Act, which Republicans have said is overly burdensome on employers and as a whole will be difficult to implement.
In delaying the employer requirement, the administration will push it past an important political deadline: the 2014 midterm elections. Implementation of the Affordable Care Act is expected to be a topic of discussion in campaigns over the next few years, but Democrats running for House and Senate in 2014 won't have to answer questions about a newly applied employer mandate.
01.10.13 - Start of Tax Season Delayed Until Jan. 30; Later for Some Taxpayers
Start of Tax Season Delayed Until Jan. 30; Later for Some Taxpayers
Jan. 10, 2013
IRS has announced that they will not start processing tax returns until January 30th. Some tax returns won't be able to be filed until February or March! If you have depreciation expense, residential energy or business credits, you'll be in the latter group. Please bring your information in as soon as you have it ready and we'll get it ready so that when the IRS is ready we'll be able to file for you.
Finally, the fiscal cliff has been averted! While some taxes are increasing, it could have been much worse. The main provisions we were watching survived. Income rates increase on individuals with taxable income of $400,000 for single and $450,000 for married filers. The estate tax exemption remains at $5 million though the rate is increased. The AMT (alternative minimum tax) patch was made permanent. Section 179 expensing and 50% bonus expensing for business asset purchases were extended. For much more, check out this link or call us with any specific questions or concerns.
09.17.12 - American Cancer Society - Making Strides Against Breast Cancer
American Cancer Society - Making Strides Against Breast Cancer
Sep. 17, 2012
McMullen and Mancuso CPAs is sponsoring a team to participate in the upcoming walk for Making Strides Against Cancer on Oct. 6th at Heritage Square in Sulphur!! You can find out more information by visiting:
The standard mileage rate for computing the deductible cost of operating a car (including vans, pickups, or panel trucks) for business use will remain at 55.5 cents per mile. It has been at this rate since July 1, 2011.
01.06.12 - Pension Plan Limitations for 2012
Pension Plan Limitations for 2012
Jan. 6, 2012
The maximum amount that an employee may elect to defer to an Code Sec. 401 (k) cash or deferred compensation plan is $17,000 in the 2012 tax year (up from $16,500 in 2011). The maximum amount that an employee/participant may elect to defer to a savings incentive match plan for employees (SIMPLE plan) remains at $11,500. The limitation on total annual contributions to defined contribution plans is $50,000 (up from $49,000 in 2011).
The maximum aggregate annual contribution that can be made to a health savings account in 2012 is $3,100 for self-only coverage (up from $3,050 in 2011) and $6,250 for family coverage (up from $6,150 in 2011).
01.06.12 - 2011 Capital Gain and Loss Reporting
2011 Capital Gain and Loss Reporting
Jan. 6, 2012
Taxpayers will have to report new information on Form1040, Schedule D, Capital Gains and Losses, and file a new form, Form 8949, Sales and Other Dispositions of Capital Assets, to report gains and losses of certain capital assets. The information on Form 8949 will correspond to the new information being reported on 2011 Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions.
01.06.12 - 2012 Federal Minimum Wage Rate
2012 Federal Minimum Wage Rate
Jan 6, 2012
The federal minimum wage rate is still $7.25 per hour in 2012.
01.06.12 - Bonus Depreciation of 2012
Bonus Depreciation of 2012
Jan. 6, 2012
The 100% first-year bonus depreciation provision expired on December 31, but 50% bonus depreciation is available for property placed in service in 2012.
12.23.10 - Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
DEC. 23, 2010
The recently enacted "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year "patch" of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. Here's a look at the key elements of the package:
The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
Employees and self-employed workers will receive a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.
A two-year AMT "patch" for 2010 and 2011 will keep the AMT exemption near current levels and allow personal credits to offset AMT. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.
Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.
Businesses can write off 100% of their equipment and machinery purchases, effective for property placed in service after September 8, 2010 and through December 31, 2011. For property placed in service in 2012, the new law provides for 50% additional first-year depreciation.
Many of the "traditional" tax extenders are extended for two years, retroactively to 2010 and through the end of 2011. Among many others, the extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit.
After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35%. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010's or 2011's rules.
