Tax Planning in Today’s Economy. November 5, 2009 Sarah Anderson, CPA, MST Barbara Peña, CPA, MST, MAcc. Agenda. Hot Topics Business Tax Provisions Individual Tax Provisions Potential Future Tax Law Changes State Tax Considerations. Payroll Tax Audits to Begin.
November 5, 2009
Sarah Anderson, CPA, MST
Barbara Peña, CPA, MST, MAcc
Business Tax Provisions
Individual Tax Provisions
Potential Future Tax Law Changes
State Tax Considerations
The IRS expects to audit the payroll tax returns of 6,000 businesses over the next three years
Notices will start going out February 2010
All types of businesses will be scrutinized – S Corporations, Partnerships and Limited Liability Companies – in a wide variety of fields.
Agents will be on the lookout for employers that violate worker classification rules as well as the tax rules for executive pay and fringe benefits.
The IRS has been adding more bulk to its audit force. Expect more audit due to this added bulk.
Multiple Factor Test:
Example 1: If Mr. Seller, whose only location is in State A, sells TPP to Mr. Buyer, a resident of State B, and the transfer of that TPP takes place in State A, Seller is obligated to collect sales tax from Mr. Buyer and remit it to State A.
Example 2: If, instead, Mr. Seller ships the TPP to State B, via common carrier (UPS, FedEx, etc.), Mr. Seller is not obligated to collect sales tax from Mr. Buyer. Why? The transfer of TPP takes place in State B. Since Seller has no connection (or nexus) in State B, he has no obligation to collect and remit the sales tax to State B.
Example 3: Same facts as Example 2. Since Mr. Seller is not obligated to collect sales tax from Mr. Buyer, Mr. Buyer is off the hook, correct? Wrong. Since no sales tax was charged to Mr. Buyer, Mr. Buyer is obligated to charge himself use tax.
New COBRA rules
Individual Taxpayer Provisions
2009 & 2010 distributions from §529 plans will be tax-free when used to pay for computers and computer technology, including internet access.
Contributions to §529 are considered gifts for gift tax purposes
Can give up to $13,000 ($26,000 MFJ) per recipient in gifts tax free in 2009
Special gift tax rule allows a $65,000 contribution ($130,000 MFJ) in 2009. However, then you are unable to make tax-free gifts to the recipient for the next 5 years. ($13,000 x 5 = $65,000)
2010 Roth Conversion tax spread out over 2 years, 2011 & 2012
No income limitation for 2010
Top tax bracket filers may want to pay all of the tax in 2010 because the top rate will likely go from 35% to 39.6% after 2010
Facts and circumstances test whether it is right for you.
Note: No required retirement plan distributions for 2009 for individuals age 70½ and older.
40% nondeductible excise tax would be levied on health coverage in excess of $8,000 for single ($21,000 for family) coverage, effective for tax years beginning after 2012
Employers would be required to report the value of health benefits on employees’ W-2s, effective for tax years beginning after 2009
The definition of medical expenses deductible as a medical expense would generally be conformed to the definition for purposes of the itemized deduction for medical expenses (for purposes of employer provided health coverage, HRAs, FSAs, HSAs, and MSAs)
Penalty for nonqualified HSA distributions would be increased from 10% to 20% (effective for disbursements made during tax years beginning after 2010)
Allowable contributions to health FSAs in cafeteria plans would be capped at $2,500 (effective for tax years beginning after 2010)
The floor beneath itemized deductions would be raised from 7.5% of adjusted gross income (AGI) to 10% (effective for tax years beginning after 2012)
The deduction for expenses allocable to Medicare Part D subsidy would be eliminated (effective for tax years beginning after 2010)
1) Employers required to withhold NY state income tax from employee wages and whose payroll expense exceeds $2,500 in any calendar quarter
2) Individuals with net earnings from SE allocated to the MCTD that exceed $10,000 for the tax year. Includes partners in partnerships and members of a LLC treated as a partnership
Individual Tax Increases
Barbara Peña, CPA, MST, MAccAmper, Politziner & Mattia 750 Route 202 South Suite 500 Bridgewater, NJ 08807 Phone: 908.218.5002 X2337 Fax: 908.218.5009
“The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.”
Sarah Anderson, CPA, MST Amper, Politziner & Mattia 750 Route 202 South Suite 500 Bridgewater, NJ 08807 Phone:908.218.5002 X2235 Fax: 908.218.5009