by Garrett Spangler on February 11, 2011
The first hearings were held by the US House of Representatives this week on the proposed repeal of additional 1099 filing requirements passed alongside President Obama’s health care legislation last year. Small business owners and organizations have been outspoken about the concerns they have with the new requirements as the economy struggles to get back on its feet.
The 1099 reporting requirements seek to require businesses to file 1099 forms to report payments made to other businesses that exceed $600 in any one year. The proposal for additional reporting requirements was made by the Bush administration to try to keep better track of business earnings and expenditures to help the IRS keep tabs on taxes due. President Obama followed up the proposal with support of his own but many small business owners have expressed concern over the anticipated burden such a mandate may create.
The US Chamber of Commerce and other small business organizations across the country have stepped up their cries in recent weeks to repeal the 1099 reporting requirement. All suggest that demanding additional paperwork and information be reported to the IRS at a time when small businesses are attempting to recover from the recent downturn and spur the economy with new jobs is misguided.
While the idea behind reporting mandates is often sound because the government would like to be able to track where money passes as much as possible, there are clearly issues with the way the IRS and other taxing authorities have gone about it. A quick look at the reporting requirements already in place for a small retail business here in Philadelphia reveals just how outlandish reporting can get. The number of tax returns or related reports that must be filed with various agencies quickly tops forty. (See: http://www.taxgirl.com/whats-in-a-name/)
That’s no mistake, it is common for small businesses to file forty returns or reports related to taxes annually; quite onerous by any standards. Adding additional 1099 reporting requirements without taking a more broad look at how reporting may be able to be streamlined is looking like the straw that is beginning to break the camel’s back. At least it appears that Congress is listening because the Senate has already voted to repeal the new 1099 requirement and it seems that the House may be soon to follow.
by Garrett Spangler on January 27, 2011
It’s that time of year again, W-2’s are being sent out by employers and the last of your year end financial statements should be arriving soon. That can only mean that its time to get cracking on filing your annual income tax return.
This year there are a few changes that you should be aware of, including a few last minute changes implemented by Congress at the end of 2010 that may require you to wait a little bit longer before filing your return. Not to worry though, the IRS has provided everyone with a couple extra days to file their returns due to observation of Emancipation Day in Washington D.C., pushing the official filing deadline back to Monday, April 18th, this year.
President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act in late December following passage through Congress. While the finishing touches are being put on tax filing forms and software, certain taxpayers may need to wait until at least mid-February to file their returns. Below are a few common reasons you may need to wait:
1) If you itemize deductions on Schedule A you will need to wait before you file. Popular itemized deductions includes things like mortgage interest, charitable contributions, medical expenses, and state and local taxes.
2) Those claiming the Higher Education and Fees Deduction will also have to wait before filing. This deduction may be taken by students or their parents for up to $4,000 of post-secondary education tuition and fee payments. No delay is necessary however for those filing only for the American Opportunity Credit or Lifetime Learning Credit.
3) Primary school teachers who wish to take advantage of the Educator Expense Deduction will also need to wait. This provides teachers of grades K-12 with a deduction of up to $250 for out-of-pocket classroom related expenses.
Just because you may have to wait before filing does not mean that you can’t get started. Download your favorite commercial tax preparation software or head over to www.irs.gov/efile for information about how you might be able to qualify to file both your federal and state income tax returns electronically free of charge.
For additional tax information, see the IRS website at http://bit.ly/ffimmp.
by Garrett Spangler on January 7, 2011
With a newfound majority in the House, Republicans have wasted no time using their influence to pass a new set of rules for cutting taxes. Under the new proposal, the “pay-as-you-go” system used by the former Democratic majority would be replaced. The “pay-go” system limited new tax cuts by requiring either new taxes or spending cuts to offset the shortfalls that would otherwise result from lost tax revenue. Democrats set forth this system to attempt to reduce the deficit that ballooned under the Bush administration due to the combination of tax cuts and increased spending.
This new “cut-as-you-go” system, as it has been called by new Budget Committee Chairman Rep. Paul Ryan, would allow for tax cuts to be made without any offset elsewhere in the budget. The “cut-go” system would, however, require new spending proposals to continue to be paid for with savings in other governmental programs, but not through an increase of taxes. The new “cut-go” system still must pass the Senate, which maintained a Democratic majority following the November elections, and therefore seems destined to fail in its current state.
