Tuesday, October 11, 2011
TAX SAVINGS IN MILLIONAIRE TAX BILL
The American Jobs Act introduced in the Senate last week (commonly known as the Millionaire Surtax Bill) contains some tax breaks for businesses. Since the chance of this passing is fairly slim, rather than confuse you with the details we will keep an eye on the legislation and let you know what to expect if passed. I really don’t think it would be wise to use the proposal in our yearend tax planning. However, if you would like some of the details that I think impact business let me know and I will summarize for you.
Saturday, October 8, 2011
IF YOU HAVE BEEN USING INDEPENDENT CONTRACTORS TAKE NOTE
IRS Announces New Voluntary Worker Classification settlement Program (VCSP)
The Internal Revenue Service announced a new program that will enable some employers to resolve worker classification issues by voluntarily reclassifying their workers. This new program will allow employers to resolve worker classification disputes by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64.
Under the program, eligible employers can obtain relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to businesses, tax-exempt organizations and government entities that are uncertain whether to treat their workers or a class or group of workers as employees or independent contractors, and now want to correctly treat these workers as employees.
To be eligible, an applicant must:
• Consistently have treated the workers in the past as nonemployees;
• Have filed all required Forms 1099 for the workers for the previous three years; and
• Not be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.
Employers accepted into the program will pay an amount effectively equaling just over 1 percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
The Internal Revenue Service announced a new program that will enable some employers to resolve worker classification issues by voluntarily reclassifying their workers. This new program will allow employers to resolve worker classification disputes by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64.
Under the program, eligible employers can obtain relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to businesses, tax-exempt organizations and government entities that are uncertain whether to treat their workers or a class or group of workers as employees or independent contractors, and now want to correctly treat these workers as employees.
To be eligible, an applicant must:
• Consistently have treated the workers in the past as nonemployees;
• Have filed all required Forms 1099 for the workers for the previous three years; and
• Not be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.
Employers accepted into the program will pay an amount effectively equaling just over 1 percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
Friday, October 7, 2011
FACT-CHECKING WARREN BUFFETT
Here is an article from the Tax Foundation. They are trying to figure where the Oracle of Omaha get’s his numbers. LRK
Warren Buffett's much-discussed op-ed arguing that high-income earners aren't paying enough taxes makes the following claim:
"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."
To me, the effective rates he claims for other workers in his office seem too high to be realistic, and I can't figure out how he calculated them, even if you include all payroll (employee and employer) taxes. Even if you assume the scenario that leads to the highest possible tax burden (single filer, no deductions), a taxpayer would have to make at least $285,388 (in 2010) before his or her effective rate reaches 33 percent. 41 percent is impossible, as far as I can tell: the limit of total taxes over total income, as income approaches infinity, is 37.358%. That's the highest possible effective rate anyone could have paid in 2010, if you include income and all payroll taxes.
To demonstrate this, I've made a little calculator which shows the maximum possible effective rate for any income amount. Try it out on the Tax Foundation website.
Warren Buffett's much-discussed op-ed arguing that high-income earners aren't paying enough taxes makes the following claim:
"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."
To me, the effective rates he claims for other workers in his office seem too high to be realistic, and I can't figure out how he calculated them, even if you include all payroll (employee and employer) taxes. Even if you assume the scenario that leads to the highest possible tax burden (single filer, no deductions), a taxpayer would have to make at least $285,388 (in 2010) before his or her effective rate reaches 33 percent. 41 percent is impossible, as far as I can tell: the limit of total taxes over total income, as income approaches infinity, is 37.358%. That's the highest possible effective rate anyone could have paid in 2010, if you include income and all payroll taxes.
To demonstrate this, I've made a little calculator which shows the maximum possible effective rate for any income amount. Try it out on the Tax Foundation website.
Thursday, October 6, 2011
ACCOUNTANTS IN THE MOVIES
In Hollywood, accounting can seem like a pretty glamorous profession, or not.Kirstie Alley stars as New York accountant Mollie Jensen in the 1989 romantic comedy "Look Who's Talking." She meets cab driver John Travolta when she needs to get to the hospital in a hurry because she's about to have a baby. Travolta helps her bring up the baby, but the real father is her tax client George Segal. The baby's voice also sounds strangely like Bruce Willis. Alley reprised the part of Mollie in the 1990 sequel "Look Who's Talking Too," in which Roseanne Barr joined Willis in providing the voice of another of Mollie's kids. The 1993 threequel "Look Who's Talking Now" added the voices of Diane Keaton and Danny DeVito, but this time as Mollie's dogs.
Wednesday, October 5, 2011
SILVER TAX LINING FOR EMPLOYEE
Q. We found out that one of our office workers stole about $500 from petty cash. Can we deduct the loss?
A: Yes. As with personal theft loss, the amount of the loss is generally treated as a deductible casualty and theft loss, reduced by the amount of any insurance reimbursements. But you could run into a problem if the IRS ever challenges your claim. Keep copies of police reports and other supporting documentation.
A: Yes. As with personal theft loss, the amount of the loss is generally treated as a deductible casualty and theft loss, reduced by the amount of any insurance reimbursements. But you could run into a problem if the IRS ever challenges your claim. Keep copies of police reports and other supporting documentation.
