Tax Talk

Some of our employees started or stopped contributing to our SIMPLE IRA plan in the middle of the year. Are we required to make our 3% match based on the employees’ compensation for the entire calendar year or only the compensation earned during the period they actually contributed to the plan?

You must base your SIMPLE IRA plan employer matching contribution on an employee’s entire calendar-year compensation, regardless of when the employee starts or stops contributing during the year.

Examples:

Bob’s annual salary is $50,000 and he starts contributing to his employer’s SIMPLE IRA plan on September 1. He contributes $1,536 through December 31. Bob’s employer must match Bob’s contributions up to 3% of Bob’s calendar-year compensation, or $1,500 (3% of $50,000). It doesn’t
matter that Bob only contributed to the plan during the last 4 months of the calendar year.
John, age 56, earns $60,000 a year. He made the maximum salary reduction contribution for 2011 of $14,000 ($11,500 plus $2,500 catch-up contributions) to his employer’s SIMPLE IRA plan from January 1 to September 30. John’s employer is required to match John’s contribution up to
3% of his entire calendar-year compensation or $1,800 (3% of $60,000), even though John stopped contributing to the plan on September 30.
Joe’s annual salary is $70,000 and he contributed 1% of his compensation, or $700, to his employer’s SIMPLE IRA plan. Joe’s employer must make a matching contribution of $700 because the employer is only required to match the amount Joe actually contributes during the year up to
a maximum of 3% of his calendar-year compensation.

An employer can make matching contributions to an employee’s SIMPLE IRA:

on a per-pay-period basis, or
by the due date of the employer’s tax return (including extensions).

from: Retirement New for Employers, IRS, Winter 2012

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.

Here’s a free app from the IRS for all you Millennials, Generation Xers, and even a few of us Boomers, IRS2Go. Like doing your own research? Feel free. And when you’re in information overload, give us a call, e-mail us, or even text. Here’s what the IRS has to say about its social media products:

Federal Tax Information Aplenty through Social Media

Using the latest technologies, the IRS offers multiple avenues for you to get tax information. If you have a smartphone, we have an app! If you like to watch videos from your phone or computer, we have dozens of helpful YouTube videos…and, of course, follow us on Twitter.

Check out how the IRS delivers the latest tax information, initiatives, products and services through social media.

1. IRS2Go The IRS recently launched a smartphone application that allows you interact with the IRS using your mobile device. Our app can help you get your refund status and tax updates. IRS2Go is available for the iPhone or iTouch and the Android.

[To Download the free IRS2Go App, for Apple iPhone or iTouch visit the iTunes app store. For an Android device, visit the Android Marketplace.]

2. YouTube The IRS offers short, informative videos on an assortment of tax-related topics through our YouTube Video channel. The videos are offered in English, American Sign Language and a variety of foreign languages.

3. Twitter IRS tweets include tax-related announcements, news for tax professionals and updates for job seekers. Follow us @IRSnews.

4. Audio files for podcasts These short audio recordings provide useful information on one tax-related topic per podcast. They are available on iTunes or through the Multimedia Center on IRS.gov (along with their transcripts).

5. Widgets These tools, which can be placed on websites, blogs or social media networks, direct others to IRS.gov for information. The widgets feature the latest tax initiatives and programs and can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.

6. RSS Really Simple Syndication, or RSS, is an easy way to gather a wide variety of content in one place on your computer. The IRS now offers RSS feeds. RSS, is an easy way to get the news you want whenever it is updated, even if you are not on our website.

Keep in mind that the IRS uses these tools to share information with you. Do not post any confidential information on new or social media sites, especially your Social Security number. The IRS will not be able to answer personal tax or account questions through any of these services.

To find links to all of IRS’s social media tools, visit www.irs.gov and click on “Social Media.”

posted: 1-21-2012

Larger employers (50+ employees) will soon be required to provide health insurance. To retain good employees, smaller employers are looking at their options. Here’s a flyer you’ll want to read:

Here's an IRS Flyer You'll Want to Read

Also see our post “What is the difference between an income tax deduction and a tax credit?”

CAUTION to small business: You might be subjected to needless audits if you don’t note this. Please read on:

Beginning with the 2011 tax year, the IRS requires businesses to exclude from Form 1099-MISC any payments they made by credit card, debit card, gift card, or third-party payment network such as PayPal. (These payments are being reported by the card issuers and third-party payment networks on Form 1099-K.) However, this requirement is not well known and many small businesses could issue 1099-MISC with errors.

Therefore, if you are a small business and you RECEIVE a 1099-MISC from another business which includes payments made to YOU with a credit card, debit card, gift card, or third-party payment network such as PayPal, these payments will be have been reported to the IRS twice. THEREFORE, the IRS will expect you to report the payments in income twice. You will be subjected to an audit and will have to provide evidence that you only received the payment once.

An IRS audit can be costly in terms of accounting fees, clerical costs and lost man hours. TO PREVENT THIS LOSS, check every 1099-MISC that your business receives to insure that it does not include payments made to your company by credit card, debit card, etc. In other words, generally, only payments made by check or cash should be included on the 1099-MISC.

Please contact us if you have questions about this or you believe this might affect you.

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent this communication addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under
the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.

Question: I often see you use the phrase: Open 23/7/365. Shouldn’t that be 24/7/365?

Answer: No, that is not a typo. I use that phrase in honor of my dad.

My dad, Boyd Collett, spent well over a decade of his life under ground in the coal mines. In the late 1950’s he started his own taxicab company, OK Cab, in Pineville, Bell County, KY, which he owned and ran for over 30 years. His business cards always read, “Open 23 hours a day.” I remember, when I was a child, my dad seemed to always be working. He would go out to help those who needed to be transported any time, day or night. He lost a lot of sleep, missed many Christmas dinners, but would never leave someone stranded. Later on I asked him, “Dad, your cards said ’23 hours a day’. What hour were you closed?” To which he replied, “That’s exactly it, I got to choose the hour.”

My dad was not a highly educated man. He worked hard in jobs that no one expected to make a lot of money. But he taught me, by example, to work hard, whether it was while studying to get my education, for my bosses as an employee, or for my many clients today. I am proud to say, “We are open 23/7/365.”

Thanks, dad.

Here are some pertinent tips to make tax time easier without losing any of your refund.*

Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

Have a question? [Write them down. Call for a pre-tax preparation appointment. We are glad to answer many short tax questions right over the phone.]

IRS e-file IRS e-file is the safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers – 106 million people – used IRS e-file. [Conover & Conover, CPAs, PSC, has been an Authorized e-file provider since 1992.] If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.

Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. [Of course, you won’t have to worry about math calculations if we prepare your return.] Don’t panic! If you run into a problem, remember the IRS is here to help. [And most importantly, so are we! Conover & Conover, CPAs, PSC can be contacted 23/7/365.]

*[Bracketed, italicized comments are mine].

Welcome to Tax Talk. We are still under construction, but check back here often for important tax updates, tips, and news.

CIRCULAR 230 DISCLOSURE: To ensure compliance with the requirements imposed by the IRS, we inform you that, to the extent any communication in this blog [Tax Talk] addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties imposed under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein. Likewise, nothing herein is intended to convey an expression of an opinion as to the likelihood a tax position would ultimately prevail if challenged by the IRS.

S.I.M.P.L.E. news~For the employer match, what is compensation?

An app for you!

Small Business Health Care Credit

Protect your small business from needless audit

Open 23/7/365: In honor of my dad

Tax-Time Tips from the IRS

Here are some pertinent tips to make tax time easier without losing any of your refund.*

Welcome