Help For Small Employers To Claim New Health Care Tax Credit

On December 2, 2010, the Internal Revenue Service released final guidance for small employers and small tax-exempt organizations eligible to claim the new small business health care tax credit for the 2010 tax year. The release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.

New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T now are available on the official IRS website at www.IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82, both of which are designed to help small employers correctly figure and claim the credit.

Included in the Affordable Care Act enacted in March 2010, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multi-employer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.

Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.

reprinted from Shadian Law

The maximum credit goes to smaller employers—those with 10 or fewer full-time equivalent (FTE) employees—paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Since the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return. Tax-exempt organizations will first use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. (Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T also will be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.)

reprinted from Shadian Law

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Important Dates January 15th - 4th Quarter Est. Tax Payment for 2010 taxes April 15th - Personal Returns Due Preparing for 2010 Taxes As the leaves fall during the months of November and December we encourage you to make an appointment with us to go over your final numbers for the year and create a tax plan that suits your personal or business needs. This is a great opportunity to get a clear idea of where you stand financially as of 2010, and if there are any adjustments to your financial situation that can be made before the end of the year to maximize your profits and minimize tax liability. Tax breaks such as the Energy efficient home improvement credit and the Making Work Pay tax credit (along with many others) will be expiring at the end of 2010, and there is no indication of these being renewed in 2011. This is a vital time to look ahead and take advantage of the tax breaks in place today. Please see our website at www.mbtaxpro.com for help in your tax organization. We have a page full of useful forms to help keep your finances in order. You are also welcome to call or email the office and Fern will send you over forms that are best suited for your particular tax needs. Bookkeeping By MB Tax MB Tax Professionals offers bookkeeping to facilitate your business financial organization and to make your tax time with us even easier. Our mission is to alleviate you of the day to day accounting tasks so that you can focus on growing your business. We want to help you achieve a clear picture of your company's financial position so that you can make more informed financial decisions. We work closely with business owners to implement accounting solutions that are tailored to meet the needs of your business. Whether you need help closing out your books at the end of the month, weekly tracking of your expenses, or you crave systems that will help increase productivity and efficiency, MB Tax can help! We offer weekly, monthly, or quarterly services, depending on the needs of your business. We also offer a year end overview of your books. Our general bookkeeping fee is $45/hour, with weekly/monthly/quarterly rates as well. Give us a call and we will work out the best bookkeeping plan for you. Lower Paychecks No Matter What in 2011? (reprinted from telegram.com) Employers in the U.S. are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts. "I've been doing payroll for probably close to 30 years now, and never have we seen something like this, where it gets that down to the wire," said Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University's Langone Medical Center. "That's what's got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios." Lawmakers won't start debating whether to extend the cuts, which expire Dec. 31, until after the Nov. 2 elections. Because it takes weeks to prepare withholding schedules, the Internal Revenue Service will probably have to assume the cuts will expire and direct employers to increase deductions starting Jan. 1, experts say. If Congress fails to act, income tax rates will revert to higher levels dating from June 2001. For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children. Paychecks could shrink in January and into February, depending on how long it takes Congress to act. January could well be a time of "sticker shock" for salaried employees and their employers, said Kathy Pickering, executive director of the Tax Institute, an independent research division at Kansas City, Missouri-based H&R Block Inc. "If the laws get passed late in December, it's just necessarily going to take one to three weeks to get those payroll tables updated and implemented into the system," Pickering said. Allowing the tax cuts to expire, even temporarily, would deal a blow to disposable income and could curtail the consumer spending that accounts for about 70 percent of the economy, said Alec Phillips, a Washington-based economist at Goldman Sachs Group Inc. "The longer the expiration lasts, the more significant the impact will be," he said. Please see the tables below for a more comprehensive view on what this means for you, courtesy of www.taxfoundation.org. For the full article, see our MB Tax Pro Blog! Table 1 Summary of Taxes Owed (+ or -) on Typical Tax Returns 2011 Full Expiration Republican Plan Democratic Plan Single Parent, One child, $25,000 -$901 -$1,856 -$1,856 Married couple, three children, $45,000 $1,028 -$1,510 -$1,713 Married couple, two children, $50,000 $2,833 $690 $690 Married couple, two children, $85,000 $7,235 $5,385 $5,385 Single, no children, $60,000 $8,255 $7,500 $7,500 Single, no children, $150,000 w/ investment income $28,340 $25,071 $25,071 Married couple, two children, $150,000 w/ investment income $21,602 $17,800 $17,800 Married couple, two children, $300,000 $76,616 $64,971 $68,392 Married couple, no children, $420,000 w/ investment income $106,815 $95,554 $98,591 Married couple, no children, $1,000,000 w/ investment income $293,106 $231,900 $260,871 Retired couple, $60,000 w/ investment income $3,444 $768 $768 Table 2 Summary of Effective Tax Rates (Taxes as a Percentage of Income) Paid on Typical Tax Returns 2011 Full Expiration Republican Plan Democratic Plan Single Parent, One child, $25,000 -3.6% -7.4% -7.4% Married couple, three children, $45,000 2.3% -3.4% -3.8% Married couple, two children, $50,000 5.7% 1.4% 1.4% Married couple, two children, $85,000 8.5% 6.3% 6.3% Single, no children, $60,000 13.8% 12.5% 12.5% Single, no children, $150,000 w/ investment income 18.9% 16.7% 16.7% Married couple, two children, $150,000 w/ investment income 14.4% 11.9% 11.9% Married couple, two children, $300,000 25.5% 21.7% 22.8% Married couple, no children, $420,000 w/ investment income 25.4% 22.8% 23.5% Married couple, no children, $1,000,000 w/ investment income 29.3% 23.2% 26.1% Retired couple, $60,000 w/ investment income 5.7% 1.3% 1.3% Changes in filing Payroll Tax The IRS has announced that proposed regulations will expand the use of electronic payment systems for payroll and other tax payments, and discontinue the use of paper coupons next year. For the full article, please see our MB Tax Pro Blog!	Helpful Links More About Us Our Blog Our Network Helpful Links Forms Our Services Tax Planning Representation Business Constulting Tax Preparation See what our clients have to say! Our Fans
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Changes In Filing Payroll Tax

