Team DKB Tax Update
An ongoing discussion of federal and state income tax issues that impact your business and personal life.
Saturday, December 08, 2012
DKB presentation "The Fiscal Cliff"
Team DKB presented our webinar on the tax impact of the Fiscal Cliff. Click on the link to see more. Make sure to call us if you have questions.
Thursday, November 15, 2012
2012 form 1099 filing
As the year comes to a close, we wanted to take this
opportunity to remind you of the filing requirements for Forms 1096 and 1099.
The Internal Revenue Service requires businesses and self-employed
individuals who file Schedule C to issue a Form 1099 to any individual,
partnership, incorporated law firm or unincorporated business they have paid in
excess of $600 per calendar year for rents, services, prizes, and other income
payments. This is required whether these
payments are spread out over the year or are paid in one lump sum. For example,
because DeJoy, Knauf & Blood, LLP is a partnership, you are required to
issue us a Form 1099 if you have paid us in excess of $600 for services.
If you made payments that meet these requirements, you are
required by the IRS to obtain form W-9 from each individual or business to
which the payments were made. This
ensures you have their correct name, address and either employer identification
number or social security number and provides documentation to substantiate
your expenses in the event you are audited.
That information, along with the amount and type of payment made, must
then be reported to the individual or business via Form 1099. The Form 1099 must be provided to the
individual or business no later than January 31, 2013. Copies of the Form 1099 and corresponding
Form 1096 must be filed with the Internal Revenue Service no later than
February 28, 2013.
Tuesday, April 17, 2012
The Sun Sets on Another April 15th at DeJoy, Knauf & Blood, LLP
The staff at DKB has pretty much put the wraps on another
April 15th. People are
getting ready for a little refreshment and relaxation. This marks the conclusion of my 30th
busy season. The new term for busy
season is “prime time” in the world of political correctness. I will try, but am not sure it will ever not
be “busy season”.
I have had opportunities to tell staff how it was in the “old days”. Filling out tax forms with a pencil…adding numbers with an adding machine…writing and mailing letters…talking to clients on the phone…mailing huge volumes of paper etc. Much has been replaced with spreadsheets…desktop tax preparation software…scanned documents…email/text messages/video conferences…efiling… and thankfully still talking to clients on the phone. I feel like my father telling about walking to school five miles, uphill both ways with no shoes. My partner, Dennis Stein, and I are thankful that we no longer suffer from the most vicious of all accounting injuries…the dreaded paper cut.
I have had opportunities to tell staff how it was in the “old days”. Filling out tax forms with a pencil…adding numbers with an adding machine…writing and mailing letters…talking to clients on the phone…mailing huge volumes of paper etc. Much has been replaced with spreadsheets…desktop tax preparation software…scanned documents…email/text messages/video conferences…efiling… and thankfully still talking to clients on the phone. I feel like my father telling about walking to school five miles, uphill both ways with no shoes. My partner, Dennis Stein, and I are thankful that we no longer suffer from the most vicious of all accounting injuries…the dreaded paper cut.
Even with all of this change, the Talking Heads (that's a band for you youngsters) had it right
that it is the “Same as it ever was”.
How we grow as a firm is still is guided by a culture of working hard to
take great care of our clients. Yes
doing this today is done with a new set of tools in our tool box (like my
iPhone 4S, which is pretty cool). However,
without great people, the tool box would be underutilized. DKB has great people who work hard to take
great care of our clients and are darn good with the new tools of public
accounting. Clients may wonder at times
why we ask a question twice so we fully understand a transaction and find the
hidden tax benefits. Or wonder why it is
taking a little bit longer to complete their tax return filing or financial
statements. Or understand why they might
be getting an email from DKB staff at 10pm asking a question to they can meet a
critical deadline. It is about taking
great care of our clients.
I feel like we have a
“connection” with every one of our clients.
The connection can be different from client to client. A relationship can be deeper with some clients
than others. However at DKB, our firm
culture has never been built on a customer who simply pays us revenue and we
provide service. I think there is always
some further connection or story to the relationship with our clients. That’s why we have great clients. We thank everyone of you. Happy tax day to all.
Saturday, March 10, 2012
IRS Fresh Start Program
Everyone needs a fresh start from time to time. The IRS to the rescue!
