Wednesday, October 19, 2011

2290

Updated as of September 28, 2011 Congress has passed and the President has signed an extension of the Heavy Highway Vehicle Use tax through September 30, 2012. By November 30, 2011, taxpayers will be required to file Form 2290 for vehicles first used in July, August, September and October 2011. Although the Form 2290 is expected to be available in late October, the IRS will not provide a stamped (receipted) Schedule 1 until November 1, 2011. In the meantime, you can still pay your 2010 excise tax, get your 2011 tags and register your new or used vehicle.

Thursday, October 06, 2011

2011 Trip to Arlington

We recently traveled to Arlington Texas to attend the Arkansas Society of CPA's Annual Banquet and received the 2011 Firm Public Service Award. It was an honor to be selected by the Arkanasas State Society as the State's Winner.

IRS Fresh Start for Employers

The IRS announced an opportunity for a fresh start for employers on the much debated classification of contract laborers as employees. Procedures outlined in IRS Announcement 2011-64 offer business owners a window of opportunity to voluntarily reclassify contract laborers as employees within certain guidelines. This voluntary reclassification, called the Voluntary Classification Settlement Program (VCSP), allows eligible employers to reclassify contract laborers as employees on a forward looking basis with only minimal federal, social security, and Medicare tax exposure for past liability periods (note, however, that state withholding and workman’s compensation authorities are not bound to this program). The IRS, in previous publications, has announced an expected increase in the number of audits in this area due to non-compliance and wants to give employers a chance to change any misclassifications they may be aware of. To be eligible, the employer must have treated the workers or group of workers consistently as independent contractors and issued 1099-Misc forms for services performed during the last three years. An employer under IRS or DOL audit is not eligible even if it otherwise would have met the conditions set forth. If an employer has been previously audited and has continued to comply with the conditions of that audit, the employer will be eligible for the program. The application is made on form 8952. On this form, the federal tax and social security withholdings are calculated by taking the 1099-MISC income for the entire group of laborers who are being reclassified as employees, multiplying that number by a pre-determined factor (10.68% for 2010 and 10.28% for 2011 for laborers under the social security wage base threshold amount), the product of which is multiplied by 10%. There are no penalties or interest assessed on the result of this calculation, but the employer agrees to treat the workers as employees on a prospective basis and a six year statute of limitations instead of three. Please contact Kelly Phillips or Nell Sterling at (501) 753-9700 if you have questions regarding the calculation and how it may benefit you. Bell & Company can help you apply for the program through the IRS. WARNING: Carefully think through the reclassification process for 2011 and into the future. For instance, consider the impact upon the 50 person employee rule (base measurement used by the health care reform to be effective in 2014), matching payroll taxes, etc. Also, be aware - this fresh start opportunity has not been adopted by the State of Arkansas for unemployment and state withholding purposes. One should carefully consider the implication of these additional taxes when evaluating the reclassification process.

Tuesday, October 04, 2011

When is it Safe to Shred Tax Records?

By George Wong, CPA Have you ever asked yourself: “When can I delete old bookkeeping files and tax files on my computer?” or “Why can’t I get rid of these old tax records that are cluttering up my house?” These are good questions! In this article, I will discuss when it is and when it is not appropriate to shred or erase (if kept on your computer) your tax records and files according to the Internal Revenue Service (IRS) guidelines. As you may already know, the main purpose of keeping your prior year tax records is to have documentation if the IRS audits your tax return. Having tax receipts is your main defense in proving your deductions during audit. Generally, a three year statute of limitations exists after the original date the return is filed or due, whichever is later, for all returns. Basically, the IRS can audit your tax returns filed three years ago. Therefore, you should generally keep your tax records for at least three years. In special circumstances, the IRS may go back 6 years if the taxpayer omits from gross income an amount in excess of 25% of the amount of gross income reported on the originally filed tax return. This statute of limitations begins from the date the original tax return was filed. In an extreme case where either the taxpayer filed a false or fraudulent tax return, the taxpayer is willfully attempting to evade taxes, or the taxpayer does not file a tax return, the IRS may assess taxes. In addition, if a fraudulent tax return was filed, the IRS can impose additional taxes at any time, without regard to statutes of limitations, although the burden of proof falls on the government to prove fraud by the taxpayer. Hopefully in this case, you kept all of your tax records from the beginning of time. When in doubt, keep all your tax receipts, records, and tax returns. It is also a good idea to hire a Certified Public Accountant or tax advisor to represent you in an audit by the IRS or state taxing authority. For more information please send e-mail to george.wong@bellandcompany.net.