Estate and GST taxes—Where We Are and Where We’re Headed if Congress Doesn’t Act

Estate and generation-skipping transfer (GST) taxes have been repealed for 2010 but are scheduled to return in 2011. Next year’s rules, however, won’t be those that applied during 2009 when these taxes were last in effect. Rather, unless Congress acts, rules from 2001 will apply for next year. This Practice Alert explains what repeal means, what old rules are scheduled to return in 2011, and relevant concerns and planning considerations both for this year and next year.

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No more Paper Coupons for business after 12/31/10

As of January 1, 2011 business taxpayers will no longer be allowed to use a paper coupon (IRS Form 8109 – Federal Tax Deposit Coupon) to deposit federal taxes directly to an authorized bank. You will now be required to make deposits by telephone or online using the Electronic Federal Tax Payment System (EFTPS). Because the process for enrolling in EFTPS can take several weeks and involves multiple steps, we highly suggest you enroll right away if you have not already done so. Enrollment can be done via the web at www.eftps.gov or by completing Form 9779 EFTPS Business Enrollment Form.

Enrollment can take about 10-15 business days for online enrollment and up to 10 weeks for paper enrollment, so sign up today!

If you have any questions or would like any assistance with the enrollment process, please contact us.

2011 Standard Mileage Rates

The IRS released Rev. Proc. 2010-51 and announced that beginning January 1, 2011, the following standard mileage rates will apply:

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

These rates apply to the use of cars, vans, pickups, or panel trucks. California conforms to these amounts. (R&TC §17024.5)

W-2 Health Care Coverage Reporting Requirement

The IRS has released notice 2010-69 making the health care coverage W-2 reporting requirement optional for 2011. Before the notice was issued, employers were required to report the applicable cost of employer provided coverage on the 2011 Form W-2 under the Patient Protection and Affordable Care Act of 2010, enacted March 23, 2010. This reporting will no longer be mandatory for 2011, allowing employers additional time to implement changes to their payroll systems in order to track the reportable costs. Further guidance from the IRS as to when the reporting requirement will be put into effect is expected before the end of this year. In the meantime, the IRS has released a draft version of the 2011 W-2, which includes the codes employers will use to report the coverage costs. Click here to view the 2011 draft W-2.

Nonprofits are Eligible for Tax Credits Under the Health Care Bill

 The Internal Revenue Service has posted information on how tax-exempt organizations can claim the Small Business Health Care Tax Credit.

 In a recently updated Frequently Asked Questions page about the tax credit, the IRS stated that a tax-exempt employer as described in Section 501(c) of the Tax Code that is exempt from tax under Section 501(a) can claim the refundable credit by filing a Form 990-T with an attached Form 8941 showing the calculation of the claimed credit.

 The tax credit, provided as part of the health care reform bill, is designed to encourage small employers to offer health care coverage.  Qualifying employers must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate, must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible), and must pay average annual wages below $50,000. Both taxable (for profit) and tax-exempt entities qualify.

 The credit is worth up to 35 percent of a small business’ premium costs in 2010 or 25 percent of a tax-exempt organization’s. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).

 The credit phases out gradually for entities with average wages between $25,000 and $50,000 and for entities with the equivalent of between 10 and 25 full-time workers.

 For more information on the Small Business Health Care Credit and FAQs, visit IRS.gov.  Please contact LMGW for any questions or assistance with claiming this tax credit.