1099 Reporting Reminder for 2011

There have been a few failed attempts at legislation to change the new 1099 reporting requirements.  The new reporting requirements were passed as part of the two healthcare bills in 2010.

The summary reminder that follows was developed by Janet Graves, CPA and Matt Curbeau, CPA.  Janet is a manger and Matt is an experienced staff in our tax practice .  

Future 1099 Requirements – will you be prepared?


Effective January 1, 2012 businesses will be required to issue Forms 1099 for virtually all payments made to vendors of $600 or more, unless the payee is a tax-exempt recipient. Items which will be subject to the new reporting requirements include merchandise, equipment, inventory and raw materials.

Under the new law, businesses will be required to collect and enter into their accounting systems taxpayer identification numbers from corporate payees, providers of merchandise, equipment, etc. If a correct TIN is not provided, the businesses will also be required to make backup withholding from payments.

The reporting requirements by businesses can be eliminated if payments are made via a credit or debit card. The IRS has stated that the reporting requirements will fall on the credit card companies.

Beginning with payment made in 2011, most landlords will be required to comply with current 1099 reporting requirements.  In the past, landlords were not considered to be in a trade or business (which is a requirement to need to issue 1099's) for purposes of 1099 reporting.  Beginning on January 1, 2011 for 1099 reporting purposes, landlords will be considered to be in a trade or business and will therefore need to prepare and file form 1099 for applicable payments.

What is the next step?

Businesses that have purchases in excess of the $600 limit should start evaluating their current accounting system to ensure that it can track and report non-credit card payments by vendor and reviewing vendor information to be sure that correct TIN’s are on hand for reporting.

Team DKB will keep you updated as further guidance on the new law becomes available.

Last Minute Tax Advice...Last Minute Legislation!

I typed in "last minute tax planning tips" into a Google search.  The page hits filled the first search results page with that exact phrase and kept on going.

We are spending significant time in November and December 2010 working with clients to determine year end tax planning strategies.  As with many things in life, taxes are about timing...timing of recognition of income and deduction of expenses.  The timing of these items can have a significant impact on a business's or individual's tax liabilities.  For example, moving the sale of a security from one year to the next can have an impact on the resulting tax due.  We plan event like this to minimize our client's tax liabilities.

All the web posts and new articles about last minute tax planning tips makes me feel like we are behind in serving our clients.  However, we am still not certain in many cases what to tell clients to do.  We make informed and educated guesses on what the the tax law might look like in 2011 and after.  In many cases we do not know what the law will be for 2010.  All of this happening and unresolved on December 3, 2010.

Karl Rove's article in the Wall Street Journal( Karl Rove: Nancy Pelosi's Unwelcome Christmas Gift) may really be directed as a criticism of Speaker Pelosi.  It provides a lengthy summary of the many unresolved tax issues for 2010, 2011 and after.  I found that part more interesting.

CPA's like rules.  We work hard to understand them, properly implement them and help our clients to pay the lowest tax liability allowed under the law.  What are the rules?  I don't exactly know.  Do you?

I am starting to get the feeling like we are not the ones who are behind.

Grandfathered Health Plans

Reversing course, the IRS amended regulations issued earlier the year to allow certain changes in coverage without the loss of grandfathered status under the Patient Protection and Affordable Care Act.  All group health plans may switch insurance companies and preserve their grandfathered status. The change is not retroactive.  The amendment applies to group health insurance changes which become effective on or after November 15, 2010.  Changes prior to this time will likely result in loss of grandfathered status.

This change can allow employers to maintain a group health plan's grandfathered status and avoid new requirements such as discrimination testing for group health plan (which was previously not required).  Many employers change insurance coverage for group health plans from year to year due to changes in premium costs and benefit levels.  Without this change in regulation, very few group health plans would have been able to maintain grandfathered status.

Comment on their report card..."Doesn't play well with others"

GOP Decision to Cancel White House Meeting Brings Talk of Gamesmanship - FoxNews.com

A significant meeting today between Congressional leaders and the President is postponed until November 30, 2010. Is this just business as usual? What's being held up by the inability of these leaders to meet? Just a few small things...

• Action on the Bush Tax cuts that are set to expire on December 31, 2010. That's right. They are going to meet for the first time 30 days before these tax cuts expire to work out a deal. Really?

• Action on tax extenders package. This includes the what seems like the every year extension of the alternative minimum tax exemption increase and popular tax credits like the research and experimentation credit. Failure to pass the extenders package will have a significant impact on middle class tax liabilities when they discover the increase in their alternative minimum tax liabilities.

It appears that most action on tax planning is going to have to wait until you have had your turkey dinner and started your holiday shopping. I am sure you will be excited to be spending additional time with your accountants in the holiday season.