Omitted from the new law: Repeal of a controversial expansion of Form 1099 reporting requirements.
Also not included: Extension of the Build America Bonds program, which permits state and localities to issue federally-subsidized municipal bonds.
I hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call.
Very truly yours,
McMullen and Mancuso, CPAs, LLC
12.23.10 - In 2011, Many Tax Benefits Increase Slightly Due to Inflation Adjustments
In 2011, Many Tax Benefits Increase Slightly Due to Inflation Adjustments
DEC. 23, 2010
WASHINGTON - In 2011, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.
These inflation adjustments relate to eight tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17. New dollar amounts affecting 2011 returns, filed by most taxpayers in early 2012, include the following:
The value of each personal and dependent exemption, available to most taxpayers, is $3,700, up $50 from 2010.
The new standard deduction is $11,600 for married couples filing a joint return, up $200, $5,800 for singles and married individuals filing separately, up $100, and $8,500 for heads of household, also up $100. The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000, up from $68,000 in 2010.
The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $102,000 for joint filers, up from $100,000, and $51,000 for singles and heads of household, up from $50,000.
Several tax benefits are unchanged in 2011. For example, the monthly limit on the value of qualified transportation benefits (parking, transit passes, etc.) provided by an employer to its employees, remains at $230. Details on these inflation adjustments can be found in Revenue Procedure 2011-12.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. Most of the new dollar amounts, including retirement-plan-related adjustments, were announced in October. To avoid confusion, the eight provisions released today were not included in the October announcements, due to the anticipated impact of extender legislation.
12.23.10 - IRS Kicks Off 2011 Tax Season with Deadline Extended to April 18
IRS Kicks Off 2011 Tax Season with Deadline Extended to April 18; Taxpayers Impacted by Recent Tax Breaks Can File Starting in Mid- to Late February
DEC. 23, 2010
WASHINGTON - The Internal Revenue Service today opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns. The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.
Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.
The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.
The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties.
"The IRS has made important strides at stopping tax avoidance using offshore accounts," said IRS Commissioner Doug Shulman. "We continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts."
The IRS also reminded tax professionals preparing returns for a fee that this is the first year that they must have a Preparer Tax Identification Number (PTIN). Tax return preparers should register immediately using the new PTIN sign-up system available through www.IRS.gov/taxpros.
Who Must Wait to File
For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.
Some taxpayers - including those who itemize deductions on Form 1040 Schedule A - will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:
Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes (add link to Schedule A). In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students - covering up to $4,000 of tuition and fees paid to a post-secondary institution - is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.
In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses. The Act also provides various job creation and investment incentives including 100 percent expensing and a two-percent payroll tax reduction for 2011. Those changes have no effect on the 2011 filing season.
The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. In the interim, taxpayers affected by thesetax law changes can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes. Additional information will be available at www.IRS.gov.
For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers. The IRS urges taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax law changes and ensure accurate tax returns.
Except for those facing a delay, the IRS will begin accepting e-file and Free File returns on Jan. 14. Additional details about e-file and Free File will be announced later this month.
Many Ways to Get Assistance
The IRS is also continuing to focus on taxpayer service. Taxpayers with questions should check the IRS website at www.IRS.gov, call our toll-free number or visit a taxpayer assistance center.
This is also the first filing season that tax packages will not be mailed to individuals or businesses. There are still many options for taxpayers to get paper forms and instructions if they need them. In recent years, fewer and fewer taxpayers received these mailings. Last year, only 8 percent of individuals who filed tax returns received tax packages in the mail. Taxpayers can still get any forms and instructions they need online at www.IRS.gov, or they can visit local IRS offices or participating libraries and post offices.
In addition, individuals making $49,000 or less can use the Volunteer Income Tax Assistance program for free tax preparation and, in many cases, free electronic filing. Individuals age 60 and older can take advantage of free tax counseling and basic income tax preparation through Tax Counseling for the Elderly.
IRS Free File provides options for free brand-name tax software or online fillable forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $58,000 or less can choose from approximately 20 commercial software providers. There's no income limit for Free File Fillable Forms, the electronic version of IRS paper forms, which also includes free e-filing.