The IRS has announced that proposed regulations will expand the use of electronic payment systems for payroll and other tax payments, and discontinue the use of paper coupons next year.

What are Paper Coupons?

In the past, businesses could submit payroll tax payments using a paper coupon by taking the coupon to a bank along with a check for the payroll tax amount. The IRS says the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010.

What is the New Electronic Payment System?

There is not a new system; the proposed regulations will require use of the existing federal tax deposit process, through the Electronic Federal Tax Payment System (EFTPS).

What is EFTPS?

The Electronic Federal Tax Payment System (EFTPS) was set up to provide taxpayers a way to make payments electronically, instead of mailing them. The IRS says that using EFTPS benefits users because they can make payments at any time, day or night, from anywhere, by computer or phone. EFTPS also reduces payment errors. And you can schedule payments up to 120 days in advance of the payment date.

How Do I Sign Up for EFTPS?

Since you will most likely have to stop using payment deposit coupons come January 1, 2011, it may benefit you to sign up now so you can become comfortable with the service. You can sign up by going to the the EFTPS website at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477. For more information on how to enroll and pay using EFTPS, see IRS Publication 4132 (PDF).

Failure To File Penalties can make this Halloween verrry spoooky!

If you owe taxes, the Internal Revenue Service will calculate penalties and interest on the amount owed. If you have a refund, the IRS may pay you interest on the delayed refund. (Note the difference between "will" and "may" - the IRS generally pays interest on refunds that have been delayed because of slow processing by the IRS. Since most late tax returns take longer to process, the IRS "may" pay you interest on based on the extra amount of time it takes them to process your return.) If you have a refund, there is no penalty for filing late. Penalties are calculated on the amount due. Since there is no amount due, there is no penalty.

If you have a balance due on a late tax return, the IRS will calculate additional penalties and interest. There are three separate penalties:

• Failure to File Penalty
• Failure to Pay Penalty
• Interest

Each is calculated differently. Let's take a look at each one.

Failure to File Penalty

The failure-to-file penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually filed your tax return. The penalty is 5% for each month the tax return is late, up to a total maximum penalty of 25%. The percentage is of the tax due as shown on the tax return. If your tax return is more than five months late, simply multiply your balance due by 25% to calculate your failure to file penalty.

Failure to Pay Penalty

The failure-to-pay penalty is calculated based on the amount of tax you owe. The penalty is 0.5% for each month the tax is not paid in full. There is no maximum limit to the failure-to-pay penalty. The penalty is calculated from the original payment deadline (the original April 15th filing deadline) until the balance due is paid in full.

Interest

Interest is calculated based on how much tax you owe. Interest rates change every three months. Currently, the IRS interest rate for underpayment of tax is 4% per year. The interest is calculated for each day your balance due is not paid in full.

IRS interest rates are variable and are set quarterly. For historical IRS interest rates, see this chart at TaxAlmanac.org.

