Under the Affordable Care Act employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall. The initial act required employers to report this for 2011, and issued on W-2s mailed in 2012. In today’s guidance, the IRS is providing relief for smaller employers (those filing fewer than 250 W-2 forms). The requirement will now be optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) until further guidance is issued.
We currently struggle with educating large payroll providers like ADP and Paychex to conform to laws that were enacted 10 years ago. As tax consultants and business managers, this helped us a lot with our smaller clients.
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.
I have had some great experiences dealing with the IRS, especially when a client was present. One time I walked in with a client who was the daughter of a well-known actor. She actually resembled her father, too. The first thing the IRS appeals agent said was, “I have been a fan of your father for years!” I knew we had just won our case. In fact, within ten minutes we had agreed with the IRS agent on excellent terms.
Then my client start talking, and talking, and talking….I kicked her under
the table. Luckily, this stopped the vocal hemoraging before any real damage was done.
Even though the IRS is our adversary many times, they also put out some items trying to protect the taxpayer from unscrupulous people. The IRS 2010 Dirty Tax Scams listed areas where taxpayers can be screwed by someone other than the IRS. It actually is very informative:
Return Preparer Fraud: Unfortunately some tax preparers skim off their client’s refunds. Other preparers tell clients that they can get big refunds, and end up preparing a bad return that creates problems down the line. Check out your tax preparer. I have corrected many.
Hiding Income Offshore: This is a no-brain-er. Don’t play games. I turned down a client who wanted me to prepare financial statements for a questionable offshore insurance vehicle.
Phising: Anytime you get an email, phone call, or letter from the IRS, do not disclose any information no matter how threatening they sound. Call a professional to check it out. The IRS never calls for information like a credit card to pay taxes over the phone. Ask their permission to record the conversation and see how fast they hang up.
Filing False and Misleading Forms: The low income earned income tax credit is a favorite by schemers. The IRS is having a hard time tracking them down. Also, phony forms 1099 (OID).
Non-taxable Social Security and withholdings: I have not pesonally seen this.
Abuse of Charitable Organizations and Deductions: As a co-founder of FOLA (Foundation of Local Arts), I can tell you the IRS makes you jump through a lot of hoops for your 501(c) (3) letter. If you plan to star an organization, find a good tax lawyer.
Frivolous Arguments: Don’t listen to scheming ideas and constitutional arguments. Remember, taxes pay the courts. They are certainly not going to buy your argument that Congress does not have the right to tax.
Abusive Retirement Plans: Don’t over contribute to your IRAs, and have a pension professional help set one up for you.
Disguised Corporate Ownership: Nevada corporation and you live in LA? Sure, the California Franchise Tax Board is looking for you. The IRS wonders why, too.
Zero Wages: This is a new one to me. Using forms to correct W-2s and 1099s as a way of hiding income.
Misuse of Trusts: Private Annuity Trusts, and foreign trusts to deduct private expenses are fertile ground for the IRS.
Fuel Tax Credit Scams: If you run a business with vehicles, look out. Claiming an unreasonable amount will put you on the radar.
So, the IRS does have some value other than take your money. Tax scams will always be here, so arm yourself with professionals and don’t do anything without consulting us.
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.
People usually deal with the IRS as they would their proctologist, they avoid both so not to take it in the end. What many don’t know is that the IRS actually has a good website that helps small business among other taxpayers. Unlike IRS telephone advice, you can depend on the information you learn from their website. They are designed to make the tax code simpler(well, not really, but I live in a fantasy world.)
Health Insurance Deduction Reduces Self Employment Tax — If you are self-employed and have a qualified health insurance plan, now not only can you deduct the premiums from income tax, but also self-employment tax.
Small Business Health Care Tax Credit — Small qualified small businesses can claim a health care insurance credit from 2010-2013.
General Business Credit for Employers — The new law allows this credit to be offset against both regular and alternative taxes.
Small Businesses Can Benefit from Higher Expensing / Depreciation Limits –Consider accelerating your depreciation deduction of your asset purchases.
As you approach your tax filing deadline, keep these in mind when you visit your CPA. The IRS, though, is not the place to go to get tax advice. They are good at helping you with tax problems, but not tax law. Studies have shown that your answers vary depending on who you speak with at the IRS.
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.
I just returned from a great informative panel on healthcare reform presented the by the LA chapter of the Association of Strategic Planning. I was surprised to learn that many large and smaller companies are trying to use the independent contractor designation to reduce healthcare benefits for employees. I wrote about a similar topic in the National Healthcare Reform Magazine back in August. My article warned employers about the misclassification of an employee, and how it could sabotage their tax credit.
What I didn’t think of, were companies intentionally trying to circumvent the tax laws in order to save healthcare insurance. This can be very risky. The IRS is no stranger to businesses trying to reclassify employees as independent contractors in order to save payroll taxes. The rules are complex and employee definitions differ from state to state. However, I tell clients that if you tell your “contractor” how to do his/her job, you run the risk of the person being classified as an employee(thunbnail definition.)
Now, I can imagine these companies trying to align themselves with the Fedex case where the U S District Court ruled the drivers as independent contractors instead of employees. But now the risks involved in this aggressive stance is not only healthcare insurance penalties, but payroll taxes, and workers’ compensation issues(not to mention labor law issues.)
Be very careful when classifying those who work for you. A tax professional may be your best friend in keeping you out of “fowl” play.
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.
By now, you must have heard that the new tax bill passed both houses and is sure to be signed by the President. But what opportunities does the new tax bill have for you? Well, from a tax standpoint it depends. The impact of the tax bill is different for individuals depending on their tax bracket. For example, if you have children and are not in the top tax bracket, you may still qualify under the new tax bill for your $1,000 child tax credit. Or, if invest a lot in stocks, the new tax bill will allow you to still get your qualified dividends taxed a favorable 15% tax rate. But the main impact of the new tax bill that will affect all taxpayers is the reduction in social security withholdings. I don’t recall Congress passing a tax bill like this in the 30 plus years I have been preparing tax returns.
However, since the tax bill is throwing social security gift to you, you have an opportunity for some cash flow or retirement planning. You can start 2011 by paying down the credit cards that have accumulated over this economic downturn with your extra cash. Likewise, you can increase your retirement contributions by your savings. The trick in cash flow is to live within your means, and if you are not careful, you may squander your tax bill savings. Opportunities like this do not come along often, so use it to your advantage by planning.
Discuss your situation with your tax professional before making any decisions.
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.
I just returned from a great informative panel on healthcare reform presented the by the 