While this early move seems to run contrary to the one element that was pervasive through the factions of the Tea Party that got many of the new Republicans elected, fiscal responsibility, the move does appeal to the traditional conservative base by making it easier to permanently extend the Bush era tax cuts for wealthy individuals. Ryan has also asked voters to take his word for it that despite the proposed change, the budget committee will seek to end Washington’s culture of spending as it moves forward with new budget resolutions to bring an end to stimulating the economy through federal spending.
by Garrett Spangler on December 10, 2010
I just saw that Comedy Central has unveiled a new logo. It consists of a letter “C” wrapped in another, backward facing letter “C”. Gazing at the new logo doesn’t exactly make me believe that hilarity is about to ensue, but it does appear to stick to the old KISS (keep it simple stupid) mantra.
While the design sounds innocuous enough, does anyone notice the striking similarity between this new logo and the international copyright insignia? Not sure who might actually file a complaint against Comedy Central for infringement but it just seems too obvious to ignore.
by Garrett Spangler on December 8, 2010
Is this the best Congress can do?
We hear that Congress struck a deal, at least in principle, on the tax and unemployment situation that GOP lawmakers insist must be addressed before any other actions this year. (I guess they would otherwise take their ball and go home?) The deal includes an extension of all the Bush tax cuts for two additional years, an extension of jobless unemployment benefits for 13 months, and new estate tax rates of 35% with an individual exemption of $5 million.
What’s wrong with this picture you ask?
Let’s take a look at this from both sides of the political isle. Republicans indicate they will only agree to a deal if tax cuts for the wealthiest Americans are extended along with those for lower and middle income earners. Democrats wish to extend jobless benefits to the unemployed for an additional year to help those struggling the most while the economy continues to see only modest gains. Both claim that the plans proposed by the opposing party will add considerably to the already huge deficit. Therefore, the only obvious solution and compromise is………both?
Can Obama and the Democrats continue to say that changes to healthcare and the unemployment benefits they championed are paid for without the additional income and estate tax revenue they were anticipating? Can Boehner and the Republicans continue to spin the status quo income tax rates for the wealthy and new tax rules for estates as tax cuts that will spur job growth when the same rates and a repealed estate tax left the economy stumbling this year?
While our leaders may continue to tout this as a win for their respective interests, I suggest that these facts will do little but add to the deficit. Democrats have caved to providing benefits to the wealthy, those still making over $250,000 and impacted least during these trying economic times, to help the jobless and Republicans have no chance to see real economic growth stem from their push to simply maintain the income tax status quo and reinstate the estate tax. Together, extending the tax cuts to the wealthiest of Americans (2%) and adding a year’s worth of benefits for unemployed Americans (9%) leaves the other 89% of us standing idly by, waiting for the parties to point out how high unemployment remains, growth has floundered, and no real changes were made in Washington.
Don’t get me wrong, I am not against helping those who have had the misfortune of losing their jobs or minimizing tax burdens of rich and poor alike, just show me the money! Where is the nearly $1 trillion going to come from to pay for the spending and lost revenue these benefits and tax breaks create, to say nothing of the existing deficit? Of course, this deal plays right into the hands of lawmakers as it only covers the next two years. Just in time for the next Congressional and Presidential elections, giving us all something to argue about once again.
Yeah.
by Garrett Spangler on December 2, 2010
Beginning in January, the IRS will be adding some additional requirements for tax preparers. One such requirement applies to any tax professional who prepares tax returns for individuals, trusts, or estates. The new requirement will be phased in over the next two years and mandates that anyone who meets the IRS definition of a “specified tax return preparer” to e-file their returns.
To be considered a specified tax return preparer you must reasonably expect to file 100 or more returns in 2011. The returns that must be included in making that assessment are Forms 1040, 1040A, 1040EZ, and 1041. The 100 return qualification threshold then falls to just 11 or more returns beginning January 2012.
E-filing is fairly simple and the IRS seeks to encourage more filings to be submitted this way instead of on paper. Congress hoped to have 80% of tax returns filed electronically by 2009 and saw approximately 66% e-filed last year. These new requirements should help the IRS reach their goal. Just make sure that you get your preparer’s electronic filing identification number (EFIN) early because it takes approximately 45 days to obtain.
For additional information and to request a EFIN, head on over to www.irs.gov.
by Garrett Spangler on November 19, 2010
Well, it has come to this. Tax professionals far and wide have been shocked that 2010 has essentially come and gone without Congress addressing the repeal of the estate tax. As the final weeks of the year come into focus, the reluctance shared by tax professionals to advise clients to take certain actions this year in case a new law was enacted retroactively has evaporated. It is clear that no changes will be made to the estate and related taxes that will be applicable for 2010, so it is now time to take full advantage of the last few weeks of the year, before the estate tax returns in 2011.