If you haven't filed your 2009 taxes yet, it is not to late to set things right. Call or email the office for a tax preparation appointment, and we can give you an idea if you have been incurring penalties and interest thus far. If you don't make an appointment soon, BEWARE!!

Vote on Tax Cuts Down to the Wire - Employers Warn of Smaller Checks

Vote on tax cuts down to the wire -

Employers warn of smaller checks

Employers in the U.S. are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts.

“I’ve been doing payroll for probably close to 30 years now, and never have we seen something like this, where it gets that down to the wire,” said Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University’s Langone Medical Center. “That’s what’s got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios.”

Lawmakers won’t start debating whether to extend the cuts, which expire Dec. 31, until after the Nov. 2 elections. Because it takes weeks to prepare withholding schedules, the Internal Revenue Service will probably have to assume the cuts will expire and direct employers to increase deductions starting Jan. 1, experts say.

“We’re kind of stuck between a rock and a hard place,” said Ron Moser, head of human resources for the school district of Kenmore-Town of Tonawanda, N.Y., which pays about 1,900 teachers, custodians and aides each month. In upstate New York, where winter heating costs are among the highest in the country, many school employees earn between $20,000 and $40,000 a year, he said, and losing $50 in a paycheck is “a significant dollar amount.”

“We’re starting to get the calls” from employees asking what they need to do for the next tax year, Moser said.

President Barack Obama and most Democrats want tax cuts extended for middle-income earners, but to end for the wealthiest Americans, the top 2 or 3 percent of earners. Republicans want tax cuts extended for everyone, arguing that an increase makes little sense as the economy recovers from the worst recession since the 1930s. Tax cuts went into effect in 2001 and 2003.

For Moser, the challenge of the moment is keeping people in the Buffalo suburb, home to about 78,000 residents, calm about what will happen in January. The area has several manufacturing employers — including 3M Co., General Motors Co. and Praxair Inc. — and unemployment is 7.6 percent, lower than the national rate of 9.6 percent. Still, many people are worried, he said.

“The bulk of our employees don’t understand” the coming tax debate in Congress, Moser said. “When they see this type of thing happening, they go into panic mode. They don’t follow what’s going on.”

If Congress fails to act, income tax rates will revert to higher levels dating from June 2001.

For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children.

Paychecks could shrink in January and into February, depending on how long it takes Congress to act.

January could well be a time of “sticker shock” for salaried employees and their employers, said Kathy Pickering, executive director of the Tax Institute, an independent research division at Kansas City, Missouri-based H&R Block Inc.

“If the laws get passed late in December, it’s just necessarily going to take one to three weeks to get those payroll tables updated and implemented into the system,” Pickering said.

Allowing the tax cuts to expire, even temporarily, would deal a blow to disposable income and could curtail the consumer spending that accounts for about 70 percent of the economy, said Alec Phillips, a Washington-based economist at Goldman Sachs Group Inc.

“The longer the expiration lasts, the more significant the impact will be,” he said.

Economists raised estimates for consumer spending in the third quarter to 2 percent from 1.9 percent, according to the median forecast on a Bloomberg News survey this month. Spending rose at a 2.2 percent pace in the second quarter. The Commerce Department will release third-quarter data tomorrow.

Making a withholding-rate change could take longer for small businesses that don’t outsource payroll services, experts said. If a business can’t react fast enough, employees could recoup any over-withholding by filing a new W-4 tax form to temporarily lower their federal withholding rate.

Another option is to wait until 2012, when workers file their tax returns for the previous year.

Taxpayers could use the same strategies if Congress reinstates the tax cuts next year and they need to recoup the extra withholding.

Jodi Parsons, manager of payroll and accounts payable at IFMC, a health care management company based in West Des Moines, Iowa, said if the IRS issues two sets of withholding tables, her two-person office could be overwhelmed with processing changes to W-4 forms.

“We’d have to basically go back and hand-calculate checks for all 800-900 employees to determine whether or not we need to deduct additional taxes from them or refund taxes,” Parsons said.

