The Colorado Springs Business Journal brought back their “Best Businesses of Colorado Springs” contest. Please vote for BiggsKofford! Vote here: http://copubco.secondstreetapp.com/Colorado-Publishing-Co-Voters-Choice
Here are a few other of our trusted clients or friends we’d like to encourage you to vote for!
- Best Bean Counters: BiggsKofford
- Best Place to Get Your Spin on: SANDIA
- Best Place to Learn From Books and Professors: UCCS
- Best Logo Slinger: Allegra
- Best Place to Call When your Computer Crashes: Amnet
- Best Place to Go When the Garage Sale Doesn’t Work: Blue Star Recyclers
(AccountingToday) The Senate has approved legislation requiring online retailers to collect sales taxes from Internet sales, even if they don’t have a physical presence in the state where the customer resides.
The Marketplace Fairness Act has attracted wide support from brick-and-mortar retailers who have seen shoppers coming to their stores to check out merchandise, only to order it online, sometimes while still in the store from their smartphones. Many revenue-starved state governments have also supported the bill. The legislation even garnered the support of e-commerce giant Amazon.com, which has traditionally fought against online sales taxation, but has been expanding its warehouse presence across the country.
Smaller Web retailers have opposed the legislation, however, arguing that it would be too difficult to calculate and collect sales taxes from every state and locality that requires them. They have been supported by eBay, which argued that the exemption level of $1 million in sales for small e-tailers is too low. The bill is also expected to face opposition from many lawmakers in the House, where the prospects for its passage are uncertain. The Senate had approved the bill in nonbinding votes in recent months and was widely expected to eventually pass the legislation.
The bill authorizes each member state under the Streamlined Sales and Use Tax Agreement, the multistate agreement for the administration and collection of sales and use taxes adopted on Nov. 12, 2002, to require all sellers not qualifying for a small-seller exception (which is applicable to sellers with annual gross receipts in total U.S. remote sales not exceeding $1 million) to collect and remit sales and use taxes with respect to remote sales under provisions of the agreement, but only if the agreement includes minimum simplification requirements relating to the administration of the tax, audits, and streamlined filing.
The bill now heads to the House. The effort received a boost last week when former Vice Presidential candidate and House Budget Chairman Paul Ryan, R-Wis., spoke in favor of the concept of ending special tax treatment for online-only retailers.
(www.payrollcity.com) The I-9 form is a document that employers must keep on file to verify the identity of each new employee (both citizen & non-citizen). Employees fill this form out once, at the time they are hired (but not before accepting a job offer) along with providing the required identification. Employers must use the new I-9 form for all employees hired on or after May 7th, 2013. The new Form I-9 is available on the USCIS website at www.uscis.gov/i-9.
1. The differences between the old and new I-9 forms
It’s important to understand the differences between the two forms, so you can easily recognize whether or not you have the correct one on file. The new I-9 form is much more modern and user-friendly, and employers need not be afraid to use it. It was designed to eliminate some of the confusion from the old I-9 form. Now 2 pages long (plus 6 pages of instruction and 1 page of acceptable documents), the new I-9 form allows employees to provide additional information such as email addresses and telephone numbers. While some of these fields are optional, this is not expressly mentioned on the form itself, only in the instructions. Additionally, the new form no longer permits PO Boxes to be used as addresses. Much of the form has been re-formatted for simplicity, readability, and added clarification.
2. Existing employees should NOT fill out the new I-9.
You should not re-verify employment for existing employees unless you have a valid reason to question the authenticity of the original documents provided at time of hire. Doing so could be construed as discriminatory, and should be avoided.
3. Know what forms you should keep on file
All employers are required to keep a copy of the I-9 form and Federal W-4 form. Check with your state to see if there are additional requirements. For example: many states have an additional W-4 form, and some states, like Colorado, have a Verification Form. If an employee does not fill out a state W-4 form, make sure that the state allowances always match their federal allowances for payroll.
4. Understand the consequences of non-compliance!
In addition to fines as much as $1,100 per form, employers may be subject to criminal liability in some circumstances, as well. I-9 audits are on the rise, and even though 100% of your workforce may be legally allowed to work, you can still incur hefty fines simply by not maintaining valid records.
5. Make a To-Do List
In addition to downloading a copy of the new I-9 form, and carefully reviewing its instructions, you may wish to provide training to all employees and managers involved in administering the new I-9 form. Take care to take “smart steps” with regard to its implementation – especially if you do so prior to May 7th. You may wish to note any questions you have and consult with legal counsel where appropriate.
