Nienow & Company, LLP News

Worker Classification Becoming Major Tax Administration Issue

Paul Nienow — Fri, 27 Jan 2012 02:20:37 +0000

Between the recent voluntary classification settlement program introduced by the Internal Revenue Service, a memorandum of understanding between the IRS and the Department of Labor to share employment tax data, and the president’s proposed economic growth plan, misclassification of workers and independent contractors has been receiving a lot of attention in Washington.

Additionally, as previously reported on our blog here, the State of California has enacted new reporting requirements as well as new fines and penalties for failure to comply.

Learn more about the latest issues related to worker classification issues in this Tax Advisor article.

Please Welcome Our New Staff

kallen112 — Wed, 25 Jan 2012 23:16:18 +0000

On January 9, Nienow & Tierney, LLP hired two new staff accountants to join our team!

Joanna Nguyen and Michael Davis both completed their MS in Accountancy in 2011 from Cal State University of Fullerton. Together they bring a diverse background of work experience and education to their new positions. They started just over two weeks ago, but have already proven to have excellent technical and analytic skills as well as a strong work ethic. We are excited that Nienow & Tierney, LLP is growing and that we have added such valuable members to our team.

Additionally, we have brought an intern on board to assist us through the busy tax season of 2012. Matthew Fortney is a student at Cal State University of Fullerton, working toward his BA in Finance. Matthew will be an integral part of our firm’s operations for the next several months.

Welcome Joanna, Michael and Matthew!

State of the Union Address Provides Insight Into President’s Income Tax Reform Agenda

Paul Nienow — Wed, 25 Jan 2012 16:37:39 +0000

President Barack Obama, in his State of the Union address, proposed a minimum 30% tax on income over $1 million. High earners would lose deductions for mortgage interest, health care, retirement and child care. There seems to be little chance of enactment of any of these provisions this year, given the amount of congressional gridlock we have seen this year.

In order to raise the tax rate of high income earners, instead of raising taxes on investment income, the Obama proposal would create a new 30% alternative minimum tax (AMT) for high earners. Interestingly, the AMT is often cited as the most complicated part of the Internal Revenue Code, and is the first target of reforms aimed to simplify” the tax code.

Obama also said he would increase scrutiny of Wall Street by setting up a Financial Crimes Unit in the Justice Department to investigate fraud.

IRS–Exempt Organization tool

Stephen Tierney — Wed, 25 Jan 2012 04:24:00 +0000

On Friday, the Internal Revenue Service launched a new online tool called Exempt Organization Select Check. This new resource is designed to help taxpayers gather more information regarding exempt organizations.

Individuals can now go to this online part of IRS.gov and search whether or not an entity is eligible to receive tax exempt donations. The taxpayer can also search and determine if the organization has lost their tax exempt status due to failure to file form 990 or the IRS postcard for 990N for the past three years. Finally, the taxpayer is also allowed to view all 990N postcard returns that have been filed by the selected entity.

For more information go to:

http://www.irs.gov/charities/article/0,,id=249767,00.html

Hear Stephen Tierney on the radio with Hugh Hewitt

Stephen Tierney — Mon, 23 Jan 2012 15:02:14 +0000

On Tuesday January 24th, at 5pm, our very own Stephen Tierney will be on the air with Hugh Hewitt to talk about the running charity he started called Up and Running Again.

Up and Running Again is a 501(c)(3) public charity that trains homeless and at-risk youths to run a half marathon. It is through the training runs and the half marathon race that these individuals gain the confidence they need to get jobs or go to college.

During the 5pm hour, Hugh will be featuring three entrepreneurs and Stephen was selected to be on one of the guests. Hugh Hewitt is a nationally syndicated radio host with over 1.5 million weekly listeners.

We are very excited to see one of our firm partners be presented with a chance to share how this organization is impacting the lives of the less fortunate.

If you have an opportunity tune into AM870 in Los Angeles or go online to www.hughhewitt.com to listen live over the internet.