The IRS has announced a major expansion of its initiative to help struggling taxpayers by providing new penalty relief to the unemployed and making installment agreements available to more taxpayers. Under the new provisions, certain taxpayers who have been unemployed for 30 days or longer and certain self-employed individuals will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible for installment agreements to help more people qualify for the program.
Penalty Relief
To assist those most in need, the IRS is providing a six-month grace period on failure-to-pay penalties to certain wage earners and self-employed individuals. Penalty relief will be available to two categories of taxpayers: (1) wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year, and (2) self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy. This penalty relief is limited to taxpayers whose income does not exceed $100,000 (single or head of household) or $200,000 (married filing jointly) and whose calendar year 2011 balance due does not exceed $50,000. Eligible taxpayers requesting an extension of time to pay will get relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by October 15, 2012. Taxpayers meeting the eligibility criteria will need to complete Form 1127A to request relief. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, with a 25 percent cap.
Installment Agreements
The IRS has also announced that the threshold for obtaining an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum. Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments. Taxpayers can set up an installment agreement with the IRS by going to On-line Payment Agreement (OPA) page and following the instructions.
Saturday, February 18, 2012
2012 MIDDLE CLASS TAX RELIEF AND JOB CREATION ACT
Congress has extended the employee-side payroll tax cut through the end of 2012.
After weeks of uncertainty over whether an agreement could be reached, the House
passed the Middle Class Tax Relief and Job Creation Act of 2012 on February 17,
2012. Senate approval quickly followed, also on February 17. A
potential impasse over revenue increases was avoided entirely when both parties
agreed to offset costs of the full-year, two percentage point payroll tax cut
through transfers from the general fund of the Treasury to the OASDI trust fund.
In a revenue neutral provision, however, the new law eliminates a timing-shift
in the estimated tax payments that had been required of certain large
corporations under previous laws. Non-tax provisions within the new law extend
unemployment benefits and implement a "doc
fix" for Medicare. President Obama is expected to sign the bill as soon
as it reaches the White House.
The Temporary
Payroll Tax Cut Continuation Act of 2011 (2011 Payroll Continuation Act) had
extended the employee-side payroll tax rate reduction of two percentage points
through the end of February 2012. The new law extends the employee-side payroll
tax holiday through the end of 2012.
Under the new
law, individuals who receive wages and salaries will pay Old-Age, Survivors, and
Disability Insurance (OASDI) taxes at a rate of 4.2 percent for calendar year
2012. The OASDI tax rate for self employed individuals for 2012 similarly has
been extended at a reduced 10.4 percent level through the end of 2012.
Tuesday, January 10, 2012
A Capitalizable Christmas Present
Just before the New Year, the IRS released much-anticipated
temporary and proposed regs on the capitalization of tangible property
(so-called "repair regs"). The regs, the IRS explained,
are intended to clarify and expand existing standards for capitalization of
specific expenses associated with tangible property and provide some bright-line
tests for applying the standards. Many taxpayers will not consider the new definitions of a unit of property to be much of a Christmas present. Much analysis of these regs will be needed are they are implemented in 2012.
Background
Under Code Sec. 263(a), amounts paid to acquire,
produce, or improve tangible property generally must be capitalized. The IRS
issued proposed regs in 2006 that attempted to carve out certain repairs and
maintenance exceptions. Those proposed regs were further refined in 2008. Now,
the IRS has issued new regs, not only making further changes but also making the
regs "temporary regs," binding on both taxpayers and
the government. The temporary regs are generally effective for expenditures made
in tax years beginning on or after January 1, 2012.
Materials and supplies
The temporary regs generally track the definition of
materials and supplies in the 2008 regs and provide an alternative optional
method of accounting for rotable and temporary spare parts, along with an
election to treat certain materials and supplies under the de minimis rule of
Reg §1.263(a)-2T.
Repairs
The temporary regs also generally track the treatment of
repairs under the 2008 regs. A taxpayer is permitted to deduct amounts paid to
repair and maintain tangible property provided such amounts are not required to
be capitalized under Code Sec. 263(a) or any other provision of the Tax
Code or regs.
To determine whether payments are repairs or
capital expenditures, taxpayers must first look at the unit of property. The
regs add clarity regarding a unit of property.
Rentals/leased property
The temporary regs reflect the existing rule in Reg.