Check for a Refund
Once taxpayers file their federal return, they can track the status of their refunds by using the "Where's My Refund?" tool, located on the front page of www.IRS.gov. Taxpayers can generally get information about their refunds 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.
Taxpayers need to provide the following information from their tax returns: (1) Social Security Number or Individual Taxpayer Identification Number, (2) filing status, and (3) the exact whole dollar amount of your anticipated refund. If the U.S. Postal Service returns the taxpayer's refund to the IRS, the individual may be able to use "Where's My Refund?" to change the address the IRS has on file, online.
Also, taxpayers may complete a Form 8822, Change of Address, and send it to the address shown on the form. They may download Form 8822 from www.IRS.gov or order it by calling 800-TAX-FORM. Generally, taxpayers can file an online claim for a replacement check if more than 28 days have passed since the IRS mailed their refund.
12.23.10 - Tax Season Starts on Time for Most Taxpayers
Tax Season Starts on Time for Most Taxpayers; Those Affected by Late Tax Breaks Can File in Mid- to Late February
DEC. 23, 2010
WASHINGTON - Following last week's tax law changes, the Internal Revenue Service announced today the upcoming tax season will start on time for most people, but taxpayers affected by three recently reinstated deductions need to wait until mid- to late February to file their individual tax returns. In addition, taxpayers who itemize deductions on Form 1040 Schedule A will need to wait until mid- to late February to file as well.
The start of the 2011 filing season will begin in January for the majority of taxpayers. However, last week's changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17.
People claiming any of these three items - involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A - will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.
"The majority of taxpayers will be able to fill out their tax returns and file them as they normally do," said IRS Commissioner Doug Shulman. "We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season."
The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the late tax law changes. In the interim, people in the affected categories can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes.
The IRS urged taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax changes and ensure accurate tax returns.
Taxpayers will need to wait to file if they are within any of the following three categories:
Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students - covering up to $4,000 of tuition and fees paid to a post-secondary institution - is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16.
For those falling into any of these three categories, the delay affects both paper filers and electronic filers.
The IRS emphasized that e-file is the fastest, best way for those affected by the delay to get their refunds. Those who use tax-preparation software can easily download updates from their software provider. The IRS Free File program also will be updated.
As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure a smooth tax season.
Updated information will be posted on IRS.gov. This will include an updated copy of Schedule A as well as updated state and local sales tax tables. Several other forms used by relatively few taxpayers are also affected by the recent changes, and more details are available on IRS.gov.
In addition, the IRS reminds employers about the new withholding tables released Friday for 2011. Employers should implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011. The IRS also reminds employers that Publication 15, (Circular E), Employer's Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov before year's end.
Related Item: Forms Affected By the Extender Provisions
12.23.10 - Highlights of the HIRE Act of 2010
Highlights of the HIRE Act of 2010
DEC. 23, 2010
The President recently signed into law the "Hiring Incentives to Restore Employment Act of 2010" (the HIRE Act, P. L. 111-47, 03/18/2010). The centerpiece of this Act is a payroll tax holiday and up-to-$1,000 tax credit for businesses that hire unemployed workers. In addition to these new hiring incentives, the HIRE Act also includes a one-year extension of the enhanced small business expensing option under Code Sec. 179 . Both of these provisions are extremely important to many businesses.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed workers. To help stimulate the hiring of workers by the private sector, the new law exempts any private-sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer's 6.2% share of the Social Security payroll tax on that employee for the remainder of 2010. A company could save a maximum of $6,621 if it hired an unemployed worker and paid that worker at least $106,800-the maximum amount of wages subject to Social Security taxes-by the end of the year. As an additional incentive, for any qualifying worker hired under this initiative that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay in the second 26-week period must be at least 80% of the pay in the first 26-week period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after March 18 receive the exemption for payroll taxes. Some additional features of the new hiring incentive include:
The tax benefit of the new incentive is immediate. It puts money into a business' cash flow immediately, since the tax is simply not collected in the first place.
The tax benefit generally applies only to private-sector employment, including nonprofit organizations-public sector jobs are generally not eligible for either benefit. However, employment by a public higher education institution qualifies.
