Tag IRS

Employees vs. Independent Contractors: IRS Allowing Reclassification

0 comments By TRMoore Filed in General, Tax Tagged with , , October 25th, 2011 @ 11:02 am

The distinction between employee vs. contractor is important for payroll tax purposes. Click image to read more on our website.

The IRS has announced a new initiative that allows employers who have misclassified workers as “independent contractors” rather than “employees” to reclassify the workers.

 Under the Voluntary Worker Classification Settlement Program, employers would only have to pay a small percentage of the employment tax liability that would have been due to cover past payroll taxes, with no interest or penalties.

The classification – or misclassification – of an employee as an independent contractor has been a hot-button issue of late, with the IRS cracking down and conducing random audits to ensure compliance.

You can read more background on this issue, the tax impact and how to correctly classify your workers on our website. Here, let’s dive into the new program …

The New IRS Initiative

The new program enables certain employers to resolve past worker classification issues and gain clarity as to the worker classification issue at a relatively low cost by voluntarily reclassifying their workers. As opposed to waiting for a potential IRS audit, businesses may use the Voluntary Worker Classification Settlement Program to achieve compliance by making a minimal payment (generally 10% of the employment tax liability deemed owed) to cover past payroll tax obligations.

Eligibility

To be eligible for IRS’ offer, a business must: 

  • Have consistently treated the worker(s) as non-employees in the past.
  • Have filed all required IRS Forms 1099 for the workers for the past three years.
  • Not currently be under a worker classification audit by federal or state agencies.

 How to Apply

Employers who are interested in applying to the new voluntary classification program can do so by filing IRS Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before intending to treat a contractor as an employee. If all conditions are met, the employer will not be audited on payroll taxes related to the worker for prior years.

 Word to the Wise

Be sure to consult with your tax professionals as well as a labor law attorney regarding your participation in the program and any potential pitfalls.

 Read more background on this issue, the tax impact and how to correctly classify your workers on our website and contact us for assistance with your particular situation.

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2010 Estate Relief: IRS Extends Form 8939 Deadline

0 comments By TRMoore Filed in General, Tax Tagged with , , September 13th, 2011 @ 4:53 pm

The Internal Revenue Service announced today that large estates of people who died in 2010 will have until early next year to file various required returns and pay any estate taxes due. In addition, the IRS is providing penalty relief to certain beneficiaries of these estates on their 2010 federal income tax returns.

This relief is designed to give large estates, normally those exceeding $5 million, more time to comply with key tax law changes enacted late last year, and includes:

  • Large estates, opting out of the estate tax, now will have until Tuesday, Jan. 17, 2012, to file Form 8939. This special carryover basis form, required of estates making this choice, was previously due on Nov. 15, 2011. Because this is a change in the specified due date rather than an extension, no statement or form needs to be filed with the IRS to have this new due date apply.
  • 2010 estates that request an extension on Form 4768 will have until March 2012 to file their estate tax returns and pay any estate tax due. Normally, a six-month filing extension is automatically granted to estates filing this form, but extensions of time to pay are granted only for good cause. As a result, most 2010 estates that timely file Form 4768 will have until Monday, March 19, 2012, to file Form 706 or Form 706-NA. For estates of those dying late in 2010 (after Dec. 16, 2010, and before Jan. 1, 2011), the due date is 15 months after the date of death. No late-filing or late-payment penalties will be due, though interest still will be charged on any estate tax paid after the original due date.
  • Special penalty relief is provided to many individuals, estates and trusts that already filed a 2010 federal income tax return, or obtained an extension and plan to file by the Oct. 17, 2011, extended due date. Late-payment and negligence penalty relief applies to persons inheriting property from a decedent dying in 2010, who then sells the property in 2010 but improperly reports gain or loss because they did not know whether the estate made the carryover basis election.

Revised versions of the estate tax forms are now available on IRS.gov, and the carryover basis form will be released this fall.

For assistance with estate tax issues, contact us.

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Mid-Year Mileage Rate Increase By IRS

0 comments By TRMoore Filed in General, Tax Tagged with June 23rd, 2011 @ 3:37 pm

With rising gasoline prices ranking third only behind unemployment and the deficit as a top concern among Americans in a recent CNN poll, we know the Internal Revenue Service‘s decision to increase standard mileage rates for the last half of 2011 is a welcome one!

Normally updated once a year in the fall for the next calendar year, the standard rate has increased to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

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8 Tips for Deducting Charitable Contributions

0 comments By TRMoore Filed in Tax Tagged with , , April 11th, 2011 @ 5:11 pm

Spring is in the air, which, for many Houston businesses, means it’s time to contribute to their favorite non-profit organizations’ annual marathon, donation drive or golf tournament. Charitable contributions made to qualified organizations may help lower your tax bill, so remember these eight tips from the IRS to help ensure your giving pays off on your tax return:

  1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
  2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
  3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
  4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
  5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
  6. Regardless of the amount, to deduct a contribution of cash, check or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
  7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all non-cash contributions for the year is greater than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
  8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

Contact TR Moore & Company for more information on qualified charitable contributions.

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Deadline for Filing Form 8939 Extended Beyond April 18; Guidance to Follow With New Deadline

0 comments By TRMoore Filed in Tax Tagged with , April 1st, 2011 @ 11:16 am

The Treasury Department and the Internal Revenue Service (IRS) today announced that Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, is not due on April 18, 2011, and should not be filed with the final Form 1040 of persons who died in 2010. New guidance that announces the form due date will be issued at a later date, and Form 8939 will be released soon after guidance is issued. Form 8939 is an informational return used to establish basis for income tax purposes of property acquired from a person who died in 2010.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. The executors of the estates of certain decedents who died in 2010 were previously required to file a Form 8939 relating to large transfers at death, which was due on the date of the decedent’s final Form 1040 or a later date specified in regulations issued by the Treasury Department.

Enacted in December of last year, the Tax Relief, Unemployment Insurance Reauthorization & Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. The law allows executors of the estates of decedents who died in 2010 to elect to have the rules of the estate tax not apply to the property of a decedent’s estate. This election is to be made at the time and in the manner prescribed by the Treasury Department.

Treasury and the IRS plan to issue future guidance that will provide a deadline for filing Form 8939 and for electing to have the estate tax rules not apply to the estates of persons who died in 2010. The prior deadline was April 18, which remains the deadline for filing a decedent’s final Form 1040 this filing season. The forthcoming guidance will also explain the manner in which an executor of an estate may elect to have the estate tax not apply.

A reasonable period of time for preparation and filing will be given between issuance of the guidance and the deadline for filing Form 8939 and for electing to have the estate tax rules not apply. The Form 8939 is not currently available, but will be made available soon after the guidance is issued. Both will be made available on IRS.gov.

Contact TR Moore & Company for more information or to discuss your specific estate tax concerns.

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