Tax Tip of the Day

“When will the new 1099-B reporting requirements that require that brokerage and financial institutions include the cost as well as the proceeds from a stock transaction become mandatory?” The new reporting requirement will take effect in 2011 for stocks purchased in 2011, then in 2012, mutual funds and fixed income securities will be included in the reporting requirement. Comment: Over time, the requirement to report cost basis, will increase CPA job security, as the CPA will keep up with the basis of assets to be sold. With the complex issues of computing and tracking basis and tracking the basis, it could extend over generations, if asset are held that long.

Tax Topic of Today

“What is the small business tax credit designed to help me pay for employee health insurance premiums in 2010?” The credit is available for employers with 10 or fewer employees, with average wages of $25,000 or less, and is calculated by formula, also excludes owners. You must pay 50% or more of the employee health coverage to take the credit! The credit is equal to 35% of the amount paid. For employers with greater than 10 but less than 25 equivalent full time employees, partial credits apply. Comment: I calculated the payment for our company, and it did not apply due to wage limitations.

Tax Topic of the Day

“When will the current individual tax rates expire, and what will the new rates be?” Unless Congress changes the tax rate groupings, rates will revert back to their 2000 rate structure in 2011. Expect to pay 3 to 5% more per tax bracket, using the graduated tax rate schedules of 15, 28, 31, 36, and 39.6%. Comment: Multiply your taxable income by 5% and that will give you a rule of thumb of what your increase will be. For instance, if a husband and wife have taxable income of $200,000 multiply by 5%, you will now pay an additional $10,000.

1099s for Goods and Services

When will the new IRS reporting that requirement for 1099s miscellaneous for goods and services be required for payments over $600? 2012 is the magic year, unless Congress changes its mind. There is alot of flak in the marketplace over this one. An example I read: obtaining a federal identification number from the local starbucks outlet if your company buys more than $600 of coffee and breakfast pastries by sending over the boy Friday to pick up each morning for the working staff. We are suggesting to our clients that they start obtaining W-9 forms (request for taxpayer ID number) from anyone they pay a check to in 2011, so they will be ready for 2012. Can you imagine preparing a tax return with all the 1099’s to be reconciled and listed as gross income on a corporate or partnership tax return? This will be a job security for CPA’s.

Employer-provided Health Coverage

Employer-provided Health Coverage: According to information posted to the IRS website at www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6, starting in calendar-year 2011 , the Affordable Care Act requires employers to report the value of the health insurance coverage provided to employees on each employee's Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect the employee's tax liability, since the value of the employer contribution to health coverage continues to be excludible from an employee's income.