There is no minimum weekly number of hours that the new employee must work for the employer to be eligible, and there is no limit on the dollar amount of payroll taxes per employer that may be forgiven.
For workers that would otherwise be eligible for the Work Opportunity Tax Credit (i.e., another type of employment tax credit), the employer must select one benefit or the other for 2010. There is no double dipping.
An employer can't claim the new tax breaks for hiring family members.
A worker who replaces another employee who performed the same job for the employer isn't eligible for the benefit, unless the prior employee left the job voluntarily or for cause.
For the hiring to qualify, the new hire must sign an affidavit, under penalties of perjury, stating that he or she hasn't been employed for more than 40 hours during the 60-day period ending on the date the employment begins.
The incentive isn't biased towards either low-wage or high-wage workers. Under the measure, a business saves 6.2% on both a $40,000 worker and a $90,000 worker.
The payroll tax holiday doesn't apply with respect to wages paid during the first calendar quarter of 2010, but the amount by which the Social Security payroll tax would have been reduced under the payroll tax holiday provision during the fist calendar quarter is applied against the tax imposed on the employer for the second calendar quarter of 2010.
The Act creates a similar new set of rules allowing a payroll tax holiday for railroad retirement tax purposes.
The credit for retaining qualifying new hires is the lesser of $1,000 or 6.2% of the wages paid by the taxpayer to the retained worker during the 52-consecutive-week period. Thus, the credit for a retained worker will be $1,000 if, disregarding rounding, the retained worker's wages during the 52-consecutive-week period exceed $16,129.03. However, the credit isn't available for pay not treated as wages under the Code (e.g., remuneration paid to domestic workers).
Extension of enhanced small business expensing. The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010, the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensing-eligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009. Had the HIRE Recovery Act not been passed and signed into law, these dollar limits would have dropped this year to $134,000 and $530,000 respectively.
12.23.10 - Tax Changes Affecting Small Businesses in the Health Reform Legislation
Tax Changes Affecting Small Businesses in the Health Reform Legislation
DEC. 23, 2010
For owners of small businesses and their workers, the recently enacted health reform legislation has some key provisions to pay attention to. The major ones include: tax credits; excise taxes; and penalties. But whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. I'm writing to give you an overview of the provisions in the new law with the biggest impact on small business. Please call our offices for details of how the new changes may affect your specific business.
Tax credits to certain small employers that provide insurance. The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer's regular tax or its alternative minimum tax (AMT) liability.
Small business employers eligible for the credit. To qualify, a business must offer health insurance to its employees as part of their compensation and contribute at least half the total premium cost. The business must have no more than 25 full-time equivalent employees ("FTEs"), and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000.
Years the credit is available. The credit is initially available for any tax year beginning in 2010, 2011, 2012, or 2013. Qualifying health insurance for claiming the credit for this first phase of the credit is health insurance coverage purchased from an insurance company licensed under state law. For tax years beginning after 2013, the credit is only available to an eligible small employer that purchases health insurance coverage for its employees through a state exchange and is only available for two years. The maximum two-year coverage period does not take into account any tax years beginning in years before 2014. Thus, an eligible small employer could potentially qualify for this credit for six tax years, four years under the first phase and two years under the second phase.
Calculating the amount of the credit. For tax years beginning in 2010, 2011, 2012, or 2013, the credit is generally 35% (50% for tax years beginning after 2013) of the employer's nonelective contributions toward the employees' health insurance premiums. The credit phases out as firm-size and average wages increase.
Special rules. The employer is entitled to an ordinary and necessary business expense deduction equal to the amount of the employer contribution minus the dollar amount of the credit. For example, if an eligible small employer pays 100% of the cost of its employees' health insurance coverage and the amount of the tax credit is 50% of that cost (i.e., in tax years beginning after 2013), the employer can claim a deduction for the other 50% of the premium cost.
Self-employed individuals, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees for purposes of this credit. There is also a special rule to prevent sole proprietorships from receiving the credit for the owner and their family members. Thus, no credit is available for any contribution to the purchase of health insurance for these individuals and the individual is not taken into account in determining the number of full-time equivalent employees or average full-time equivalent wages.