So what can you do? The repeal has provided opportunities to save money on taxable gifts now and reduce your taxable estate for the future. Let’s take a look at a couple opportunities:
1) Gift Tax Rates
While the estate tax was repealed this year, the lifetime gift tax credit amount remained, allowing $1 million to pass gift tax free. If you are a wealthy individual that can afford to give money away this year, especially if you have used your lifetime credit or seek to gift in excess of $1 million, its time to strike while the iron is hot. The gift tax rate is 35% for transfers through the end of December, which is actually quite good considering the rate was 45% last year and will move to 55% in 2011. This will also reduce your total estate upon which tax will be due when you pass so make the holidays a little extra special this year for your children if you have considerable taxable assets.
2) Generation Skipping Taxes
Of course, why stop at gifting to children? The generation-skipping transfer tax (GSTT) usually applies to gifts of cash or assets to grandchildren or remote descendants since the assets will not be taxed in the estate of the very next generation. This tax was repealed for 2010 as well, so those individuals who are considering passing wealth to younger generations should make gifts this year, paying the very low rate of 35% on the transfer with no additional GSTT. This is truly a windfall for wealthy individuals who may otherwise pay approximately 70% in tax for transfers of this nature.
Time is running out so be sure to discuss some options with your tax professional before it is too late!
by Garrett Spangler on October 22, 2010
The saga around the estate tax continues, but this time some reports coming from inside the beltway suggest we will have new legislation to implement a permanent fix by year end.
Several Senate Republicans have expressed interest in coming to some type of compromise with Democrats over the estate tax. For those of you just catching up, the estate tax is repealed for 2010 and is slated to return to pre-2001 levels as of January 1, 2011. That means anyone with an estate over $1 million will have their excess assets taxed as much as 55% before passing to their heirs.
Many Republicans have been pressing for a complete repeal of the estate tax, or at least reductions in the tax rate and increases to the exemption. Democrats seek reinstatement of the estate tax, similar to that which was repealed after 2009, including a $3.5 million exemption and 45% top rate. Democrats have been reluctant to agree to Republican proposals due to the potential for pre-2001 estate tax reinstatement if an agreement is not reached.
Considerations for the future estate tax include splitting the difference between the more palpable tax rates sought by Democrats and Republicans of 35% and 45% by tying the estate tax rate to the top marginal income tax rate, expected to rise to 39.6% after 2010. This may be just enough to satisfy both sides of the aisle and get some legislation in place before the first of the year.
Stay tuned!
by Garrett Spangler on October 7, 2010
Naming a guardian for your children is something that every parent should consider. Like many of you, I have children (well, I actually have one child with a second on the way….details, details) that are young and will need someone to look after them if something were to happen and my wife and I no longer could. It’s not fun to think about such a thing happening but like the old saying goes, hope for the best but plan for the worst.
When considering who you might like to choose to raise your kids, make sure that you first consider those that have a genuine love and concern for your children. You will want them to treat your kids just as though they were the guardian’s own, both providing love and comfort along with the discipline necessary to help them succeed in life. You will also want to consider situational factors, like can the prospective guardian handle the job, do they have time to spend with the kids or have kids of their own, and are they in a position to be able to afford the child’s upbringing? Using these factors can help to focus in on the best potential guardians.
In addition to the considerations that you should make when reaching a decision, never forget to discuss it with the guardian directly. You will want to ensure that the guardian is willing to take on the responsibility that comes with a child. It is never a simple undertaking and the transition will no doubt be difficult. Will the child have to move or change schools? Is the guardian willing to move for the child’s benefit? These are discussions which you should have with anyone you are thinking about choosing as a guardian. Quite honestly, the conversations are difficult and you may not like all of the answers you get but it’s better to find that out now than force your kids to figure it out later.
So if you haven’t given it much thought yet, get the ball rolling. After all, this is planning for the unexpected and you never quite know when you might need one in place.
by Madeline Martin on October 6, 2010
On September 23rd the USCIS released its final rule on fee increases for Immigration filings.
Overall, the adjustments to the fees result in an increase of around 10%. Certain fees will be increased, some decreased and three new fees have been created. Also, the new fee rule eliminates two fees relating to naturalization for service members and veterans.
As the department pointed out in its press release(s), USCIS draws the majority of its budget from fees collected from filings. Over 85% of the USCIS’ budget request for 2011 is to be paid for by fees.
For business non-immigrant visa petitions, the I-129 (Petition for Nonimmigrant Worker) fee is raised from $320 to $325, while the I-539 (Application to Extend/Change Nonimmigrant Status) fee is reduced from $300 to $290.
The fees related to business immigration are affected as well. The fee for the I-140 (Immigrant Petition for Alien Worker) will be increased from $475 to $580 and the fee for the I-485 (Application to Register Permanent Residence or Adjust Status) will change from $930 to $985.
A bit more significant is the change in the fee for Premium Processing, which is currently $1,000 and will jump to $1,225.
The new fee schedule will go into effect on November 23, 2010.
For more information on the specific fee rates visit the USCIS website.