If you have any questions about how this change will affect your business, call BiggsKofford at (719) 579-9090.
Financial Markets Update: Plan and Manage Your Personal Wealth
A Panel Discussion Led by Chris Blees, with panelists including:
Brandon Brown, Senior Resident Director & Wealth Management Advisor, Merrill Lynch
Brian Colvert, Financial and Portfolio Manager, UBS Financial Services
Bud Rainsberger, President, Rainsberger Wealth Advisors
The Alliance of Mergers & Acquisition Advisors (AM&AA) just came out with deal stats from the last half of 2012. To check out the most up-to-date M&A activity, check out their survey results here.
Local Commercial and Residential Real Estate Markets Update
Brian Bahr, Founder of Challenger Homes
Peter Scoville, Principal at Cushman & Wakefield
Fred Veitch, Vice President of Nor’Wood Development
(Thompson Reuters) The IRS has issued its annual data book, which provides statistical data on its fiscal year 2012 activities. As this article explains, the data book provides valuable information about how many tax returns IRS examines (audits) and what categories of returns IRS is focusing resources on, as well as data on other enforcement activities such as collections. The figures and percentages in this article compare returns filed in calendar year 2011 and audited in FY 2012 to returns filed in calendar year 2010 and audited in FY 2011.
What are the chances of being audited?
Of the 143,399,737 individual tax returns filed in calendar year 2011, 1,481,966 were audited. This works out to roughly 1.0%, down slightly from 1.1% the previous year. Of the total number of individual income tax returns audited in FY 2012, 487,408 (32.9%) were for returns with an earned income tax credit (EITC) claim, a slight increase from the 483,574 (30.9%) of all audited returns for FY 2011.Only 24.3% of the individual audits were conducted by revenue agents, tax compliance officers, tax examiners and revenue officer examiners. That’s slightly down than the 25% figure for the previous year. The 75.7% balance of the audits were correspondence audits, slightly up from 75% for the previous year.
Following are selected audit rates for individuals not claiming the EITC:
- For business returns other than farm returns showing total gross receipts of $100,000 to $200,000, 3.6% of returns were audited in FY 2012, down from 4.3% in FY 2011.
- For business returns other than farm returns showing total gross receipts of $200,000 or more, 3.4% of returns were audited in FY 2012, a decrease from 3.8% in FY 2011.
- Of the returns showing farm (Schedule F) income, .5% were audited in FY 2012 versus .6% in FY 2011.
- For returns showing total positive income of $200,000 to $1 million, 2.8% of returns not showing business activity were audited, and 3.7% of returns showing business activity were audited. The audit rates for such returns were 3.2% and 3.6%, respectively, for the previous year.
- For FY 2012, the audit rate for returns with total positive income of $1 million or more was 12.1%, slightly down from the 12.5% rate for FY 2011.
Not surprisingly, examination coverage increased for higher income earners. For example, the percentage was 0.85% for those returns with adjusted gross income (AGI) between $100,000 and $200,000 (down from 1% for FY 2011), and 1.96% for those with $200,000 to $500,000 of AGI (down from 2.66% for FY 2011). Exam coverage increased to 8.9% for those with at least $1 million but less than $5 million of AGI (down from 11.8% for FY 2011). Similarly, coverage increased for those with at least $5 million but less than $10 million of AGI, as well as for those with AGI of $10 million or more.
Select audit rates for business returns were as follows:
- For all corporate returns other than Form 1120S, 1.5%, same as the year before.
- For small corporations with balance sheet returns showing total assets of: $250,000 to $1 million, 1.7%; $1-$5 million, 2.1%; and $5-10 million, 2.6%. For FY 2011, the percentages were, respectively, 1.6%, 1.9%; and 2.6%.
- For large corporations with returns showing total assets of $10 million or more, the overall audit rate was 17.8%, up slightly from 17.6% for FY 2011. The audit rate for these corporations increased with the size of the entity. For example, the audit rates were 10.5% for those with total assets of $10-$50 million (down from 13.4% for FY 2011); 22.7% for those with $250-$500 million (up from 17.4% for FY 2011); 45.4% for those with $5-20 billion (down from 50.5% for FY 2011), and 93% for those with $20 billion or more (down from 95.6% for FY 2011).
- For partnership and S corporation returns, the audit rate was 0.5%, as compared to 0.4% for the year before.
- IRS’s activity on other fronts.