Most small businesses exempted from penalties for not offering coverage to their employees. Although the new law imposes penalties on certain businesses for not providing coverage to their employees (so-called "pay or play"), most small businesses won't have to worry about this provision because employers with fewer than 50 employees aren't subject to the "pay or play" penalty. For businesses with at least 50 employees, the possible penalties vary depending on whether or not the employer offers health insurance to its employees. If it does not offer coverage and it has at least one full-time employee who receives a premium tax credit, the business will be assessed a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. So, for example, an employer with 51 employees who doesn't offer health insurance to his employees will be subject to a penalty of $42,000 ($2,000 multiplied by 21). Employers with at least 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit will pay $3,000 for each employee receiving a premium credit (capped at the amount of the penalty that the employer would have been assessed for a failure to provide coverage, or $2,000 multiplied by the number of its full-time employees in excess of 30). These provisions take effect Jan. 1, 2014.
The "Cadillac tax" on high-cost health plans. The new law places an excise tax on high-cost employer-sponsored health coverage (often referred to as "Cadillac" health plans). This is a 40% excise tax on insurance companies, based on premiums that exceed certain amounts. The tax is not on employers themselves unless they are self-funded (this typically occurs at larger firms). However, it is expected that employers and workers will ultimately bear this tax in the form of higher premiums passed on by insurers.
Here are the specifics: The new tax, which applies for tax years beginning after Dec. 31, 2017, places a 40% nondeductible excise tax on insurance companies and plan administrators for any health coverage plan to the extent that the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage. An additional threshold amount of $1,650 for single coverage and $3,450 for family coverage will apply for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions. The tax will apply to self-insured plans and plans sold in the group market, but not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). Stand-alone dental and vision plans will be disregarded in applying the tax. The dollar amount thresholds will be automatically increased if the inflation rate for group medical premiums between 2010 and 2018 is higher than projected. Employers with age and gender demographics that result in higher premiums could value the coverage provided to employees using the rates that would apply using a national risk pool. The excise tax will be levied at the insurer level. Employers will be required to aggregate the coverage subject to the limit and issue information returns for insurers indicating the amount subject to the excise tax.
I hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call.
Very truly yours,
McMullen and Mancuso, CPAs, LLC
12.23.10 - Small Business Jobs Act of 2010
Small Business Jobs Act of 2010
DEC. 23, 2010
On September 27, the President signed into law the "Small Business Jobs Act of 2010" (P.L. 111-240) which includes a number of important tax provisions for business. The recently enacted 2010 Small Business Jobs Act includes a wide-ranging assortment of tax breaks and incentives for businesses. Here's a brief overview of the tax changes in the Small Business Jobs Act.
Enhanced small business expensing (Section 179 expensing). To help small businesses quickly recover the cost of capital outlays, small business taxpayers can elect to write off these expenditures in the year they are made instead of recovering them through depreciation. Under the old rules, taxpayers could generally expense up to $250,000 of qualifying property-generally, machinery, equipment and software-placed in service in during the tax year. This annual limit was reduced by the amount by which the cost of property placed in service exceeded $800,000. Under the Small Business Jobs Act, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment limit to $2,000,000. The Small Business Jobs Act also makes certain real property eligible for expensing. Thus, for property placed in service in any tax year beginning in 2010 or 2011, the $500,000 amount can include up to $250,000 of qualified leasehold improvement, restaurant and retail improvement property.
Extension of 50% bonus first-year depreciation. Before the Small Business Jobs Act, Congress already allowed businesses to more rapidly deduct capital expenditures of most new tangible personal property placed in service in 2008 or 2009 by permitting the first-year write-off of 50% of the cost. The Small Business Jobs Act extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (as well as 2011 for certain aircraft and long production period property).
Boosted deduction for start-up expenditures. The Small Business Jobs Act allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000. Previously, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold.
