Author: Eric Buechler

Businesses:

Monthly payroll deposits for January due February 15

 

Do you have a foreign bank account, own shares in foreign hedge fund, or hold any other foreign investment housed overseas which can be valued at $10,000 or more?  If so, the IRS & Department of Treasury require taxpayers to disclose certain information regarding this foreign activity via Form TDF-90.22 or potentially Form 8938 if the value is more than $50,000.

(Olsen, TC Summ. Op. 2011-131)

Facts and cirumstances:

Taxpayer received a K-1 from his mother-in-law’s estate.  Taxpayer was unfamiliar with this tax form.  The taxpayer entered the form K-1 data incorrectly into his tax software.  About a year later the taxpayer received an IRS matching notice for underpayment of tax along with an assessment of a 20% penalty (for substantial underpayment of tax).   Taxpayer appealed and court ruled that the mistake was isolated and that he acted in good faith.  Court ruled in favor of taxpayer, removing the 20% penalty.

* Planning note – Although this taxpayer’s notice was accurate, many IRS notices are issued in error and assess late or underpayment penalties.  Two lessons can be taken from todays blog: 1) Don’t just pay an IRS assessment of additional tax and penalties.  Many IRS CP2000 tax notices stating additionally tax assessment can be cleared up by simply sending the IRS proper documentation displaying the IRS’s or third party’s error.  2) Should you have made an honest error request the IRS or state agency to abate (remove) penalties .  50% of the time this actually works!

                                                                                                      – Eric J. Buechler, EA

Employer – Heli USA Airways payed dearly for not addressing an IRS (wage) levy on one of their employee’s overdue income taxes.  Tax Court ruled the employer is liable for the worker’s overdue taxes!  Additionally, the IRS added a 50% penalty for non-compliance.

The IRS launched a new app (IRS2Go) in 2011 for smartphones allowing users to check the status of their refunds.  The IRS app also provides tax tips and access to IRS news.

The 2012 Section 179 Deduction limit after adjustment for inflation has increased to $139,000

The 2012 Section 179 Deduction threshold for total amount of equipment that can be purchased has increased to $560,000.

The Section 179 Deduction is available for most new and used capital equipment, and also includes certain software.  Section 179 is limited by income.

The new law allows 50% “Bonus Depreciation” on qualified assets placed in service during 2012. However, this can be taken on new equipment only.  Bonus depreciation is not limited by income and is mandatory.  IRS requires businesses to make an election to “elect out” of this method.

* Planning Note – Sure, it is well known that businesses can save current year taxes by quickly depreciating assets.  This however, can be a double edged sword.  Depending on the business owner’s overall financial situation, an owner could very well eliminate valuable current year tax credits by electing to deduct too much depreciation along with potentially forgoing a larger future year tax deduction!   Please seek the advice of one of our tax advisors as careful planning is needed when choosing to Section 179 expense or depreciate property. 

                                                                                                      –  Eric J. Buechler, EA

Retirement Plan Contributions

• Simple IRA made per pay period
• 403(b)(7)/ Roth 403(b)(7) made per pay period
• 401(k)/ Roth 401(k) made per pay period
• Safe Harbor 401(k)/ Roth Safe Harbor 401(k) made per pay period
• Individual K/ Roth Individual K made per pay period

Businesses:

Monthly payroll deposits for December due on January 15

4^th Quarter payroll deposits due on January 31

4^th Quarter Sales Tax due on January 20

W-2’s due January 31

W-3’s  due January 31

FUTA due January 31

State Income Tax Withholding report due January 31

State Unemployment Tax Returns due January 31

 

Provisions Expiring in 2011

First-time homebuyer credit for individuals on qualified official extended duty outside the United States (sec. 36(h)(3))

 FUTA surtax of 0.2 percent (sec. 3301(1))

 Credit for certain non-business energy property (sec. 25C(g))

 Tax credit for research and experimentation expenses (sec. 41(h)(1)(B))

 Credit for energy efficient appliances (sec. 45M(b))

 Employer wage credit for activated military reservists (sec. 45P)

 Work opportunity tax credit (sec. 51(c)(4))

 Deduction for State and local general sales taxes (sec. 164(b)(5))

 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (secs. 168(e)(3)(E)(iv), (v), (ix), 168(e)(7)(A)(i) and (e)(8))

 Additional first-year depreciation for 100 percent of basis of qualified property (sec. 168(k)(5))

 Enhanced charitable deduction for contributions of food inventory (sec. 170(e)(3)(C))

 Enhanced charitable deduction for contributions of book inventories to public schools (sec. 170(e)(3)(D))

Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes (sec. 170(e)(6)(G))

 Above-the-line deduction for qualified tuition and related expenses (sec. 222(e))

 Tax-free distributions from individual retirement plans for charitable purposes (sec. 408(d)(8))

 Reduction in S corporation recognition period for built-in gains tax (sec. 1374(d)(7))

 Temporary payroll tax cut (sec. 601 of Pub. L. No. 111-312

Business Tax

• Sole Proprietor
• Hiring spouse can cut your tax bill
• Tax savings come from a medical plan
• By offering family coverage for all employees, you can receive health insurance under your spouse’s policy. If you have no other employees, you don’t incur any extra out-of-pocket cost
• An asset must be ready for business use by year-end to qualify for expensing
• Issuing warrants to shareholders can kill a company’s S corporation status. The warrants are treated as a second class stock, and the firms’ S status is revoked.