New Pronouncements & Tax Updates

Our commitment is to you and as such we have created a website that brings you the resources and information that we think is most important to today’s middle market business owner and their advisors.

As the Federal, state and local governments draft new policies that impact the business community, we will provide the information here – and most often we will also have a brief review of the implications for you.

Please visit this page whenever you are looking for the latest accounting and tax and business pronouncements!

September 1, 2011

Tax Relief

The IRS announced today (September 1, 2011) that it is providing tax relief to individual and busines taxpayers impacted by Hurricane Irene that include certain taxpayers in New Jersey, New York, North Carolina and Puerto Rico.

Click here to read tax update

June 27, 2011

On June 23, 2011, the IRS announced an increase in the optional standard mileage rates for the remaining six months of 2011, resulting in an increase to 55.5 cents per mile for all business miles driven from July 1, 2011 through December 31, 2011.

Click here to read tax update

Posted may 2, 2011

tax alert new jersey corporate income tax changes

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Posted November 29, 2010

1099 Tax Compliance

New Law Requires 1099s for Goods and Services Starting in 2012

Under a provision in the new health care reform law, self-employed individuals, small businesses and charities will be required to provide 1099 forms to every vendor from whom they buy more than $600 in goods, beginning in 2012. In order to minimize the burden that complying with this will bring, the Internal Revenue Service is considering exempting some small-business purchases made with credit or debit cards (as they will already receive a record of those transactions from financial institutions, starting in 2011). We will keep you posted on any changes to the new provision.

Posted 4/28/2010

New Tax Policies

The New Jersey Tax Court has ruled that a corporation that has a New Jersey resident telecommuter employee as its only connection to New Jersey is still subject to the Corporate Business Tax (CBT).

One new technique being used by state tax auditors to help them identify employees who spend time in their state is to look at travel reimbursements paid by the employer. For example, if the employee who lives in and works for a New Jersey business is reimbursed for train fare or mileage and parking in NYC, the New York State tax auditors will find that employee subject to New York state withholding tax.

Posted 4/5/10

Synopsis of Some Critical Topics for the Newly passed Health-Care Reform-Act

Ninth Circuit Says Late-Filing Penalty Amount is Mandatory

Even though your nonprofit organization is exempt from paying income tax, you are required annually to file Form 990 and there are consequences for not filing or late filing.

Just this month, the Ninth Circuit Court of Appeals held that courts and the IRS have no discretion to reduce the amount of the late filling penalty for tax-exempt organizations, overruling a previous district court decision (Section 6652).

For those nonprofit organizations that file late, Section 6652 provides this formula for determining the late-filing penalty:

For exempt organizations with more than $1 million or less in receipts, the formula calls for a penalty of $20 per day, up to $10,000 or 5% of the organization’s gross receipts, whichever is less.

For exempt organizations with more than $1 million in receipts, the formula calls for a penalty of $100 per day, up to $50,000.

The Ninth Circuit found that in providing the formula, the Code section “uses mandatory language in all respects, leaving the IRS no discretion in deciding in deciding how much penalty to impose.” The court pointed to the words, “there shall be paid,” in Section 6652 ©(1) and said “this language does not confer on the agency discretion to decide how much ought to be paid.”

Posted 3/18/2010

New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law on March 18. 2010.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2% share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. (Family members and other relatives do not qualify).

The new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks.

For further information call us at 973-994-9494.

"IRS Explains Significant Changes to 2009 Form 990"

Posted 3/4/2010

The Internal Revenue Service has just issued the final 2009 versions of Forms 990 and 990-EZ along with instructions for comlpetion and a detailed explanation of the significant changes that have been made. These changes were made so that the new form is designed to promote more uniform reporting by exempt organizations.

Most tax exempt organizations must file an annual information return with the IRS. Exemptions to this rule include churches and certain political organizations. Form 990 MUST be filed by an organization that is exempt from tax under IRC 501 (a) that has gross receipts of $500,000 or more or total assets of $1.25 million or more at the end of the tax year. Organizations with smaller gross receipts and assets can choose to file Form 990-EZ. Those with gross receipts under $25,000 can choose to file Form 990-N electronic Notice (e-Postcard) for Tax Exempt Organizations Not required to File Form 990 or 990-EZ.

Remember - an organization that fails to file an annual return or notice for three consecutive years as is required by federal law will lose its tax exempt status! Once this happens, it will have to reapply with the IRS to regain its tax - exempt status. Any income received between the revocation date and renewed exemption may be taxable.

As we said, there are a number of critical changes to the 2009 Forms 990 and 990-EZ. For more information, please feel free to call our ofice at 973-994-9494 or visit the IRS at www.IRS.gov./charities for a detailed description.

"Five Ways to Offset Education Costs"

posted 3/4/2010

In response to the incredible cost of obtaining a college education today, the IRS has just published "Five Ways to Offset Education Costs" to help students and parents looking for ways to help them manage the cost of today's tuition.

