Category: Tax Planning

Deadline Tax Filing Tips from the IRS

Rick_E_Norris_An_Accountancy_Corporation_Deadline_Tax_Filing_Tips_From_The_IRSBack in the 1980’s I lived in the San Fernando Valley near the main post office.  At about 9 pm on April 15th, I would walk my dog to the post office to watch the late tax filers.  A line of cars always stretched around the corner and up the 405 Sherman Way freeway offramp up into the slow lane.  But the best part were the anti-tax people protesting the existence of the income tax.  They would be picketing in front of the post office telling drivers not to throw their returns into the large canvass bins manned by postal employees.  What a circus, I loved it.

If you are one of those last minute people, here are some tips from the IRS:

1. File electronically Most taxpayers file electronically.
If you haven’t tried it, now is the time! The IRS has processed more than 1
billion individual tax returns safely and securely since the nationwide debut
of electronic filing in 1990. In fact, 112 million people — 77 percent of all
individual taxpayers — used IRS e-file last year.

2. Check the identification numbers Carefully check
identification numbers — usually Social Security numbers — for each person
listed. This includes you, your spouse, dependents and persons listed in
relation to claims for the Child and Dependent Care Credit or Earned Income Tax
Credit. Missing, incorrect or illegible Social Security numbers can delay or
reduce a tax refund.

3. Double-check your figures If you are filing a paper
return, double-check that you have correctly figured the refund or balance due.

4. Check the tax tables If you e-file, the software will do
this for you. If you are using Free File Fillable Forms or a paper return,
double-check that you used the right figure from the tax table for your filing
status.

5. Sign your form You must sign and date your return. Both
spouses must sign a joint return, even if only one had income. Anyone paid to
prepare a return must also sign it and enter their Preparer Tax Identification
Number.

6. Send your return to the right address If you are mailing
a return, find the correct mailing address at www.irs.gov.
Click the Individuals tab and the “Where to File” link under IRS Resources on
the left side.

7. Pay electronically Electronic payment options are
convenient, safe and secure methods for paying taxes. You can authorize an
electronic funds withdrawal, or use a credit or a debit card. For more
information on electronic payment options, visit www.irs.gov.

8. Follow instructions when mailing a payment People
sending a payment should make the check payable to the “United States Treasury”
and should enclose it with, but not attach it to, the tax return or the Form
1040-V, Payment Voucher, if used. The check should include the Social Security
number of the person listed first on the return, daytime phone number, the tax
year and the type of form filed.

9. File or request an extension to file on time By the
April 17 due date, you should either file a return or request an extension of
time to file. Remember, the extension of time to file is not an extension of
time to pay.

10. Visit IRS.gov Forms, publications and helpful
information on a variety of tax subjects are available at www.irs.gov.

If you hire a CPA to help you file, you don’t have to worry about these things.  But, just like dancing, everything in taxes depends on timing. So, make sure you stay in step, or it can cost you penalties or delays.  Discuss this with a tax professional before making any decisions.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Breaking Bad with a Mysterious Spouse

Rick_E_Norris_An_Accountancy_Corporation_Breaking_Bad_With_A_Mysterious_SpouseBelieve it or not, I don’t watch TV very much.  However, my wife and son sat me down to watch the series Breaking Bad.  We are  on episode 13 of the drama spotlighting a cancer-stricken high school chemistry teacher turned methamphetamine manufacturer.  The acting is superb.

The other night I told my wife that if Walter White (the main character) dies from his lung cancer, his wife could be liable for for tax evasion because of the unpaid taxes from the drug income.

However, Walter’s wife, and Flin (the son stricken with cerebral palsy) could be spared from the IRS if she meets some requirements under  Spousal Tax Relief. The IRS states the following:

You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.

Here are a couple of facts:

1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.

2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.

Now, the Whites live in New Mexico, a Community Property state.  That could mean that the income (whether illicit or not) could be attributable to the Walter’s wife because it is earned income.  Also, that fact that she knows that he is somehow paying for his chimotherapy my hurt her defense that a reasonable person should have known that $50,000 doesn’t materialize out of the air.

