In an unusual move, the IRS recently issued Notice 2011-72 determining personal use of employer provided cell phones is not taxable to the employee. Additionally, no record-keeping of usage is required. This is in stark contrast to many other provisions of the Internal Revenue Code that have strict record-keeping and substantiation requirements. Read more
Earlier this year a foreign LLC lost an appeal before the California Board of Equalization because its sole member was a California resident and it was unable to prove that it did not conduct business within California (Appeal of Legend Plus Enterprises, LLC (February 22, 2011) Cal. St. Bd. of Equal. Case No 486026.) If you are a California resident and a member of an LLC formed in another state the LLC may be subject to the CA LLC annual tax even if there is no California source income. At first glance it may seem that the LLC is not subject to the tax since it is an out of state entity. However, the FTB presumes the entity is doing business in California if the LLC has a California member. It is up to the taxpayer to prove otherwise. Read more
The IRS has recently updated its audit technique guide for exams of independent consultants. With the explosive growth of the consulting industry over the past decade, especially here in Silicon Valley among tech companies, the IRS is now focusing its efforts more closely on these types of audits. Read more
Thinking of converting your traditional IRA to a Roth IRA?
One advantage of this downturn in the market may be to convert your traditional IRA to a Roth IRA. Remember that you only pay tax on the value at the date of conversion (less your after tax contributions).
Did you already convert your traditional IRA to a Roth IRA in 2010?
If so you may still change your mind until October 17, 2011, even if you already filed your 2010 tax return. If the value of your Roth IRA has decreased since the original conversion, you should consider reversing back to a traditional IRA. After waiting 30 days, you may again convert the presumably lower value to a Roth IRA.
The rules for Roth IRA conversions and reversals are complex. Please contact your LMGW advisor before taking any action.
The .2% Federal Unemployment Tax (FUTA) surtax expired on June 30, 2011 bringing the FUTA tax rate before state unemployment credits to 6%. FUTA is paid on the first $7,000 of wages paid per year per employee. Now that the surtax has expired employers will be required to separately track FUTA taxable wages before July 1, 2011 and after June 30, 2011 since the FUTA rate is different between the two periods.
The IRS will be revising Form 940, the Employer’s Annual Federal Unemployment Tax Return. There have also been talks in Congress about making the surtax permanent but so far no legislation has been passed.