Links & Information

Small Business

• Independent Contractors or Employees. A major topic for businesses is “Do I have Independent Contractors or Employees”? Individuals may ask this often, too. Here’s information that can help you decide. Independent Contractor (Self-Employed) or Employee @ IRS.gov

• Requirements Changed for Federal Tax Deposit Coupons. Businesses currently permitted to use paper Federal Tax Deposit coupons will have to make those deposits electronically beginning in 2011 with a few exceptions, primarily businesses with $2,500 or less in quarterly tax liabilities that pay when filing their returns. So, if you and your business still use the Federal Tax Deposit coupons, you’ll need to register for the EFTPS by December 31, 2010. To do that, contact our office and we’ll be glad to send you the start-up kit for registering for EFTPS, or you can check out the following link. EFTPS: The Electronic Federal Tax Payment System @ IRS.gov

• The New Small Business Health Care Credit. The IRS has issued detailed guidance on the small employer health insurance credit created by the recently-enacted health reform legislation. Under the new law, effective for tax years beginning after December 31, 2009, an eligible small employer may claim a tax credit for non-elective contributions to purchase health insurance for its employees. The small employer must have no more than 25 full-time equivalent employees employed during its tax year, and the employees must have annual full-time equivalent wages that average no more than $50,000. However, the full credit is available only to an employer with 10 or fewer full-time employees and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000. The new guidance adopts a liberal approach to the new law’s requirements, including three alternative methods for figuring total hours of service and also explains how small employers claim the credit if their State provides a credit or subsidy for employee health coverage. For more information on this credit, click on the following link. Small Business Health Care Tax Credit for Small Employers @ IRS.gov

• Expanded Form 1099 Reporting Requirements. Under the Health Care Reform Act, it was mandated that beginning in 2012, the IRS would require businesses to report a wider range of payments to contractors, vendors and others. These payments are an aggregate amount of $600 or more in a calendar year. Under the regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirements because they are already reported by banks and other payment processors. This law does expand the reporting requirements to payments related to goods and other property, and also includes payments to corporations. The IRS is seeking public comment on how to most effectively carry out this law change. The deadline for public input is September 29, 2010.

Individual

• IRS Withholding Calculator. This withholding calculator can help you decide if you need to change your W-4 at work. Withholding Calculator @ IRS.gov

• Life Events Have Tax Impact. Here’s a list of events in your life that may cause a significant tax impact. Life Events @ IRS.gov

• Good Reasons for Roth IRA Conversions. In 2010, anyone with a traditional IRA can convert all or part of it to a Roth IRA for at least five years and after you are age 59 1/2, all withdrawals are tax free. You will, however, owe income tax on a Roth IRA conversion. If you convert in 2010 you can elect to defer the tax payments to 2011 and 2012. Even with this deferral, you probably will pay income tax much sooner than you would have paid if you had kept the money in a traditional IRA. So, why would you want to accelerate those tax payments? Here are some possible reasons:

  Estate Planning: You are not required to take any withdrawals from a Roth IRA, no matter how old you are. With traditional IRAs, you generally must take at least required minimum distributions (RMDs) after age 70 1/2. Therefore a Roth IRA can be ideal if you have ample wealth from other sources and wish to pass a tax-free account to your heirs.

  Tax Tactics: When you convert a traditional IRA to a Roth IRA, you will have to recognize income from the conversion. That income may help you use up tax benefits that otherwise would be used later or not at all. Tax benefits that may expire for lack of income include net operating losses, ordinary losses, and charitable contributions.

  Market Timing: If your traditional IRA loses value, you will owe less tax on a Roth IRA conversion. Many taxpayers invest IRA money in stocks. Because the broad US stock market is currently below its peak, Roth IRA conversions are relatively inexpensive.

  Retirement Planning: Some taxpayers believe they will be in a higher tax bracket in retirement than they are now. They may have low taxable income this year, for example, or they may plan to relocate to a high income tax state. In addition, many people fear that future income tax rates will be higher than today’s rates because the federal government will need more money to cover its obligations.

  In some circumstances you might want to convert all or part of your traditional IRA to a Roth IRA now and pay tax at current rates. Once you meet the five year and age 59 ½ tests, you will have a source of tax-free cash no matter what happens to your personal tax rate.

Payroll Forms

• 2010 Form W-4: http://www.irs.gov/pub/irs-pdf/fw4.pdf

• I-9 Form: http://www.uscis.gov/files/form/i-9.pdf

• Texas New Hire Form: http://facpa.com/documents/NEWHIRE2.pdf

"Pursuant to IRS Circular 230 and IRS regulations we inform you that any U.S. federal tax advice contained on this page (including any attachments and or links) is not intended or written to be used, and cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax related penalties imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any partnership or other entity, investment plan, arrangement or other transaction addressed herein "