This article is not meant to be tax advice but a warning to persons regarding their spouses’ mysterious income.  If you find yourself in such a position, you can talk to your CPA tax advisor and visit www.irs.gov

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Don’t Shoot the CPA! Something New This April If You Can’t Pay Your Taxes

Rick_E_Norris_An_Accountancy_Corporation_Don't_Shoot_The_CPA_Something_New_This_April_If_You_Can't_Pay_Your_TaxesYou’ve worked hard, but got laid off.  Then on April 15th the following year, your CPA tells you that you owe taxes, but you don’t have the money.  What are you going to do?  Check out what our “compassionate” IRS has to say:

The Internal Revenue Service today announced a major expansion
of its “Fresh Start” initiative to help struggling taxpayers by taking steps to
provide new penalty relief to the unemployed and making Installment Agreements
available to more people.

Under the new Fresh Start provisions, part of a broader effort started at the
IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer
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.

“We have an obligation to work with taxpayers who are struggling to make ends
meet,” said IRS Commissioner Doug Shulman. ”This new approach makes sense for
taxpayers and for the nation’s tax system, and it’s part of a wider effort we
have underway to help struggling taxpayers.”

Penalty Relief

The IRS announced plans for new penalty relief for the unemployed on
failure-to-pay penalties, which are one of the biggest factors a financially
distressed taxpayer faces on a tax bill.

To assist those most in need, a six-month grace period on failure-to-pay
penalties will be made available to certain wage earners and self-employed
individuals. The request for an extension of time to pay will result in relief
from the failure to pay penalty for tax year 2011 only if the tax, interest and
any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

  • 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.
  • Self-employed individuals who experienced a 25
    percent or greater reduction in business income in 2011 due to the economy.

This penalty relief is subject to income limits. A taxpayer’s income must not
exceed $200,000 if he or she files as married filing jointly or not exceed
$100,000 if he or she files as single or head of household. This penalty relief
is also restricted to taxpayers whose calendar year 2011 balance due does not
exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to
seek the 2011 penalty relief. The new form is available on IRS.gov.

The failure-to-pay penalty is generally half of 1 percent per month with an
upper limit of 25 percent. Under this new relief, taxpayers can avoid that
penalty until Oct. 15, 2012, which is six months beyond this year’s filing
deadline. However, the IRS is still legally required to charge interest on
unpaid back taxes and does not have the authority to waive this charge, which is
currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly
encourages taxpayers to file their returns on time by April 17 or file for an
extension. Failure-to-file penalties applied to unpaid taxes remain in effect
and are generally 5 percent per month, also with a 25 percent cap.

Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the
ability to use streamlined installment agreements to catch up on back taxes.

The IRS announced today that, effective immediately, the threshold for using
an installment agreement without having to supply the IRS with a financial
statement has been raised from $25,000 to $50,000. This is a significant
reduction in taxpayer burden.

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).
Taxpayers may also pay down their balance due to $50,000 or less to take
advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire
tax bills by the due date. Penalties are reduced, although interest continues to
accrue on the outstanding balance. 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 the
On-line Payment Agreement (OPA) page on IRS.gov and following the
instructions.
These changes supplement a number of efforts to help struggling
taxpayers, including the “Fresh Start” program announced last year. The
initiative includes a variety of changes to help individuals and businesses pay
back taxes more easily and with less burden, including the issuance of fewer tax
liens.

Generally, an offer will not be accepted if the IRS believes that the
liability can be paid in full as a lump sum or through a payment agreement. The
IRS looks at the taxpayer’s income and assets to make a determination regarding
the taxpayer’s ability to pay.

So don’t shoot your CPA who informs you of bad news.  We’re here to help.  Always discuss your situation with a tax professional before making any decision.

Source: IRS Site

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Taxes and a Load off Your Debt, Or is It?