§1.162-11(a) that provides a taxpayer may amortize the cost of acquiring a
leasehold over the term of the lease. The temporary regs also revise the rule in
Reg. §1.162-11(b) that provides that the cost of erecting a building or making a
permanent improvement to property leased by the taxpayer is a capital
expenditure and is not deductible as a business expense.
Acquire/produce tangible property
The temporary regs generally track the 2008 regs in the
treatment of amounts paid to acquire or produce units of tangible property.
Generally, acquisition and production costs must be capitalized. The temporary
regs also address moving and reinstallation costs; work performed prior to
placing property into service; and transaction costs. Additionally, the
temporary regs modify the de minimis rule in the 2008 regs.
Amounts to improve property
The temporary regs retain the approach in the 2008 regs for
determining the unit of property and for determining whether there is an
improvement to the unit of property. The temporary regs also retain some of the
simplifying conventions in the 2008 regs.
Accounting method
The IRS reported it anticipates issuing additional guidance
to advise taxpayers regarding how to obtain automatic consent to change to a
method of accounting provided in the temporary regs for tax years beginning on
or after January 1, 2012. These automatic consent requests may be filed
beginning with taxpayers’ 2012 returns. Taxpayers may not request a change to a
method described in the temporary regs on their 2011 returns, the IRS advised.
Thursday, December 29, 2011
Temporary Payroll Tax Cut Continuation Act of 2011
What did our disfunctional Congress do before leaving town for Christmas?
At the eleventh hour, Congress
approved a two-month extension of the employee-side payroll tax cut in the
Temporary Payroll Tax Cut Continuation Act of 2011. The two-month extension,
for January and February 2012, is intended to give lawmakers additional time to
negotiate a full-year extension of the payroll tax cut through the end of
2012.
OASDI tax rate. Social Security's Old-Age, Survivors, and Disability
Insurance (OASDI) program and Medicare's Hospital Insurance (HI) program are
financed primarily by employment taxes. Prior to 2011, the OASDI tax rate was
6.2 percent for employees and employers, each; and the OASDI tax rate for
self-employment income was 12.4 percent.
OASDI limits the amount of earnings
subject to taxation for a given year. This limit changes each year with changes
in the national average wage index. For 2011, the OASDI wage base was $106,800.
The OASDI wage base is $110,100 for 2012. There is no limitation on HI-taxable
earnings.
2011 temporary reduction. The Tax Relief, Unemployment Insurance Reauthorization, and
Job Creation Act of 2010 reduced, for wages and salaries paid in 2011 and
self-employment income in 2011, the OASDI tax by two percentage points, applied
to the portion of the tax paid by the employee and the self-employed individual
(4.2 percent and 10.4 percent, respectively). The employee-side payroll tax cut
under the 2010 Tax Relief Act was scheduled to expire after December 31,
2011.
Two-month extension. On December 23, 2011, Congress approved and President Obama
signed a two-month extension of the employee-side payroll tax cut. The Temporary
Payroll Tax Cut Continuation Act of 2011 extends the two percentage point
employee-side payroll tax cut through the end of February 2012.
Recapture. Shortly after President Obama signed the Temporary Payroll Tax
Cut Continuation Act, the IRS explained that the new law includes a recapture
provision, which applies to individuals who receive more than $18,350 during the
two-month extension period. The OASDI wage base for 2012 is $110,100, and
$18,350 represents two-months of the full-year amount. The recapture tax would
be payable in 2013 when the employee files his or her income tax return for the
2012 tax year. The House Ways and Means Committee reported that the recapture
provision will only apply if the payroll tax reduction is not extended for the
remainder of 2012.
Implementation. The IRS instructed employers to implement the reduced payroll
tax rate as soon as possible in 2012 but no later than January 31, 2012. For any
Social Security tax over-withheld during January, employers should make an
offsetting adjustment in employees’ pay as soon as possible but no later than
March 31, 2012, the IRS advised.
Tuesday, December 13, 2011
NYS Tax Law Changes for 2012
Condensed summary of NYS law changes as provided by our friends at CCH.
New York Gov. Andrew M. Cuomo has signed legislation containing new credit provisions and modifications to the corporate franchise and personal income tax rates, including a restructuring of the individual income tax brackets. The legislation also contains property tax provisions, which are reported separately.
New York Gov. Andrew M. Cuomo has signed legislation containing new credit provisions and modifications to the corporate franchise and personal income tax rates, including a restructuring of the individual income tax brackets. The legislation also contains property tax provisions, which are reported separately.
