Proposed Changes to Electronic Payment System

The IRS has issued proposed regulations eliminating the paper deposit coupon system and replacing it with mandatory use of the Electronic Federal Tax Deposit System (EFTPS) begininng January 1, 2011.

EFTPS is currently required only for taxpayers whose deposits of certain taxes exceed $200,000 annually. The proposed regulations would require use of the EFTPS for depositing certain taxes, including withholding, FICA, FUTA, and corporate income and estimated taxes. Some businesses with minimal amounts of tax would not be subject to the EFTPS requirements and could still remit payments with the related tax return.

The proposed regulation is expected to be made final by the end of this year. The existing deposit requirements, thresholds, etc. would generally remain the same.

Small Business Jobs Act of 2010

On September 27, 2010 the President signed into law the Small Business Jobs Act of 2010. The act includes a few new incentives for both individuals and small businesses. We have outlined some of the more interesting provisions below:

Health Insurance Costs deductible in computing Self-employment Tax – Under prior law, health insurance premiums paid on behalf of a self-employed person and their family was deductible as an above-the-line deduction in computing taxable income, but was not allowed as a deduction against the self-employment tax. Under the new law, Individuals may now deduct the cost of health insurance premiums for themselves, their spouse, and their dependents up to age 26 as a trade or business expense for purposes of computing both income tax and the self-employment tax. There are still certain restrictions, such as the prohibition of the deduction for any month the taxpayer is eligible to participate in a subsidized health plan maintained by their spouse’s employer, and the limitation of the deduction to earned income for the year.

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Help your favorite local charities stay tax-exempt

You can help your favorite local charities or non-profit organizations by telling them about a new law that may affect their exemption from paying federal income taxes.

A few years ago, Congress passed a law requiring all tax-exempt organizations, even the smallest ones, to file an annual return with the Internal Revenue Service. Previsouly any organization with gross receipts less than $25,000 per year was exempt from any filing requirement. Any organization that does not file for three consecutive years automatically loses its federal tax exemption. Churches and some church-related organizations are among the few exceptions.

The first three-year deadline for filing those returns was May 17, 2010. While thousands of organizations did file, a significant number did not. Read more

Two New Hiring Incentives For Employers

Under the Hiring Incentives to Restore Employment (HIRE) Act, two new tax incentives have recently come into effect to help businesses hire new employees. The first incentive is the payroll tax exemption. Employers will not have to pay their 6.2% share of social security tax on wages paid to qualifyied employees from March 19, 2010 to December 31, 2010. A qualified employee is an individual hired after February 3, 2010 and before January 1, 2011 who was unemployed or employed for 40 hours or less during the 60 day period prior to their hire. The employee generally will not qualify for the credit if they are replacing another employee that was terminated without cause or if they are related to the employer. Read more

Health Care Coverage for Older Children

The Affordable Care Act passed in March of 2010 as part of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 has expanded the health insurance coverage available to older children. An older child is defined as the son, daughter, stepson, stepdaughter, legally adopted child or eligible foster child of the employee who is under the age of 27. The Affordable Care Act requires group health plans that provide dependent coverage of children to extend that coverage until the child reaches the age of 27. The child does not have to be a dependent for tax purposes to qualify for the extended coverage. Furthermore, health care coverage and reimbursements for medical care under an employer provided accident or health plan to an employee’s child who is under age 27 will not be taxable.