Monday, October 3, 2011
L’OREAL DENIES LIGHTENING SKIN TONES OF SLUMDOG MILLIONAIRE ACTRESS IN LATEST AD
(As reported by Cosmetics Design)
Cosmetics giant L’Oreal has categorically denied that any alterations were made to an advert featuring actress, Freida Pinto, amid allegations that the appearance of her skin has been ‘lightened’.
Fueled by speculation from online publications, national newspapers and online communities such as Facebook, L’Oreal came under fire after many accused it of lightening the appearance of Pinto’s skin in the new advert for its L’Oreal Paris Colors Take Flight make up range.
However, according to a company statement, a L’Oreal spokesperson said: “Freida Pinto has been a spokesperson for the L’Oreal Paris brand since 2009. We highly value our relationship with Ms. Pinto.”
‘Categorically untrue’
“It is categorically untrue that L’Oreal Pairs altered Ms. Pinto’s features or skin-tone in the campaign for Project Runway “Colors Take Flight” limited-edition collection.”
There are many possible explanations for the appearance of the image, such as the lighting, or perhaps a photoshop blunder, but despite L’Oreal’s statement many online discussion boards have been filled with consumers questioning the advertisements, with many articles doing the rounds on Facebook.
It is not the first time L’Oreal has come under this kind of scrutiny following accusations they had done the same to an image of Pinto when she signed for the brand as an ambassador back in 2009.
A history of allegations
However, these allegations were proved wrong when it revealed that the image in question at that time came from Pinto’s representatives not the skin care brand, exonerating it of any wrongdoing.
The same questions were also aimed at L’Oreal regarding a 2008 advert for its Feria hair color product in which it was accused of lightening the skin tone of US singer Beyonce Knowles; an allegation that was once again categorically denied.
Earlier this year, L’Oreal did however admit to retouching and digitally enhancing images of Julia Roberts and Christy Turlington for the Lancome and Maybelline brand adverts, which were ultimately removed and banned in the UK.
Cosmetics giant L’Oreal has categorically denied that any alterations were made to an advert featuring actress, Freida Pinto, amid allegations that the appearance of her skin has been ‘lightened’.
Fueled by speculation from online publications, national newspapers and online communities such as Facebook, L’Oreal came under fire after many accused it of lightening the appearance of Pinto’s skin in the new advert for its L’Oreal Paris Colors Take Flight make up range.
However, according to a company statement, a L’Oreal spokesperson said: “Freida Pinto has been a spokesperson for the L’Oreal Paris brand since 2009. We highly value our relationship with Ms. Pinto.”
‘Categorically untrue’
“It is categorically untrue that L’Oreal Pairs altered Ms. Pinto’s features or skin-tone in the campaign for Project Runway “Colors Take Flight” limited-edition collection.”
There are many possible explanations for the appearance of the image, such as the lighting, or perhaps a photoshop blunder, but despite L’Oreal’s statement many online discussion boards have been filled with consumers questioning the advertisements, with many articles doing the rounds on Facebook.
It is not the first time L’Oreal has come under this kind of scrutiny following accusations they had done the same to an image of Pinto when she signed for the brand as an ambassador back in 2009.
A history of allegations
However, these allegations were proved wrong when it revealed that the image in question at that time came from Pinto’s representatives not the skin care brand, exonerating it of any wrongdoing.
The same questions were also aimed at L’Oreal regarding a 2008 advert for its Feria hair color product in which it was accused of lightening the skin tone of US singer Beyonce Knowles; an allegation that was once again categorically denied.
Earlier this year, L’Oreal did however admit to retouching and digitally enhancing images of Julia Roberts and Christy Turlington for the Lancome and Maybelline brand adverts, which were ultimately removed and banned in the UK.
Saturday, October 1, 2011
AM I A WIDOW?
Q. I had a friend of the family who does tax returns file my 2010 return. My dear husband passed away in 2009. Tony, the guy that did my return, filed me as a widow. I thought that was correct. We were married for 55 wonderful years so I thought I was a widow. I was at coffee with the girls the other day and Mable one of my friends whose husband passed away at the same time said that she was told that she was not a widow and she had to file as single. I have not been able to sleep worrying about the IRS coming to get me. Who is right.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
Olive
A. First of all Olive don’t worry too much. My best guess is that you are going to owe some money to the IRS and to the state but they are not going to throw you into jail or get audited. This is a good example of why someone should use a “qualified tax professional.” The key to this is that although you are a widow the actual IRS wording is “qualified widow or widower.” In order to meet that definition you must have a child that lives with you. In addition the qualification is only for two years after the death of the spouse. For the 2010 returns this would mean that the spouse died is 2008 or 2009 and you had a child living with you during those two years.
What should you do? I would recommend that you hire a qualified professional to amend your 2010 federal and, don’t forget your state return. I would also ask them to look at your 2009 return. Even though your husband died in 2009 you can still file a joint return. Make sure that a joint return was filed.
It is a pleasure serving you.
FOLLOWUP
Thank you so much. I am now sleeping better. How much would you charge to fix my problem?
Olive
I would be happy to help. Amending your federal and state returns would cost $225. This includes looking at your 2008 and 2009 returns to see if there are any other errors.
Let me know.
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