100% exclusion of gain from the sale of small business stock. Ordinarily, individuals can exclude 50% of their gain on the sale of qualified small business stock (QSBS) held for at least five years (60% for certain empowerment zone businesses). This percentage exclusion was temporarily increased to 75% for stock acquired after Feb. 17, 2009 and before Jan. 1, 2011. Under the Small Business Jobs Act, the amount of the exclusion is temporarily increased yet again, to 100% of the gain from the sale of qualifying small business stock that is acquired in 2010 after September 27, 2010 and held for more than five years. In addition, the Small Business Jobs Act eliminates the alternative minimum tax (AMT) preference item attributable to such sales.
General business credits of eligible small businesses for 2010 get five-year carryback. Generally, a business's unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. Under Small Business Jobs Act, for the first tax year of the taxpayer beginning in 2010, eligible small businesses can carry back unused general business credits for five years instead of just one. Eligible small businesses are sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.
General business credits of eligible small businesses not subject to AMT for 2010. Under the AMT, taxpayers can generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits, such as the credit for small business employee health insurance expenses, can be used to offset AMT liability. The Small Business Jobs Act allows eligible small businesses to use all types of general business credits to offset their AMT in tax years beginning in 2010.
Deductibility of health insurance for the purpose of calculating self-employment tax. The Small Business Jobs Act allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in calculating their 2010 self-employment tax.
Cell phones no longer listed property. This means that cell phones can be deducted or depreciated like other business property, without onerous recordkeeping requirements.
S corporation holding period for appreciated assets shortened to five years. Generally, a C corporation converting to an S corporation must hold onto any appreciated assets for 10 years or face a built-in gain tax at the highest corporate rate of 35%. The 2010 Small Business Jobs Act temporarily shortens the holding period of assets subject to the built-in gains tax to 5 years if the 5th tax year in the holding period precedes the tax year beginning in 2011.
New tax break for long-term contract accounting. The Small Business Jobs Act provides that in determining the percentage of completion under the percentage of completion method of accounting, bonus depreciation in 2010 is not taken into account as a cost. This prevents the bonus depreciation from having the effect of accelerating income.
Limitation on penalty for failure to disclose certain reportable transactions. The Small Business Jobs Act generally limits the penalty to 75% of the decrease in tax resulting from the transaction, retroactively to penalties assessed after Dec. 31, 2006. Minimum and maximum penalties apply.
Revenue raisers. These tax breaks come at a cost. To mention a few of these unfavorable provisions, information reporting will generally be required for rental property expense payments made after Dec. 31, 2010, and increased information return penalties will be imposed.
Please keep in mind that I've described only the highlights of the most important changes in the Small Business Jobs Act. If you would like more details about any aspect of the new legislation, please do not hesitate to call.
Very truly yours,
McMullen and Mancuso, CPAs, LLC
12.17.10 - Payroll Tax Cut to Boost Take-Home Pay for Most Workers; New Withholding Details Now Available on IRS.gov
Payroll Tax Cut to Boost Take-Home Pay for Most Workers; New Withholding Details Now Available on IRS.gov
DEC. 17, 2010
WASHINGTON - The Internal Revenue Service today released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee's future Social Security benefits.
The new law also maintains the income-tax rates that have been in effect in recent years.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer's Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.
The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible but not later than March 31, 2011.
Employers and payroll companies will handle the withholding changes, so workers typically won't need to take any additional action, such as filling out a new W-4 withholding form.
As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.
12.03.10 - IRS Issues 2011 Mileage Rates
IRS Issues 2011 Mileage Rates
DEC. 3, 2010
WASHINGTON - The Internal Revenue Service today issued the 2011 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, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
51 cents per mile for business miles driven
19 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
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.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. The IRS is requesting public comments on whether taxpayers should be allowed to use the business standard mileage rate in this circumstance.
Beginning in 2011, a taxpayer may use the business standard mileage rate for vehicles used for hire, such as taxicabs.
Also beginning in 2011, the standard mileage rates are announced in a separate notice, which also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost for automobiles under a FAVR allowance. The IRS plans to discontinue publishing the standard mileage rate revenue procedure annually but will publish modifications as required.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
11.25.09 - 10 Important Facts about the Extended First-Time Homebuyer Credit
10 Important Facts about the Extended First-Time Homebuyer Credit
NOV. 25, 2009
If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.
Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.