The American Opportunity Credit can help parents pay part of the cost of the first four years of college. The American Recovery and Reinvestment Act modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maxium annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
The Hope Credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009.
The Lifetime Learning Credit can help pay for undergraduate, graduate and professional degree courses - including courses to improve job skills - regardless of the number of years in the program. Eligible taxpayers may qualify for up to $2,000 - $4,000 if a student in a Midwestern disaster area - per tax return.
Enhanced benefits for 529 college savings plans, including certain computer technology purchases, are now added to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.
Under tuition and fees deduction, students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subjected to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American Opporunity, Hope, or Lifetime Learning Credits.

Please note: You cannot claim the American Opportunity and the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim any of the credits if you claim tuition and fees deduction for the same student in the same year. To qualify for an education credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676)

EFAST2: What You Need to Know

posted 2/15/10

Effective with plan years beginning on or after January 1, 2009, all pension and welfare plans are required to submit their annual returns (Form 5500 or 5500-SF) electronically through an all-electronic system called EFAST2.

The Sponsor of the Plan must register as the "Filing Signer" on the DOL's EFAST2 system. The returns can no longer be filed by paper, unless you are filing Form 5500-EZ.

As a new user of EFAST2, you will need to register to access the filing system before Form 5500 can be filed. The registration process must be done online but is simple and will take only a few minutes to complete. During the registration process you will be assigned a User ID, PIN and create a password. The registration link can be found at www.efast.dol.gov

The PIN assigned is confidential and is not allowed to be shared with anyone; including your CPA who prepares your return. You will be asked to accept a PIN Agreement to not share your PIN with anyone. This is why each Plan Administrator (or other signer) must register and obtain a PIN which will be used to electronically sign the returns in order to satisfy the annual reporting requirements under ERISA and the Internal Revenue Code. Your CPA will work out the details with you on how to enter the password from EFAST2 into their tax software.

During registration you will be asked to select your type of user. You should select 'filing signer'. According to the DOL website base of frequently asked questions: (http://www.dol.gov/ebsa/faqs/faq)

Filing Signers can sign Form 5500/5500-SF filings. Signers must ensure that the filing information is correct prior to its submission. The signer's signature indicates that to the best of the signer's knowledge and belief the filing is true, correct, and complete. Signers include Plan Administrators, Employers/Plan Sponsors, and Direct Filing Entities.

If your Plan does not qualify to file form 5500-EZ, it may qualify to file a new two-page short form filing, 5500_SF. Eligible small plan filers may be able to take advantage of this reduced reporting, but are still required to register for credentials with the Department of Labor as described above.

If you would like to discuss the specifics of your Plan's filing, or if you have any questions or concerns regarding this new procedure, please contact our office.

Five Filing Facts for Recently Married or Divorced Taxpayers

Posted 1/7/10

If you were married or divorced recently, there are a couple of things you'll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.

Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.

If you took your spouse's last name or if both spouses hyphenate their last names, you may run into complications if you don't notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can't match the new name with their Social Security Number.
If you were recently divorced and changed back to your pervious last name, you'll also need to notify the SSA of this name change.
Informing the SSA of a name change is a snap; you'll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
Form SS-5 is available on SSA's Web site at www.socialsecurity.gov [http://www.socialsecurity.gov ], by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
If you adopted your spouse's children after getting married, you'll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSN's, the parents can apply for an Adoption Taxpayer Identification Nember - or ATIN - by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-Form (800-829-3676).

Important Links:

Social Security Administration

http://www.socialsecurity.gov

Form SS-5, Application for a Social Security Card

http://www.socialsecurity.gov/online/ss-5.pdf

Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions (PDF 42K

http://www.irs.gov/pub/irs-pdf/fw7a.pdf

Estate Tax Update

Posted 1/15/2010

In spite of all the predictions to the contrary, Congress has allowed the 2001 Tax Act to remain in place.

This means that for the year 2010 - but not for subsequent years - unless Congress takes action, then:

The federal estate tax will be repealed
The federal generation-skipping transfer (GST) tax will be repealed
The federal gift tax will remain in place but with a lower top rate of 35%
The automatic step-up in basis for inherited assets will be largely eliminated

For most of us, the two significant facts are that the federal estate tax and the GST will be repealed for the estates of persons dying after December 31, 2009.

The House of Representatives passed a bill in December extending the current (2009) provisions with a top rate of 45% and a $3,500,000 exemption amount, as the administration had requested, but the Senate failed to act.

We expect that attempts will be made in 2010 to enact similar legislation, likely retroactive to January 1, but when that might occur is unclear. However, many have questioned the constitutionality of a retroactive tax bill even if enacted.

If Congress fails to act in 2010, the pre-2001 tax law, with a top estate and gift tax rate of 55% and a $1,000,000 exemption amount, will return for estates of persons dying after December 31, 2010 as will the GST tax.

This has federal implications only and does not affect state estate taxes. That is, New Jersey continues with the same 16% top rate, but a $675,000 exemption amount.

We are currently exploring the tax planning opportunities resulting from the repeal but this is a difficult task since it is unclear what Congress will actually do, and whether or not any attempts at retroactive changes will be upheld when challenged in the courts. We continue to monitor the situation and we encourage you to contact us if you would like to discuss how this impacts your personal situation. We can be reached at 973-994-9494 or by e-mail at ken.hydock@sobel-cpa.com

Please note: Research for this update and some of the details provided here were reprinted from information supplied through Integrity Advisors Pension Consultants.