Answers on W-2 Reporting of Health Care Benefits

May 7, 2012 Leave a comment

Maximum Out-of-Pocket Premium Payments Under PPACA

Maximum Out-of-Pocket Premium Payments Under PPACA (Photo credit: Wikipedia)

On March 23, 2010, the Affordable Health Care Act (also informally known as Obamacare) was signed into law.  Right now, the provisions of this act are still in force and certain features will begin to transition into action this year.

One of those items includes the requirement for employers to report health care benefits on W-2s for 2012. In general, the value of the health care coverage is to be reported in Box 12 of the W-2 with Code DD. The amount reported will include both the portion paid by the employer and the portion paid by the employee.

There will be some transition relief for employers, but take notice of any future IRS announcements that will provide additional guidance on this reporting.

The costs of health care provided by employers and employees will appear on the W-2 for informational purposes only and the employee should note that they will not be taxed on this coverage.

If you are an employer and want further information from the IRS, check out this link.

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Get Your Focus Back on Running Your Business

May 4, 2012 Leave a comment

The focus of the first of every year for many business professionals is on taxes.  Both personal and business tax issues come into focus and you spend a good bit of time pulling together all your financial information so that you will be in compliance.

It’s now time to get your focus back on running your business.  Compliance issues are not the primary focus of your business.  Growing and maintaining a successful business venture requires your focus on a multitude of issues and strategies.

Maybe it is a good time to take a quick assessment of where you are and where you want to go.  Is your cash flow strong?  Are you marketing your business in a way that keeps growth as a focus of your business strategy?  How about your pricing, is it time to evaluate something here?  Any employee issues such as training or benefits analysis?

You may need a day to brainstorm, to get away and think through the issues.  Seize the moment during this post-tax season time to get your focus back on the long-term aspects of running your business.  You will be glad you did.

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Nonprofit Leaders Check Out Revised Publication 1771

May 3, 2012 Leave a comment

Charity

Charity (Photo credit: Wikipedia)

There is a revised version of IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements.  Nonprofit leaders should take note.

While most of the gift substantiation requirements have not changed, there are some updates regarding how acknowledgements may be made to donors.  For example, it is permissible for the nonprofit to provide acknowledgements electronically in order to meet gift substantiation requirements.

Please note that it is proper for nonprofits to acknowledge gifts in a proper and timely manner, however it is the responsibility of the donor to obtain an acknowledgement.

Visit the IRS website for this and other information for exempt organizations at www.irs.gov/eo

 

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Taxes 2012 – A Reminder You Have Until April 17 to File

April 2, 2012 Leave a comment

taxes

taxes (Photo credit: 401K)

Good news is worth repeating, so remember you have a couple of extra days this year to file your personal tax return.

Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays affect tax deadlines in the same way that federal holidays do, giving all taxpayers two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns.

The crunch is on!

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Taxes 2012 – Support Your Deductions With Receipts

February 11, 2012 Leave a comment

A receipt, obtained in Swiss mountain restaura...

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This is a perennial question, “Do I need to keep receipts for tax purposes?”  The answer is yes, but what may surprise you is that the format may be paper or digital.

First, let’s deal with the IRS requirements.  Section 6001 of the Code says that taxpayers are required to keep accurate records so that various types of costs and expenses that affect their income tax liability are able to be determined.  These records should be kept for at least the period of limitation for that return.

Then we move to Rev. Proc. 97-22 which gave taxpayers the right to document receipts in digital form as well as paper form.  The taxpayer must ensure “an accurate and complete transfer of original computerized books and records to an electronic storage media. The electronic storage system must also index, store, preserve, retrieve, and reproduce the electronically stored books and records.”  If you are moving to collect your stuff in digital form, make sure you can retrieve and  preserve all this support for a few years.  If you scan your receipts into electronic format, you may then dispose of the paper receipts.  Just make sure the digital storage works properly and is accessible before destroying your paper receipts.

Finally, many publications by the IRS help guide you in understanding how to document support for income and expenses.  Their Tax Guide for Small Business is a good one to check with, as well as any publication dealing with itemized deductions.

