Newsletters prior to 2015 are available in our Archives
Nov 17, 2016
- Overtime: The Final Rule
On May 18, 2016, President Obama and Secretary Perez announced the publication of the Department of Labor’s final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4 million workers within the first year of implementation. https://www.dol.gov/whd/overtime/final2016/
For more information and details, visit the above Department of Labor link. The rule changes begin December 1, 2016. Business owners should contact their payroll service with any questions.
David S. Nelson, CPA, CTRS
-YEAR-END TAX PLANNING
This year's tax planning season (for businesses December 1 to December 31 and December 1 to January 15 for individuals) will be especialyl challenging.
Any bonuses, payments, dividen payments, and 70-1/2 pension distribution, charitable contribution, and payments for deductible business expenses must be paid by December 31.
Estimated income tax payments for individuals are due January 15, 2014.
We don't know if there will be any tax benefits such as the sales tax deduction or energy credits extended. No matter what Congress enacts, any year-end actions and tax payments must be made by the above dates.
The new 3.8% tax on dividends, interest, and capital gains for for high earners, and the the Medicare tax of .09% for individuals start at income over $250,000 for married, and $2000.00 for single.
Get your numbers for 2013 to us as soon as possible so we can best advise you.
AMERICAN TAXPAYER RELIEF ACT OF 2012
A Summary of the new tax act.
Although Congress averted many of the consequences of a possible tumble over the fiscal cliff with last-minute action, you should be aware of the impact of the bill that was passed — known as the American Taxpayer Relief Act of 2012 — signed into law January 2 2013.
We have compiled an overview of the key provisions of this new law. We encourage you to review them and call us if you have any concerns about how your tax situation will change as we prepare your returns for this filing season.
• A Tax Increase on the Highest Incomes in 2013. Although most taxpayers avoided a tax increase, rates did rise for top earners. Taxpayers (including those who receive income through partnerships and S corporations) who earn more than $400,000 ($450,000 for married taxpayers filing jointly) have a marginal tax rate of 39.6%. All other existing rates remain the same.
• Higher Capital Gains Rates for Top Earners. The same individuals who are subject to the new 39.6% top rate on income now face a 20% rate on capital gains and dividends, up from 15%. Taxpayers in the 10% and 15% income brackets have a zero capital gains rate and those in the middle will continue to pay 15%.
• Higher Personal Exemptions Phase-out Levels. The phase-out levels for personal exemptions and itemized deduction have been raised to $300,000 for married couples and surviving spouses and $250,000 for individuals.
• Permanent AMT Inflation Indexing. The alternative minimum tax originally was intended to prevent high-income individuals from avoiding taxes. In the absence of a patch for last year, more than 60 million middle-income taxpayers might have been subject to the AMT on their 2012 income. After years of last-minute AMT “patches,” the new law permanently indexes the AMT to inflation starting in tax year 2012. For income you earned in 2012, the exemptions are $50,600 for individuals and $78,750 for married taxpayers filing jointly.
• Restoration of the Full Rate for Social Security and Medicare Taxes. The law did not extend the 2% cut for the employees’ portion of the Social Security payroll tax, which means it will go back to the full rate of 6.2% on income up to $113,700 in 2013.
• Clarity on Estate and Gift Taxes. After years of uncertainty in this area, the new law holds the estate and gift-tax exclusion at $5 million, indexed for inflation ($5.12 million in 2012). The top tax rate jumped to 40% from 35% as of January 1, 2013, but without this change, it would have soared to 55% with a $1 million exclusion amount. The act made permanent the estate tax portability election, which allows a surviving spouse to use a deceased spouse’s unused exemption amount.
• Marriage Penalty Relief Retained. Certain taxpayers filing jointly will no longer have to worry about paying more than if they filed as single taxpayers; joint filers also will enjoy a larger standard deduction.
• Education Tax Benefits Extended. Many deductions for education expenses were set to expire at the end of last year, but they will remain in place under the new law. For example, the law extends the deduction for qualified education expenses through 2013 and retroactively for the 2012 tax year.
• Conversions to Roth Retirement Plans. The new law allows participants in an employer-sponsored 401(k) to transfer any amount to a Roth 401(k) — the funds will be taxed upon conversion.