1. You must buy - or enter into a binding contract to buy a principal residence - on or before April 30, 2010.
2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
4. A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you've lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
5. The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
7. The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 - whether the credit is claimed for 2008 or for 2009 - and for all home purchases that are claimed on 2009 returns.
8. No credit is available if the purchase price of the home exceeds $800,000.9. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.10. A dependent is not eligible to claim the credit.
For more information about the expanded First-Time Home Buyer Credit, visit IRS.gov/recovery.
IR-2009-108, First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify
11.05.09 - President Signs Unemployment Bill With Tax Items
President Signs Unemployment Bill With Tax Items
NOV. 5, 2009
On Friday, President Obama signed into law a bill that includes changes to the first-time homebuyer credit, increased NOL carrybacks for small businesses, and mandatory e-filing for most tax return preparers. The bill cleared Congress on Thursday.
First-Time Homebuyer Credit
The bill extends and modifies the IRC 36 homebuyer credit, which was first introduced by the Housing Assistance Tax Act of 2008. The credit had been scheduled to expire Dec. 1. Under the bill, it is extended to May 1, 2010, and is modified so that taxpayers do not have to close on the house by that date, but merely have to enter into a binding contract by that date. To be eligible for the credit, taxpayers who have entered into a binding contract to purchase an eligible principal residence by May 1, 2010, must close before July 1, 2010.
In another major change, the credit is also modified to apply not just to first-time homebuyers. Under the bill, taxpayers who have owned and lived in their old house for any five consecutive years within the preceding eight years will be treated for purposes of the credit as first-time homebuyers. However, instead of the full $8,000 credit, such long-term residents would be eligible for only a $6,500 credit.
The bill increases the income limitations for credit eligibility to $125,000 for individuals (and $225,000 for couples). It also introduces a purchase price limit: No first-time homebuyer credit will be allowed for the purchase of any residence if the purchase price is more than $800,000.
The bill also extends the benefits of the credit to members of the military or Foreign Service on extended duty outside the United States and waives the recapture rule for those individuals.
Apparently reacting to reports that some taxpayers had been titling residences in their children's names to qualify for the credit, the bill sets a minimum age of 18 to qualify for the credit.
The American Recovery and Reinvestment Act allowed qualified small businesses (those with less than $15 million in annual gross receipts) to carry back a 2008 net operating loss (NOL) for up to five years. The bill extends that treatment to 2009 NOLs, although it limits the amount of loss than can be carried back to the fifth year. It also allows all businesses to take the five-year carryback, except those that received TARP assistance.
The bill also would mandate e-filing by almost all return preparers. Section 17 of the bill requires any return preparer who filed more than 10 individual income tax returns per year to e-file those returns. This requirement will go into effect in 2011.
Other Tax Provisions
The bill increases the penalty for failure to file partnership or S corporation returns (IRC 6698 and 6699) from $89 to $195.
The bill also extends the 0.2% FUTA surtax in IRC 3301 through the first six months of 2011 (the surtax had been scheduled to expire at the end of this year).
11.06.09 - The American Recovery and Reinvestment Act of 2009: Information Center
The American Recovery and Reinvestment Act of 2009: Information Center
Updated Nov. 6, 2009: The newly-enacted Worker, Homeownership And Business Assistance Act Of 2009 extends and expands thefirst-time homebuyer credit.
Information for Individuals
Some of the provisions of the law primarily affect individuals.
Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans. To make sure enough tax is withheld from their pay, taxpayers can use the IRS withholding calculator. See Making Work Pay for more.
First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement. New legislation extends and expands this credit.
$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.
Work Opportunity tax credit. This newly-expanded credit adds returning veterans and "disconnected youth" to the list of new hires covered by the credit that businesses may claim. Businesses have until Oct. 17 to request certification for the tax credit for some new hires.
Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions, is now available.
Municipal Bond Programs. There are new ways to finance school construction, energy and other public projects.