I ran across some research from a couple of years ago that you will find interesting.  This study shows that 80% of the U.S. population receives one to three receipts a day, 11% of which immediately get thrown away. With America’s retailers generating approximately 228.7 million pounds of receipt paper per year, this translates to 22.87 million pounds of paper that instantly become trash.

Then there’s this guy who blogged about receipts the other day.  He says he has more receipts in his wallet than money.  He thinks it would be cool to receive a trophy every time you make a purchase, perhaps even a small pet or sticker.  I like his creativity. See “Bonfire of the Receipts.”

Right now I guess we still need to document, so which ever way you do it make sure to do it well.

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Circular 230 Disclosure

February 9, 2012 Leave a comment

Reblogged from Cash Accounting and Consulting:

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained herein.

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Taxes 2012 – What to do With That 1099-K You Received

February 7, 2012 Leave a comment

Česky: Kreditní karty Deutsch: Kreditkarten En...

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Does your business take payments via credit card?  Do you accept payments through another service such as PayPal?

If you answer yes to either of these questions, you will receive in the mail a form 1099-K.  Looking like a 1099-Misc, this form 1099-K is explained on the IRS website as follows:

The 1099-Kis a new IRS information return for reporting electronic financial transactions to improve voluntary tax compliance. You should get a 1099-K by the end of January 2012 if, in 2011 you received payments from:

  • merchant card transactions (e.g., debit or credit cards) OR,
  • in settlement of third party payment networks (e.g., PayPal or Google Checkout) at or above our minimum reporting thresholds
    -gross payments that exceed $20,000, AND
    -more than 200 such transactions.

Of course the purpose of the form is to improve compliance with reporting taxable income for businesses.  So if you get one in the mail, keep it because you will report it on some part of your tax return for 2011.

For individuals who are sole proprietors or report their business income on Schedule C, there is a new line that will hold information from your 1099-K.  Also, look on Schedule E for new lines for reporting 1099-K amounts as well as on Schedule F.

For businesses tax returns, such as form 1120 or 1120S, there are new lines for reporting amounts from your 1099-K.

If you are a nonprofit organization that uses a merchant service to collect payments, you will receive a 1099-K from that service provider.  Keep these on file, but as of this moment there does not appear to be a place for reporting on form 990.

Lots of online sources are there for your help if you have questions.  I would start with the IRS website.

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Taxes 2012 – Most Common Tax Return Mistakes

January 21, 2012 2 Comments

IRS Form W-2

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I know you don’t make mistakes, but you might want to slow down and double check that tax return before you file.

According to the IRS, taxpayers make some common mistakes that could be avoided.  If you want to know their views on this, a short YouTube video is available to help you as you prepare your 2011 return.

From my review of various lists, here are some common mistakes to look for:

  • Check your math
  • Make sure Social Security number is correct and on all pages of your return
  • Include all Social Security numbers for your dependents
  • Verify that your filing status is correct
  • Claim those retirement account contributions
  • Poor record keeping
  • Not signing and dating your return
  • Missing forms

Now, these all sound like mistakes for filing paper returns.  Indeed they are, so some of the issues could be avoided by e-filing.  Find a professional who can do this for your and the errors will be minimized.

The main culprit behind most errors is a lack of organization.  Get everything together, keep good records, and it will be a smooth process.

 

 

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Taxes 2012 – Refunds

January 18, 2012 1 Comment

IRS

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Tuesday, January 17, the IRS began accepting e-filed tax returns for 2011, so I guess we can say that the tax season has officially started.

Some notes are in order if you expect a refund.  If you e-file and choose direct deposit for your refund, you may receive your money as soon as 10 days after you file.  The IRS estimates that at least 90% of all refunds will be sent within 21 days after you file.  Of course that is only if you have no errors on your return.

Remember that you may check on the status of a refund by using the “Where’s My Refund?” tool on the IRS website.  Also, there is a smart phone app, IRS2go, that will link you up to check on a refund.

Happy filing!

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