For the full article, see the link below:
http://www.telegram.com/article/20101028/NEWS/10280738/1237

#1007 - October 15th - Final Personal Returns Due

Important Dates October 15th - Final Tax Deadline for Individuals January 15th - 4th Quarter Est. Tax Payment for 2010 taxes October 15th - Final Tax Deadline for 2009 October 15th is fast approaching and is a key deadline for millions of individual taxpayers who requested an extension to file their 2009 tax returns. As many as 10 million tax returns are expected to be filed from taxpayers who requested a six-month extension to file their returns, according to the IRS. This is the final tax deadline, there are no more extensions available for 2009 taxes. If you do not file at this point the following actions may be taken by the IRS: Penalties may be assessed and added to the total amount you owe. The IRS may automatically file a return for you. This will naturally be bare bones, omitting any exemptions or expenses you are entitled to. Based on the IRS substituted return, the IRS may initiate collection. They can put a lien on property and even levy your wages or bank accounts. If you want to file on time but can't pay the full amount owed, you can request a payment plan by filing a Form 9465. Though you will incur fees, penalties, and interest it still may be beneficial because it spreads the payments out into monthly payments. We at MB Tax are committed to working at full capacity before October 15th to do our best to ensure that you are filed for 2009 on time. If you have filed an extension, but have not yet made an appointment with us to begin tax prep, please do so as soon as possible. Also, please tell your family and friends about our tax services, we would love to help anyone experiencing this tax urgency. If you need any 2009 tax organizing forms, please see our website at www.mbtaxpro.com. Preparing for 2010 Taxes During the months of November and December we encourage you to make an appoinment with us to go over your final numbers for the year and create a tax plan that suits your personal or business needs. This is a great opportunity to get a clear idea of where you stand financially as of 2010, and if there are any adjustments to your financial situation that can be made before the end of the year to maximize your profits and minimize tax liability. Please see our website at www.mbtaxpro.com for help in your tax organization. We have a page full of useful forms to help keep your finances in order. We also offer bookkeeping services to help you get on track and stay on track. Please call the office and speak with Fern at (503) 595-5890, or you may email Fern at office@mbtaxpro.com to learn more about how bookkeeping may be the right choice for you. Changes in filing Payroll Tax The IRS has announced that proposed regulations will expand the use of electronic payment systems for payroll and other tax payments, and discontinue the use of paper coupons next year. What are Paper Coupons? In the past, businesses could submit payroll tax payments using a paper coupon by taking the coupon to a bank along with a check for the payroll tax amount. The IRS says the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. What is the New Electronic Payment System? There is not a new system; the proposed regulations will require use of the existing federal tax deposit process, through the Electronic Federal Tax Payment System (EFTPS). What is EFTPS? The Electronic Federal Tax Payment System (EFTPS) was set up to provide taxpayers a way to make payments electronically, instead of mailing them. The IRS says that using EFTPS benefits users because they can make payments at any time, day or night, from anywhere, by computer or phone. EFTPS also reduces payment errors. And you can schedule payments up to 120 days in advance of the payment date. How Do I Sign Up for EFTPS? Since you will most likely have to stop using payment deposit coupons come January 1, 2011, it may benefit you to sign up now so you can become comfortable with the service. You can sign up by going to the the EFTPS website at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477. For more information on how to enroll and pay using EFTPS, see IRS Publication 4132 (PDF). The sun sets on 2001-2003 tax cuts, but what is on the horizon? At 12:01 a.m. on January 1, 2011, the largest tax increase in American history could go into effect if Congress fails to act. The Investor's Business Daily editorial board explains, "Unless something is done soon, the New Year will also come with a raft of tax hikes - including a return of the death tax - that will be real killers." Also scheduled to end are vital tax credits such as the Earned Income Credit and the Child Tax Credit. These tax increases could cost $2.6 trillion over the next decade, stalling our economic recovery and threatening millions of American jobs. For a family of four earning $50,000, you may have a tax increase next year of $2,100. This is an incredibly important matter, shaping the next decade of America's economy at least, and we encourage all of you to do your own research on this matter. Opencongress.org is a non profit information site specifically designed to track all bills as they are introduced, become law, or fail to become law. It's very user friendly, with a break down of the language used in each bill, and it provides contact information for every Congress person. They love to hear from their constituants, so if you have an opinion about the upcoming tax hike, feel free to share it! Bush Era Cuts vs. Obama's Proposal Income Taxes Current Income Level Scheduled Rate Next Year 10.00% $0-$16,750 15.00% 15.00% $16,751-$68,000 15.00% 25.00% $68,001 - $137,300 28.00% 28.00% $137,301-$209,250 31.00% 33.00% $209,251-$373,650 36.00% 35%% $373,651 and above 39.60% *www.wnyc.com Capital Gains Taxes Current Income Level Scheduled Rate Next Year 15.00% Couples up to $250,000 20.00% 15.00% Couples over $250,000 20.00% *www.wnyc.com	Helpful Links More About Us Our Blog Our Network Helpful Links Forms Our Services Tax Planning Representation Business Constulting Tax Preparation See what our clients have to say!