• Tax Relief for Mortgage Loan Modifications. Taxpayers struggling to pay their mortgages, or whose home values have fallen below their purchase price, were given another year of tax relief on any qualifying “indebtedness income” they may receive as a result of a loan modification or short sale on their principal residence.
Also, taxpayers who have net investment income beginning in 2013 will face 3.8% surtax on categories of certain unearned income, potentially increasing the total tax rate to 43.4% (39.6% + 3.8%). This tax was already slated to go into effect as a result of health care reform.
We can help you understand the effect that these changes will have on your tax situation. In addition to preparing your return in a way that maximizes your tax advantages, we are also available after tax season to advise on strategies and planning decisions that will help you minimize taxes and meet your financial goals.
If you have an immediate question regarding these changes please email us.Otherwise, we can discuss the changes during your tax appointment for 2012-tax year or after May 1, 2013 you can schedule an appointment to discuss changes for 2013-tax year.
-Year-End Tax Planning - December 18, 2012
This year’s tax planning season (for businesses is November 15 to December 31, 2012, and December 1 to January 15, 2013 for individuals) has never been so challenging.
Most clients who need to make year-end tax moves have already sent us data. Remember: Any bonuses, dividend payments and 70-1/2 pension distribution, charitable contribution and payments for deductible business expenses must be done by December 31. Estimated income tax payments for individuals are due January 15, 2013.
We hope to soon know what tax law changes Congress and the President agree to. No matter what new issues come, any year-end actions and tax payments must be made by the above dates.
Our best guess is that there will be some major surprises with the coming changes.
If we don’t have your numbers for 2012, get them to us as soon as possible so we can best advise you once we have the new law in hand.
-Charitable Donations - December 16, 2012
If you make a donation to a charity that is valued at $250 or more, you are required to obtain a written receipt from the charity. The receipt must state that you were provided with no goods or services in return for your donation.
Canceled checks work well as proof of cash donations, as do credit card statements showing a gift paid by credit card.
Worksheets for valuations of non-cash contributions are available at our website: http://dnelsoncpas.com/sworksheets.htm.
For more information regarding charitable donations, visit the IRS website at: http://www.irs.gov/taxtopics/tc506.html
-Payroll Tax Cut Temporarily Extended into 2012 - December 24, 2011
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.
For more information, visit: http://www.irs.gov/newsroom/article/0,,id=251650,00.html
-IRS INCREASES MILEAGE RATE - June 30th, 2011
The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."
-FBAR: June 30, 2011 Deadline - June 8, 2011
You have until June 30, 2011 to file by mail a Report of Foreign Bank and Financial Accounts (FBAR). Form available at: http://www.irs.gov/pub/irs-pdf/f90221.pdf
U.S. persons are required to file FBARs Form TD F 90-22.1 annually if they have a financial interest in or signature authority over financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.
U.S. persons required to file an FBAR this year are required to meet the June 30, 2011 filing date. Unlike federal income tax returns, extensions of time to file are not available.
Go to: http://www.irs.gov/businesses/small/article/0,,id=148849,00.html
for more information.
-Offshore Account Amnesty...sort of. - May 31, 2011
The IRS is offering taxpayers with undisclosed income from offshore accounts one more chance to participate in a new, voluntary disclosure initiative to get current on their tax returns. The 2011 Offshore Voluntary Disclosure Initiative (OVDI) will be available only through August 31, 2011.
The 2011 initiative has a higher penalty rate than the previous voluntary disclosure program, which ended October 15, 2009, but it offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk IRS detection and face criminal prosecution later. The 2011 initiative includes new guidelines to provide fairness to people with smaller amounts of undisclosed assets or unusual situations.
Now is your chance to come clean - you only have until August 31, 2011.
For more information, go to: http://www.irs.gov/newsroom/article/0,,id=235695,00.html
-Washington State Department of Revenue New Quarterly Filing Requirements - May 31, 2011
Recent legislation requires Washington State taxpayers who file business excise taxes quarterly to file and pay electronically after July 22, 2011. Taxpayers who file paper returns should have received a letter in mid-May that included instructions on how to set up an online account and descriptions of electronic payment options. The DOR (Department of Revenue) will not mail returns after Quarter 2 unless the taxpayer has received a waiver. Go to: http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/MandatoryE-file.aspx for more information.