Is there potential relief for all those 1099's?

The United States Senate Committee on Finance: Newsroom - Chairman's News

It looks like someone in Congress might actually understand that issuing millions of 1099's might not really improve compliance. The problem is who will be required to issue 1099's? Who will be considered a small business? How do you gather all the data needed to comply with whatever new filing requirements may be adopted? Does this really just avoid killing more trees?

More to come...

2010 year end tax planning

The Holidays are fast approaching and you know what that means …..

Time for Year-End Tax Planning

Tax planning for year-end 2010 brings with it many new challenges. With the anticipation of tax legislation that may be put to a vote in Congress before year’s end, recent changes in legislation and tax laws and the complicated context of effective dates for many tax planning incentives, it is important to stay on top of the game!

New legislation that has been passed includes the Patient Protection and Affordable Care (PPAC) Act. This was designed to effectuate fundamental reforms to the U.S health care system. The PPAC brings with it tax credits for employers providing health insurance to their employees, certain medical care tax benefits to children under the age of 27 and small employers cafeteria plans.

Congress also passed the Hiring Incentives Restore Employment (HIRE) Act which provides tax breaks for businesses to encourage hiring and imposes a number of potential burdens with respect to reporting and disclosure of foreign assets. The Small Business Act of 2010 was also passed by Congress and was designed to increase lending to small businesses and create incentives for small business investment.

As new laws take over others are set to expire. Unless Congress acts to extend favorable tax benefits provided under the Jobs and Growth Tax Relief Reconciliation Act of 2003, 2010 will offer some unique opportunities which will not be available next year.

This is the sales pitch...

DKB can help whip away the confusion of the changing tax scene.  With the significant changes in the tax law that have happened in 2010 and the expected changes that will happen in 2011 and after, planning is a must.  Don't miss opportunities that might not be there on January 1, 2011. 

White House Gives In On Bush Tax Cuts

White House Gives In On Bush Tax Cuts

This story in the Huffington Post is the first indication of what might happen with the expiring
Bush tax cuts. It looks like they may not be expiring. Who would have thought this would happen 6 months ago?

An indication from the President that current ordinary income and capital gains tax rates might be extended will lend some greater clarity to individual taxpayers 2010 year end planning issues. We have spent time wrestling with the idea of accelerating capital gains into 2010 to take advantage of the 15% long term capital gains rates. The wrestling may be over?

Small Business Health Care Tax Credit

The IRS has published questions and answers to help taxpayers to understand if they are eligible to claim the Small Employer Health Care Tax Credit.

Small employers that provide health care coverage to their employees and that meet certain requirements (“qualified employers”) generally are eligible for a federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and (3) the employer must pay the premiums under a “qualifying arrangement”.

IRS Q&A's are at http://www.irs.gov/newsroom/article/0,,id=220839,00.html.  The IRS has also posted a video that provides a high level summary of the new credit at http://www.youtube.com/watch?v=85i1kzIG57k.

New Law Allows In-Plan Rollovers to Designated Roth Accounts

New Law Allows In-Plan Rollovers to Designated Roth Accounts

The IRS provides some initial guidance on "in plan" rollovers to designated Roth accounts in this item. New law provisions included in the Small Business Jobs Act of 2010 provided for this new planning opportunity. The new law provides plan participant with an opportunity to complete a Roth conversion within a 401(k), 403(b) or 457 plan. The plan needs to include an option for Roth accounts. Any amounts rolled over are treated as a taxable distribution that is included in taxable income.

Mark, Where Do I Find Section 179?

Ed, right after section 178 and just before section 180...duh!

Seriously, if you want to enjoy some enhanced tax benefits in 2010 and 2011 TeamDKB can help you to figure this out.

Generally, section 179 permits a business that satisfies limitations on annual investment to elect to deduct (or “expense”) the cost of qualifying property rather than depreciate the cost over time. For tax years beginning in 2010 and 2011, the 2010 Jobs Act amendments permit taxpayers to expense up to $500,000 of the cost of qualifying property under Code Sec. 179, reduced by the amount by which the qualified investment exceeds $2,000,000.

Qualifying property includes depreciable tangible personal property purchased for use in the active conduct of a trade or business. Off the shelf computer software placed in service in tax years beginning before 2011 is treated as qualifying property. 

The 2010 Jobs Act incentive provisions also temporarily expand the definition of qualifying property to include certain real property used in business, specifically, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.  Up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property ("qualified real property") may be applied to the Code Sec. 179 limit for tax years beginning in 2010 and 2011. However, any amount expensed with respect to qualified real property that is disallowed under the income limitation may be carried forward only to 2011 but not to later years. Taxpayers are permitted to elect to exclude real property from the definition of section 179 property.