New Forms for Cost of Goods Sold and Officer Compensation

Stephen Tierney — Mon, 23 Jan 2012 03:49:37 +0000

When filing their 2011 tax returns, businesses taxed as corporations or partnerships will notice two new forms attached to their returns. The IRS has moved the reporting of Cost of Goods Sold to a new Form 1125-A. Likewise the reporting of officers compensation will be moved to Form 1125-E. These forms will be attached to either corporate Form 1120 or partnership Form 1065.

$1,000 retained worker credit

Stephen Tierney — Fri, 20 Jan 2012 15:27:41 +0000

In 2010, Congress passed the HIRE Act which included a credit for businesses that hired unemployed workers. If the new employee had been out of work for 60 days prior to hiring, the business was allowed a “payroll tax holiday” on the Social Security tax for that eligible employee. This credit was available on wages paid from February 3, 2010 through December 31, 2010. The credit was claimed on the employers payroll tax returns.

Along with the “payroll tax holiday”, if the same worker is retained for 52 consecutive weeks, the employer is allowed a credit equal to the lesser of $1,000 or 6.2% of the workers wages. The employees wages in the second 26 weeks of employment need to be 80% of the first 26 weeks of employment.

Since the HIRE Act was passed in 2010, the first time the $1,000 credit would be available is on the 2011 business tax return, 52 weeks later. The credit will be claimed on Form 5884-B.

FUTA Surtax Changes

Melinda Mergelsberg — Mon, 09 Jan 2012 23:26:00 +0000

Due to California’s current budget woes, the state has not repaid money it borrowed from the federal government to pay unemployment benefits. The Department of Labor has determined California to be a “credit reduction state” for 2011. As such, employers that pay wages that are subject to the unemployment tax laws of a credit reduction state must pay additional federal unemployment tax.

FUTA tax is calculated on the first $7,000 paid in wages to each employee during a calendar year. On June 30, 2011 the 0.2% FUTA surtax expired. Therefore, the base FUTA rate for the first half of 2011 is 6.2% and 6.0% for the second half. In the past California has received a credit to offset the FUTA rate of 5.4%. This resulted in a net FUTA tax rate of .8% for California. Since the credit reduction applies to California in 2011, there is an additional 0.3% of FUTA taxes assessed. California employers will need to determine the base tax for pre-July 1st subject wages and one for post-June 30th subject wages on their Form 940 for 2011. California employers will also have to attach Form 940 (Schedule A), Multi-State Employer and Credit Reduction Information which calculates the amount of credit reduction.

In all likelihood, unless California pays back the $9 billion it owes before November 30, 2012, the credit reduction will be increased from 0.3% to 0.6%. This will result in a net FUTA tax rate of 1.2% for 2012 assuming that California does not repay the money borrowed to pay unemployment benefits. The entire amount of credit reduction is treated as incurred in the fourth quarter and is therefore not due in any of the first three quarters of the year. This is the case regardless of whether the state is in its first or subsequent years of credit reduction. Fourth quarter payments must be made by the due date of the return which is January 31st.

You can visit the Department of Labor’s website for additional information at http://workforcesecurity.doleta.gov/unemply/finance.asp.

House GOP Leaders Accept 2-Month Extension of Payroll Tax Cut

Paul Nienow — Fri, 23 Dec 2011 18:42:58 +0000

House Republicans have dropped their opposition to a Senate bill to extend a payroll-tax cut for two months. A House vote could come today. The tax would remain 4.2% of wages through Feb. 29.

Payroll Tax is Set to Rise as Congress Goes Home for Holidays

Paul Nienow — Wed, 21 Dec 2011 16:40:30 +0000

The federal payroll tax is set to increase in less than two weeks after Congress failed to reach a compromise to extend a tax cut. The House refused to pass a Senate bill to extend the cut for two months, continue unemployment benefits for the long-term unemployed and stop a reduction in Medicare payments to doctors.

All kinds of details can be found at these articles from

The Washington Post and the

Los Angeles Times