Here’s a roundup of some of the other valuable information carried in the new IRS Data Book.
Number of returns filed.
The number of partnership returns filed (Form 1065) increased by 1.5%, and the number of S corporation returns (Form 1120S) grew by .8%. The number of C or other corporation (e.g., REMIC, REIT, RIC) returns dropped by 2.2%.The number of individual income tax returns (e.g., Forms 1040, 1040A, 1040EZ) increased by 1.8%, reflecting the second consecutive increase (likely due to improvement in economic activity) after the 2% drop exhibited in FY 2010 and the 6.7% drop shown in FY 2009.
The number of estate tax returns filed in FY 2012 increased by 145.5%, following last year’s 62.1% plunge (which was attributable to the temporary repeal of the tax for deaths in calendar year 2010 before being reinstated retroactively with a $5-million exemption as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010).
Math errors on individual returns.
IRS sent out roughly 2.7 million math error notices relating to the 2011 return.Of the total math error notices, 23.9% were for tax calculation/other taxes (which includes errors related to self-employment tax, alternative minimum tax, and household employment tax), 15.3% related to exemption number/amount, 13.4% related to the EITC, 10.6% related to the standard/itemized deduction(s), 5.3% related to the child tax credit, and 5.2% related to the first-time homebuyer credit.
In FY 2012, IRS assessed 28.5 million civil penalties against individual taxpayers, slightly down from 28.75 million assessed in the previous year. Of the FY 2012 assessments, the “top three” penalties in percentage terms were 60.2% for failure to pay, 24.8% for underpayment of estimated tax, and 11.5% for delinquency. On the business side, there were a total of 995,533 civil penalty assessments (down from 1,080,027 for the year before), and the “top three” penalties in percentage terms were 51.4% for delinquency, 25.8% for failure to pay, and 20% for estimated tax.
In FY 2012, 64,000 offers-in-compromise were received by IRS (versus 59,000 for FY 2011), and 24,000 were accepted (up from 20,000 for the year before).
IRS initiated 5,125 criminal investigations in FY 2012. There were 3,701 referrals for prosecution and 2,634 convictions. Of those sentenced, 81.5% were incarcerated (a term that includes imprisonment, home confinement, electronic monitoring, or a combination thereof). By way of comparison, in FY 2011, IRS initiated 4,720 criminal investigations, there were 3,410 referrals for prosecution, and there were 2,350 convictions. Of those sentenced, 81.7% were incarcerated.
If you have any questions about this, please contact Gregory L. Gandy, CPA, Deborah Helton, CPA, or Michael E. McDevitt, CPA, for more information.
A few of our physician clients have received large refunds of their student FICA taxes paid while a medical resident.
Medical residents of hospitals and universities that were paid wages from 2002 – April 1, 2005 may be eligible for a refund of the FICA tax paid on their wages during the time of residency under the student FICA exception. If you were a medical resident during this time period you should contact your former employer (hospital or university) to see if it filed a FICA refund claim. If it did file a claim, you can register for your portion of the refund with the employer; the resident won’t hear directly from IRS.
This is a very specific window for the refund and action must have been taken by the hospital or university to claim the funds, but worth the inquiry. Unfortunately, the IRS has since changed the rules to state that medical residents working no longer qualify for this exclusion. Current medical students will not qualify for the exclusion.
If you have questions about your student FICA refund claim, please contact Deborah Helton, CPA.
The Internal Revenue Service said last week that it was expanding its Voluntary Classification Settlement Program (VCSP). The reasoning for this expansion is to give more businesses the opportunity to reclassify workers as employees, as opposed to independent contractors, for future tax periods, offering them relief from their past payroll tax obligations.
The IRS is modifying several eligibility requirements, making it possible for many more interested employers, especially larger ones, to apply for the program. Applying for this program gives a partial relief from federal payroll taxes for eligible employers who are treating their workers or a class or group of workers as independent contractors or other nonemployees and now want to treat them as employees.
To be eligible for the VCSP, an employer must currently be treating the workers as nonemployees; consistently have treated the workers in the past as nonemployees, including having filed any required Forms 1099; and not currently be under audit on payroll tax issues by the IRS. In addition, the employer cannot currently be under audit by the Department of Labor or a state agency concerning the classification of these workers or contesting the classification of the workers in court. Normally, employers are barred from the VCSP if they failed to file required Forms 1099 with respect to workers they are seeking to reclassify for the past three years. However, for the next few months, until June 30, 2013, the IRS is waiving this eligibility requirement.