Rick_E_Norris_An_Accountancy_Corporation_Taxes_and_A_Load_Off_Your_Debt_Or_Is_ItLosing your home is bad enough, but paying taxes because the experience rubs salt in the wounds.  Prior to 2007, there was very little relief for a debtor that had a residence debt forgiven.  However, that changed in 2007.  Canceled debt is normally taxable to you, but there are exceptions. One of
those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.

Here are some points I found on the IRS web site regarding the tax implications and considerations:

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions. However, I have found that some clients that have lost  rental property with a high basis may have a chance of offsetting the gain with the rental’s basis.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home
in Box 7.

If the bank forgave your debt, do not wait until April the next year to tell your tax advisor.  Sometimes, proper tax planning can help reduce the pain.  Discuss your situation with a tax advisor before making any decisions.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Don’t Mess with Taxes

Rick_E_Norris_An_Accountancy_Corporation_Don't_Mess_With_Taxes(From Marx Brother’s Duck Soup)

The new Secretary of War Chicolini( Marx brother Chico) is discussing the  funding of the war:

Minister of Finance: Something must be done! War would
mean a prohibitive increase in our taxes.

Chicolini: Hey, I got an uncle lives in Taxes.”

Minister of Finance: No, I’m talking about taxes – money,
dollars.

Chicolini: Dollas! There’s-a where my uncle
lives. Dollas, Taxes!

People usually stress about taxes in the first quarter of every year.  What a person doesn’t need is a negligent or dishonest tax preparer.  Brian O’Connell wrote an article, 5 Signs You’ve Got a Lousy Tax Preparer which offered some good advice.  However, the points he raised really seemed to point to a dishonest tax preparer, as opposed to a lousy one.  Here are the points:

  1. Your preparer promises a big tax refund:  This is comical.  Why would a tax preparer proclaim a big refund especially before seeing the documents unless they are going to “create” numbers?
  2. Your preparer doesn’t have proper credentials:  The IRS has really buckled down on the education and registration of tax preparers.  This of course doesn’t apply to CPAs where we have our own standards to adhere to.
  3. The tax preparer requires that your refund be deposited into their bank:  This is a clear red flag to run.  We never take our client’s refunds in any circumstance.
  4. The preparer’s fee is based on a percentage of your refund:  This is another ethical violation for CPAs.  Never take the bait.

Taxes are not something to gamble with.  Make sure you understand your tax return.  Expecially understand where the numbers come from.  Make sure your preparer is not dreaming up numbers.  Discuss any advice given here with your tax advisor before making any decisions.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

CPA Tax Tip:Are You Tarnishing Your Golden Years By Using Your Retirement as a Piggy Bank?

Rick_E_Norris_An_Accountancy_Corporation_CPA_Tax_Tip_Are_You_tarnishing_Your_Golden_Years_By_Using_Your_Retirement_As_A_Piggy_BankYears ago, a client referred me to a songwriter.  The first thing I noticed about the songwriter is that he and his wife had liquidated his IRAs to buy a bigger house.  Now this was prior to the first home exception of $10,000. I cringed.  The upshot was that the large distribution sling-shotted the couple into a much higher tax bracket, triggered additional income tax, and a 10% premature penalty.

There are some exceptions, now, but before you make the plunge into that pot of gold reserved for the golden years, you should know  the rules:

1. Payments you receive from your Individual Retirement Arrangement before
you reach age 59 ½ are generally considered early or premature distributions.  This was the situation of my clients.

2. Early distributions are usually subject to an additional 10 percent tax.  As previously discussed, there was no way I could get them out of this penalty.

3. Distributions are reported to the IRS and identified such as rollovers or due to death.

4. Distributions you roll over to another IRA or qualified retirement plan
are not subject to the additional 10 percent tax. You must complete the
rollover within 60 days after the day you received the distribution.  These are also not subjet to income taxes also.

5. The amount you roll over is generally taxed when the new plan makes a
distribution to you or your beneficiary.

6. If you made nondeductible contributions to an IRA and later take early
distributions from your IRA, the portion of the distribution attributable to
those nondeductible contributions is not taxed.  If you do not need a tax deduction (yes I have had client’s like this), then this may be a good strategy to shelter some investment income.