-Critical Notice Corporate Officers - December, 2009
Corporate officers must complete, sign and mail or FAX the Corporate Officer Exemption Form by January 15, 2010.
If you fail to do so, you will be subject to state unemployment tax. Generally, it saves money.
Form available at: http://www.esd.wa.gov/uitax/corporateofficers/corp-officer-fam.pdf#zoom=100 (If you are not able to access the page with the above link, copy/paste it into your Internet browser.) This is due by January 15, 2010.
Because the law requires two signatures for each corporate officer exempted, print a separate form for each officer. The exempted officer must voluntarily agree to be exempt and sign the form.
In addition, a second officer (if there is one) must also sign the form.
If you have any questions, the FAQ is available at: http://www.esd.wa.gov/uitax/corporateofficers/exempt-officers-defined.php
ALSO, if you believe you have not paid enough estimated tax and own your own business, you should increase your January 15, 2010 estimated payment.
If you have any questions please contact us.
-Critical Notice for S-Corporations - December, 2009
If you have not taken a wage for your S-Corporation in 2009, you MUST DO SO NOW. All corporate officer payroll checks must be dated by Dec. 31, 2009, and the federal tax liability must be paid by January 4, 2010. Many banks are no longer taking 941 payments, and the IRS is pushing for everyone to pay electronically through EFTPS. It is really quite simple. Go to www.eftps.com and click on Enrollment. The prompts will take you through the steps to enroll. It is important that you sign up now, as opposed to the end of the month. Enrollment can take up to 15 days, SO ACT NOW!! If the IRS does not receive your payment you will be subject to penalties and interest, and you can no longer get out of paying these fines.
If you are unsure as to how much to take in wages, send us a copy of your Balance Sheet and P & L Statement and we can help you determine an amount. But do not wait too long----we need some time.
If we have been preparing your 941 Payroll Reports for you we still can, provided that you give us the numbers. This quarter you cannot file 0 wages if you have net income for 2009. The 941 return is due January 31, 2010. The 940 return, W-3s and W-2s are also due by January 31, 2010. But again, the tax payment for the 4th quarter is due January 4, 2010.
If you have any questions please contact us.
-Single Member LLCs that are Subchapter S Corporations - July, 2009
Why you must file all quarterly payroll tax reports with the IRS and state agencies (940 and 941):
At the end of each quarter, whether or not you have paid any wages to yourself during the quarter, you must file IRS Form 941, and also file with State Unemployment and L&I, if you are signed up for those. You must fill out and submit those forms, marking that there were no wages paid.
You must file these payroll tax reports. Otherwise, you will receive a notice. Yes, even if you have no employees and paid no wages during the quarter, you must still file the form and report zero. Attached is an example of how 941s should be completed. Not doing this will generate an IRS notice. We have had a number of these cases in the last few months and we cannot handle them all. Simply, this is one of the things you must do, whether you pay wages or not, in order for you to reap the benefit of an S Corporation.
Please feel free to contact our office if you have any questions.
-FBAR: Do you have a foreign bank or brokerage account valued over $10,000? - July, 2009
You have until June 30th to file a Report of Foreign Bank and Financial Accounts (FBAR), US Treasury form TD F 90-22.1. It's a simple form requiring only the most basic information. FBAR forms and instructions are available at: FinCEN. Click "Other Forms" and select TD F 90-22.1
But do not panic; the IRS is aware some taxpayers have just become aware of this filing requirement. The IRS is allowing more time for taxpayers to file this report. Please follow this link for additional information: http://www.irs.gov/newsroom/article/0,,id=210174,00.html
This form can only be mailed to the IRS. While you may not have been aware of this annual filing requirement, we are here to answer any questions you may have.
-The Stimulus Bill - February, 2009
As most of you know, President Obama signed the Stimulus Bill last week. It contained 282 changes to the Tax Code. See the February Tax Tips article for more information.
NOTE: Tax laws change constantly.
Archived documents are made available ONLY as reference.
Contact a tax professional if you have any questions or
if you need help now.
--Our Policies-- www.DNelsonCPAs.com
====NOTICE REQUIRED BY IRS====
Circular 230 Disclosure:
To ensure compliance with requirements imposed by the IRS, we inform you that (i) any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.