Tax TipsDon't Forget the Second Part of the HIRE ActFebruary 2012Under the HIRE Act, employers that hire new workers who qualify for payroll tax forgiveness may also be eligible for a tax credit for each qualified employee. For the employer to be entitled to this new credit, the qualified employee must be retained on the employer’s payroll for 52 consecutive weeks. The business credit under Code Sec. 38 will be increased, with respect to each qualified retained worker, by the lesser of $1,000 or 6.2 percent of wages paid by the taxpayer to the qualified retained worker during the 52 week period. A qualified retained worker must be paid an amount equal to at least 80 percent of his first 26 weeks of wages during the last 26 weeks of the 52-week qualifying period. The HIRE Act excludes wages earned by a domestic worker or an individual eligible for the foreign earned income exclusion. The HIRE Act also includes carryback rules for the credit. If you have any questions about payroll tax forgiveness or the retained worker business credit, please contact my office for more details. » Back to Top «
Worker ClassificationFebruary 2012The IRS launched a new program in September 2011 to enable employers to voluntarily reclassify their workers for federal employment tax purposes and take advantage of a reduced penalty framework. The Voluntary Classification System Program (VCSP) is open to employers currently treating their workers as independent contractors or other nonemployees and who want to prospectively treat the workers as employees. The employer must not be under audit and satisfy other requirements. The IRS has not announced an end-date to the VCSP. Don't be fooled by this attempt to snare employers into reclassifying workers. While reclassification of independent contractors to employees has always been a goal of IRS, in order to raise revenue, there are circumstances when independent status is the correct way of reporting compensation for services. Form 1099 Requirement RepealedMay 2011Section 9006 of last year’s Patient Protection and Affordable Care Act (PL 111-148) expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The Small Business Jobs Act (PL 111-240) enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more made during 2011 and for payments made for property and to corporations beginning in 2012. Both of these provisions have been repealed » Back to Top «
American Opportunity CreditMay 2011The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. The tax credit is scheduled to have a limited life span: it will be available only for the years 2009 through 2012, unless Congress decides to extend the credit to other years. The credit is worth up to $2,500 on the first $4,000 of qualifying educational expenses, which include course materials as well as tuition. The American Opportunity credit applies to all four years of undergraduate college education. The credit is gradually reduced (or "phased out") for income from $80,000 to $90,000 (or $160,000 to $180,00 for joint filers). The tax credit is not available for people with incomes above the phase out range. Up to 40% of the credit is refundable, meaning that it can generate a refund larger than the amount of payments you made. New York State also has a $400 refundable credit for undergraduate tuition. » Back to Top «
IRS Urges Cell Phone Substantiation ReliefJune 2009IRS Commissioner Douglas Shulman announced that Treasury and the agency support the removal of cell phones from the category of listed property under Code Sec. 280F. Shulman emphasized that the IRS is not "cracking down" on employee use of employer-provided cell phones. Rather, the agency's recent announcement that it is revisiting the substantiation rules for employer-provided cell phones aims to eliminate uncertainty for businesses and individuals, Shulman said in a statement. Cell phones were added to the category of listed property under Code Sec. 280F in 1989. "The current law, which has been on the books for many years, is burdensome, poorly understood by taxpayers, and difficult for the IRS to administer consistently," Shulman said. Shulman urged Congress to ease the substantiation rules for employer-provided cell phones. "Treasury Secretary Timothy Geithner and I ask that Congress act to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers." » Back to Top «
Income Limitations on Roth IRA Conversions Eliminated in 2010May 2006Currently, individuals with adjusted gross income (AGI) below certain levels may make contributions to a Roth IRA (up to the maximum IRA contribution limit). A taxpayer with AGI of $100,000 or less may convert all or a portion of a traditional IRA to a Roth IRA. The amount converted is treated as a distribution from the traditional IRA for income tax purposes, except that the 10-percent additional tax on early withdrawals does not apply. The Bill eliminates the income limits on conversions of traditional IRAs to Roth IRAs for years beginning after 2009. Thus, taxpayers may make such conversions without regard to their AGI. For conversions occuring in 2010, unless a taxpayer elects otherwise, the amount includible in gross income as a result of the conversion is included ratably in 2011 and 2012. That is, unless a taxpayer elects otherwise, none of the amount includible in gross income as a result of a conversion occuring in 2010 is included in income in 2010, and half of the income resulting from the conversion in includible in gross income in 2011 and half in 2012. However, income inclusion is accelerated if converted amounts are distributed before 2012. In that case, the amount included in income in the year of distribution is increased by the amount distribued, and the amount included in income in 2012 (or 2011 and 2012 in the case of a distribuion of 2010) is the lesser of: (1) half of the amount includible in income as a result of the conversion; and (2) the remaining portion of such amount not already included in income. » Back to Top «
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