7. If you received an early distribution from a Roth IRA, the distribution
attributable to your prior contributions is not taxed.

8. If you received a distribution from any other qualified retirement plan,
generally the entire distribution is taxable unless you made after-tax employee
contributions to the plan.

9. There are several exceptions to the additional 10 percent early
distribution tax, such as when the distributions are used for the purchase of a
first home (up to $10,000), for certain medical or educational expenses, or if
you are totally and permanently disabled.

The place to start is to not NEED the extra money.  Try to live within your means so as to not be tempted to withdraw your retirement nest egg.  If you need help in creating a budget, or analyzing your expenses, contact your CPA.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

IRS Mercy? To Err is Human, to Forgive is Divine

Rick_E_Norris_An_Accountancy_Corporation_IRS_Mercy_To_Err_Is_Human_To_Forgive_Is_DivineWell, as a CPA for the last thirty years,  I thought I’d see the tin man get a real heart before the IRS show any heart at all.  The IRS has released some sort of an amnesty program designed to offer mercy to businesses that have misclassified workers as independent contractors instead of employees. IRS Announcment 201-64 states out the conditions that an employer must meet in order to minimize the penalties for misclassifying workers.  It is called the Voluntary Classification Settlement Program (VCSP).

For those of you that are unaware of this tax controversy, when employers classify employees as independent contractors, they escape the obligation of paying payroll taxes on those employees like social security and medicare.  The criteria of classifying workers is complex because it covers tax law, national labor laws, and state laws.  Your CPA can calculate the costs you may be avoiding.

If a taxpayer voluntary invokes this option (without being under audit), then they will only have to “pay 10 percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent year…”  They will not be liable for any interest and penalties and not subject to any prior year’s audits.

So, as an employer, what does this mean?  If you are classifying workers properly, it means nothing.  However, as a CPA, I have seen substantial misclassification by new clients that I have helped correct.  Yes, they end up paying more taxes, but the client sleeps better at night.

The downside of ignoring proper classification are heavy penalties, interest, and possibly jail time.  Sometimes employers are exposed when a worker files for unemployment compensation, worker’s compensation, or social security.  The worker is surprised that nothing had been paid in by his “employer” over the last ten years he had worked.  Thus, an investigation may materialize which will require you to hire a CPA and/or an attorney.  You will have to pay them and the taxes if you lose.

Various departments and levels of the federal government are mobilizing not only to uncover worker misclassification, but also a CPA who is improperly advising a client to do so.  Even the Obama administration is increasing efforts to uncover workers misclassification in the September 2011  release of his plan “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction.”

If you feel you want to embrace this amnesty, talk to your CPA about your exposure and the additional requirements to qualify.  As a business owner, you should clear your mind of such anxiety and concentrate on your business strategy.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

The Best CPA Tax Tip: Filing Your Tax Return For Free

Yes, you heard me.  The IRS has a link that provides free tax software to those who have an adjusted gross income of $57,000 or less.  The IRS explains the program:

Everyone can prepare and e-file their federal tax returns for free using the
IRS Free File Program. Free File is offered through a public-private
partnership between the Internal Revenue Service and tax software companies.
Free File can help you do your taxes fast; it’s safe and it doesn’t cost
anything.

Nearly 100 million Americans – that’s 70 percent of the nation’s taxpayers –
can use the free brand-name software and secure e-filing offered by
private-sector companies. Software products also are available in Spanish. Each
company sets its eligibility requirements, generally based on income, age or
state residency. However, if your adjusted gross income was $57,000 or less in
2011, you will find at least one tax software product to use.

Here’s how it works: You must access Free File through the IRS website. At www.irs.gov/freefile, there’s an online tool which allows you to give a little information about yourself then guides you to the software for which you are eligible. Or, you
can review a complete list of companies and their offerings and make a
selection.