This statute allows an income tax deduction for amounts paid during the tax year by a taxpayer for tuition and fees required for a dependent's enrollment in a nonpublic elementary or secondary school which complies with the criteria set forth in
et al. v. Dodd, et al. 425 F. Supp. 528 and
Section 501(c)(3) of the Internal Revenue Code or to any public elementary or secondary laboratory school that is operated by a public college or university. The deduction is for 50 percent of the actual amount of tuition and fees paid by the taxpayer per dependent, limited to $5,000. The total amount of the deduction may not exceed the taxpayer's total taxable income. For the purposes of the deduction, tuition also includes the following expenses:
Purchase of school uniforms required by schools for general day-to-day use.
Purchases of textbooks, curricula, or other instructional materials required by schools.
This statute allows an income tax deduction for educational expenses paid during the tax year by a taxpayer for home-schooling children. The deduction is for 50 percent of the actual qualified educational expenses paid for the home-schooling per dependent, limited to $5,000. Qualified educational expenses include amounts paid for the purchase of textbooks and curricula necessary for home-schooling. The total amount of the deduction may not exceed the taxpayer's total taxable income.
This statute allows an income tax deduction for the following fees or other amounts paid during a tax year by a taxpayer for a quality education of a dependent child enrolled in a public elementary or secondary school:
Purchases of school uniforms required by the school for general
Purchases of textbooks, curricula, or other instructional materials
required by the school.
Purchases of school supplies required by the school.
The income tax deduction is for 50 percent of the amount paid by the taxpayer per dependent, limited to $5,000. The total amount of the deduction may not exceed the taxpayer's total taxable income.
The deduction is effective beginning with the 2009 tax year, which is due by May
The school expense deductions are deductions from Louisiana taxable income-they are not tax credits.
The deduction will be reported on Schedule E of the Louisiana Resident Income Tax Return, Form IT-540, as an adjustment to income and the Louisiana School Expense Deduction Worksheet must be attached to your return.
The deduction is allowed for Louisiana residents only. Part-Year residents may take the deduction for school expenses paid in Louisiana during the time a person was a Louisiana resident. The deduction will be reported on the Nonresident and Part-Year Resident (NPR) Worksheet of the Louisiana Nonresident and Part-Year Resident Income Tax Return, Form IT-540B, as an adjustment to income and the Louisiana School Expense Deduction Worksheet must be attached to your return.
The deduction is not available to nonresidents.
Taxpayers must retain all expense receipts as proof of the amounts paid.
The deduction is for 50 percent of the costs paid per dependent, limited to $5,000.
If a dependent's expenses exceed $10,000, the deduction is limited to $5,000. If one dependent's expenses are $8,000 and the second dependent's expenses are $12,000-the total deduction allowed is $4,000 for the first dependent and $5,000 for the second dependent for a total deduction of $9,000.
If one dependent qualifies for two or more deductions and the dependent's expenses exceed $10,000, the combined total of the deductions is limited to $5,000. If the dependent attended a school that qualifies for the deduction for elementary and secondary school tuition and the expenses are $9,000-the deduction allowed is $4,500. If the dependent also attended a public school in the fall and the expenses are $1,500-the second deduction allowed is limited to $500, for a total deduction of $5,000.
If one dependent attended 2 different schools qualifying for the same deduction and the dependent's expenses exceed $10,000, the deduction is limited to $5,000. If the dependent attended a school that qualifies for the deduction for elementary and secondary school tuition and the expenses are $6,000 and in the fall attended a different qualifying school whose expenses are $16,000-the deduction allowed is $5,000.
The deduction is for the parent or guardian who claims the student as a dependent for the current tax year or claimed the student as a dependent on the prior year's return. For example, in order to claim the deduction for 2009, the taxpayer must have claimed the student as a dependent on their 2009 return or their 2008 return. If the student's parents do not file a joint return and alternate claiming the child as a dependent, both parents are allowed to claim the deduction for the expenses that each paid for the year. However, if a dependent's expenses exceed $10,000, the deduction is limited to $5,000. If one parent's paid expenses are $6,000 and the other parent's paid expenses are $6,000-the total deduction allowed is $2,500 for each parent for a total deduction of $5,000 for the dependent.
January 15th, 2014 Standard mileage rate.
Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
· 56 cents per mile for business miles driven
· 23.5 cents per mile driven for medical or moving purposes
· 14 cents per mile driven in service of charitable organizations