Individual Income Tax
Changes
Under the legislation, for joint filers in taxable years beginning
after 2011 and before 2015, taxpayers with New York taxable income of $40,000 to
$150,000 will be taxed at 6.45% (previously, 6.85%); taxpayers with New York
taxable income of $150,000 to $300,000 will be taxed at 6.65% (previously,
6.85%); taxpayers with New York taxable income of $300,000 to $2 million will be
taxed at 6.85% (previously, 7.85% to 8.97%); and taxpayers with New York taxable
income over $2 million will be taxed at 8.82% (previously, 8.97%).
For taxpayers with other filing statuses, the top 8.82% rate will
apply to head of household filers with New York taxable income over $1.5 million
and to single filers with New York taxable income over $1 million. The
legislation also provides for a cost of living adjustment to the brackets and
the standard deduction.
The Department of Taxation and Finance has announced that it is
developing new withholding tables that will be effective on January 1, 2012.
Metropolitan Commuter Transportation Mobility Tax
Metropolitan commuter transportation mobility tax (MCTMT) provisions
are amended to exclude certain small businesses from the tax. Specifically, the
legislation modifies the definition of "employer" to
provide that payroll expense must exceed $312,500 (previously, $2,500) in any
calendar quarter. The definition is also amended to exclude eligible educational
institutions.
In addition, the MCTMT, previously imposed on employers at the rate
of 0.34%, is imposed at the following rates: 0.11% for employers with payroll
expense no greater than $375,000 in any calendar quarter; 0.23% for employers
with payroll expense no greater than $437,500 in any calendar quarter; and 0.34%
for employers with payroll expense exceeding $437,500 in any calendar quarter.
For self-employed individuals, tax at the rate of 0.34% applies if earnings
attributable to the Metropolitan Commuter Transportation District exceed $50,000
(previously, $10,000) for the tax year.
The MCTMT amendments applicable to employers take effect for the
quarter beginning on April 1, 2012.
Corporate Franchise Tax on Manufacturers
The legislation provides a 50% rate reduction under the corporate
franchise tax for eligible qualified New York manufacturers, for taxable years
beginning after 2011 and before 2015.
The Commissioner of Taxation and Finance is required to establish
guidelines and criteria specifying the requirements for a manufacturer to be
classified as an eligible qualified New York manufacturer. The criteria may
include factors such as regional unemployment, the economic impact that
manufacturing has on the surrounding community, population decline within the
region, and median income within the region.
Credits
The legislation creates the Youth Works Tax Credit Program, under
which credits are available for employing at-risk youths in part-time and
full-time positions. Qualified employers are entitled to a credit of $500
(full-time) or $250 (part-time) per month for up to six months for each
qualified employee. Employers are also entitled to $1,000 (full-time) or $500
(part-time) for each qualified employee who is retained for an additional six
months. Qualified employees must start their employment on or after January 1,
2012, and no later than July 1, 2012. Up to $25 million in tax credits may be
allocated under this program.
The legislation also creates the Empire State Jobs Retention
Program, which provides credits to targeted businesses harmed by a natural
disaster. Participants in the program must (1) be located in a county in which
an emergency has been declared by the governor on or after January 1, 2011, (2)
demonstrate substantial physical damage and economic harm resulting from the
event leading to the emergency declaration, and (3) retain at least 100
full-time equivalent jobs in the county. The credit equals 6.85% of the wages of
retained jobs.
Saturday, October 15, 2011
Tuesday, October 11, 2011
Special IRS Audits Target Wealthy Elite - Forbes
A great article about new examination practices by the IRS to audit "wealthy" taxpayers. The strategy behind this program is to examine the totality of the taxpayer's reported income and expense items on their tax returns. Further, the objective is to examine the taxpayer's "financial life" and determine if items are being properly reported on tax returns. This is in contrast to past practices where the IRS may have only reviewed selected issues on a taxpayers return. The IRS perceives that there has been abuse by this group of taxpayers with respect to offshore and unreported income. There also has been a number of publicized tax shelter cases where the IRS has previaled in its challenges of these shelters.
Are you ready for an examination like this?
Special IRS Audits Target Wealthy Elite - Forbes
Are you ready for an examination like this?
Special IRS Audits Target Wealthy Elite - Forbes
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