Try it and see if you can save tax preparation fees.  Of course, if you have a business, or unusual tax situations, you may want to hire a CPA.  Always discuss your situation with your tax advisor before making any decisions.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

IRS Fraudulent Tax E-mails: Never Give a Sucker an Even Break

Rick_E_Norris_An_Accountancy_Corporation_IRS_Fraudulent_Tax_Emails_Never_Give_A_Sucker_An_Even_Break“Never give a sucker an even break,” is attributed to W.C Fields in the 1923 movie, Poppy.  However, some say it represents the real personality of W.C. Fields as a ruthless businessman.

So, don’t be a “sucker” to fraudulent tax notices.

CPA’s usually see through tax fraudsters because we know how the system works. Still, it facenates me when I get an email stating that my tax payment was rejected, or that my tax refund has not been claimed.  Fortunately, the IRS gives us some guidance to those who don’t wallow between the lines of the 1040.

Here are five things the IRS wants you to know about phishing scams:

  1. The IRS doesn’t ask for detailed personal and financial information like PIN
    numbers, passwords or similar secret access information for credit card, bank or
    other financial accounts.
  2. The IRS does not initiate taxpayer communications through e-mail and won’t
    send a message about your tax account. If you receive an e-mail from someone
    claiming to be the IRS or directing you to an IRS site:
    • Do not reply to
    the message.
    • Do not open any attachments. Attachments may contain
    malicious code that will infect your computer.
    • Do not click on any
    links. If you clicked on links in a suspicious e-mail or phishing website and
    entered confidential information, visit the IRS website and enter the search
    term ‘identity theft’ for more information and resources to help.
  3. The address of the official IRS website is https://www.irs.gov. Do not be confused or misled
    by sites claiming to be the IRS but ending in .com, .net, .org or other
    designations instead of .gov. If you discover a website that claims to be the
    IRS but you suspect it is bogus, do not provide any personal information on the
    suspicious site and report it to the IRS.
  4. If you receive a phone call, fax or letter in the mail from an individual
    claiming to be from the IRS but you suspect they are not an IRS employee,
    contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need
    to contact you. Report any bogus correspondence.
  5. You can help shut down these schemes and prevent others from being
    victimized. Details on how to report specific types of scams and what to do if
    you’ve been victimized are available at https://www.irs.gov, keyword “phishing.”

If you are unsure, do not do anything until you contact your CPA.  One phone call to a CPA can save you a bundle by keeping you out of a fraudulant transaction.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

CPA Small Business Employment Practices Alert

Rick_E_Norris_An_Accountancy_Corporation_CPA_Small_Business_Employment_Practices_AlertSmall business owners and executives need to keep abreast of labor laws.  Make sure you assemble a team of professionals that you can rely on for changes.  There are a number of bills that small business bills that will take effect on January 1, 2012.  Here are some of them.

AB 469–Labor Code Section 2810.5

Effective 1/1/12, AB 469 becomes law and will require employers  to comply with
Labor Code Section 2810.5 for non-exempt employees.  A lot of this information should already be stated on employee pay stubs.  This law requires employers to provide new hires with a written notice of various items of information:

(A) The rate or rates of pay and basis thereof ( hour, shift, day, week,
salary, piece, commission, or otherwise), including any rates for overtime, as
applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
(C) The regular payday designated by the employer in accordance with the requirements of this code.
(D) The name of the employer, including any “dba” names used by the
employer.
(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different.
(F) The telephone number of the employer.
(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
(H) Any other information the Labor Commissioner deems material and necessary.

Labor Commission has stated that they will prepare a template to help businesses.

AB 29 Employee Credit Reports

There are many laws, both federal (FCRA) and state laws that govern the use of employee’s credit reports when making an employment decision.  AB 22, too   severely limits employers use of credit reports when making employment decisions. Make sure you understand the list of guidelines before requesting a credit report.

SB 459 Independent Contractor Misclassification

I have warned employers about misclassifying employees as independent contractors verbally, and in articles.  Now, SB 459 raises the penalties to the roof.  Civil penalties could be imposed up to $25,000 PER VIOLATION if the employer did  a “willful misclassification.”  It is imperative that each small business examine the tasks of each independent contractor.

Labor law changes constantly .  Contact your labor attorney about  these and other changes that may affect small business.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.