In an attempt to reduce the volume of paper involved in audits, the IRS has been seeking electronic records as a more efficient auditing procedure.  This is also in line with what practitioners wanted: less paperwork involved in the audit process.  However, the concern remains as to how in depth an audit of electronic data will go before the efficiency of it is outweighed by the invasiveness of the records.  It is clear the IRS has legal authority to use electronic records in their audit.  Upon request, a taxpayer must provide electronic records and, if an attempt is made to withhold them, the IRS can disallow all the unsubstantiated items in the audit.  Read More »

The Work Opportunity Credit (WOTC) has been expanded to provide employers with new incentives to hire certain unemployed veterans. The tax credit allows employers to reduce their federal tax liability by up to $9,000 per new hire.   The tax credit is dependent upon the target group.

On November 21, 2011, the President signed into law the VOW to Hire Heroes Act of 2011.  This new law provides an expanded work opportunity tax credit to businesses that hire eligible unemployed veterans and for the first time also makes part of the credit available to tax-exempt organizations.  Businesses claim the credit as part of the general business credit and tax-exempt organizations claim it against their payroll tax liability.  The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013. Read More »

When drawing up a buyout clause it is critical to specify, in no uncertain terms, the value to be applied to an owner’s share. The case of the Estate of Cohen v. Booth Computers, July 13, 2011, is a good illustration of what can happen when the terms of a buy-sell agreement are not updated to reflect the current value of a company. 

Claudia Cohen and her brother James were partners of Booth Computers, a family partnership set up by their father. A buyout provision was included in the partnership agreement, stating that upon the death of one of the partners the remaining partners could buy back the share at book value plus $50,000.  One of the assets owned by the partnership was an oceanfront estate in Palm Beach Florida that had increased in value from its original cost of $760,000 in 1976 to $45 million in 2007.  The partnership paid Claudia’s estate just over $177,800 based on the “net book value” of the 50% interest as shown on the most recent balance sheet.  Read More »

President Obama signed the Temporary Payroll Tax Cut Continuation Act of 2011 on December 23, 2011.  To give Congress more time to negotiate, the 2% reduction in employee paid Social Security tax from 6.2% to 4.2% is temporarily extended through February of 2012. The employer portion remains at 6.2%.

The IRS has offered some guidance since this extension gives little time for employers and payroll companies to adjust their processes.  The IRS says they should implement the continued lower tax rate as soon as possible in 2012, no later than January 31, 2012, and if they overwithhold during January that they should offset it in worker’s pay as soon as possible, no later than March 31, 2012. Read More »

The IRS has announced that the IRS electronic filing system for Forms 990, 990-EZ,  990-PF and  1120-POL will not be available from January 1 to February 29, 2012 due to systems and programming changes.  Because of this, the IRS is granting an extension of time to file the affected returns to March 30, 2012.   This extension is automatic, so affected organizations do not need to file an Application for Extension (Form 8868).  Affected organizations are any organizations whose return is due between January 1 and March 1, 2012, specifically:

• August 31, 2011 year-ends whose original due date is January 15, 2012
• September 30, 2011 year-ends whose original due date is February 15, 2012
• February 28, 2011 and May 31, 2011 year-ends  with extended due date of January 15, 2012 
• March 31, 2011 and June 30, 2011 year-ends  with extended due date of February 15, 2012 Read More »

Beginning January 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rates for business and charitable miles are unchanged from the mid-year adjustment that became effective on July 1, 2011.

The medical and moving rates have been reduced by 0.5 cents per mile.

New for 2013, some taxpayers will be subject to a 3.8% Medicare Tax due to the Health Care and Education Reconciliation Act of 2010. 

You could be subject to the Medicare Tax if your Modified Adjusted Gross Income (MAGI) is greater than $200,000 ($250,000 for couples).  For most people, their MAGI will be the same as their AGI, unless they are U.S. citizens living abroad and have foreign earned income. Read More »

Minnesota has adopted all of the changes to the Internal Revenue Code (IRC) enacted between March 18, 2010, and April 14, 2011, effective the same date as the federal changes.

As a result:

The value of health insurance benefits provided to employees’ nondependent children younger than age 27 is also exempt for Minnesota tax purposes. (While legislation signed into law in April 2011 conformed Minnesota treatment of these benefits to federal law for 2010 only, this new law covers any benefits provided in 2011 and all future years.)

• The maximum exclusion for employer-provided adoption assistance is the same for both federal and Minnesota tax purposes.
• The exclusion from income of an employee for amounts paid or expenses incurred (up to $5,250 annually) by the employer under an educational assistance program is extended through 2011 and 2012.
• For benefits paid in 2011, employers can provide the same amount of tax-free fringe benefit to their employees for qualified transportation fringe benefits that the employer provides through transit passes and vanpooling.

“What does it take to receive good grades for communicating with employees?”

This is perhaps the most common question heard from consulting clients. It’s a question that tests the patience of leaders in companies large and small and across industries.  Frustrated by feedback that they don’t communicate well, leaders and management teams are searching to understand “what employees really want when they ask for communication?” 

The answer lies in understanding communication as an ongoing process rather than an activity, a task or even a skill.  We encounter communicators at every point along the spectrum.   Read More »

It’s general knowledge that the world economy has suffered through a prolonged financial crisis.  Recently, the European Union financial saga has been playing out like a drama starring Merkozy (German Chancellor, Angela Merkel and French President, Nicolas Sarkozy).   While interesting from a historic and economic perspective, the negative impact on multi-national companies could be significant if they have not planned for the consequences of a possible prolonged euro crisis or worse, defections of one or more member countries from the European Union.  Companies doing business in euro countries or with contracts negotiated in euros should evaluate the need to take action to reduce their economic risk including volatile exchange rates, commercial relationships, institutional counterparty risk and impact on U.S. financial markets. Read More »