Let’s take a look at who should receive a 1099 and what penalties there may be for not filing them in a timely fashion.  The Internal Revenue service wants the 1099’s filed so income does not fly under the radar and is reported on the recipients income tax return.

Who, related to payments made by your business, is required to receive a 1099?

• Persons receiving $600.00 or more for services
• Persons receiving $600.00 or more for rent
• Attorneys receiving $600.00 in legal fees.  This applies to both individuals and legal firms.

You will need to have the person or entities name, address and social security/ federal ID number to correctly record payments made to them.  Therefore, once you have someone work at your company you should get that information up front.  The last thing you want is to have you or your staff playing private detective to try and hunt someone down come the end of the year.

The 1099’s are supposed to be in the recipient’s hands by January 31 similar to a W-2.  The due date to get the 1099’s to the Internal Revenue Service is February 28.  If you don’t file the 1099’s by the due date and cannot show reasonable cause you may be subject to a penalty.  The amount of the penalty depends on when you file the correct 1099.

• $30 per 1099 if you file within 30 days of the February 28 deadline penalty
• $60 per 1099 if you file more than 30 days late and before August 1
• $100 per 1099 if  you file after August 1 or do not file the required returns

Don’t let the filing of 1099’s become an administrative headache for you. With a little upfront information gathering you can get out the necessary forms and avoid those nasty penalties.  Also, make sure that you are clear on the difference between an employee and an independent contractor.  Glass Jacobson’s seasoned tax team can help.  As your year-round tax advisor, we help guide you through employment and payroll tax issues.

Questions?

larry.goldberg@glassjacobson.com

Most of the mileage rates for 2012 are the same as 2011, or the mid-year adjusted rate.

Questions about 2012 planning?

sarah.sedlak@glassjacobson.com

Updates:

1. Make a charitable contribution. Check out this IRS publication for  more information on which records to save.  Any clothes or household goods donated must be in good condition to be deductible.  Credit card donations make before 12/31 are deductible even if you don’t pay the bill until 2012.
2. Contributing to retirement plans: though and deferrals made to employer sponsored plans must be made by 12/31, you have until April 17, 2012 to set up a new IRA or add money to an existing account and still have it count towards 2011.

Some new ideas:

1. Bad year for your investment portfolio? You can normally deduct losses up to the amount of your capital gains, plus $3000 from other income.  If your net losses are more than $3,000, the excess can be carried forward and deducted in future years.
2. Improve your home’s energy efficiency. Installing insulation, water heaters or new windows could translate into a $500 tax credit.  If you are looking at alternative energy for your home, the Residential Energy Efficient Property Credit equals a 30% credit on the cost of solar, wind, geothermal or heat pump equipment.
3. Employers, don’t forget the Health Care Tax Credit: if you pay at least half of your employee’s health insurance premiums, you may qualify.  Check out this previous post to determine your eligibility.

Contact us to make sure you are taking advantage of all these opportunities:

sarah.sedlak@glassjacobson.com

Details over which party wants what aside (a 2 month extension, a year extension, an oil pipeline (??)), the payroll tax affects 160 million Americans.  If the payroll tax is not extended, it would cost the American family making $75,000 per year an extra $1,500 in taxes.  This could be a tricky time for a tax increase of this magnitude, with the economy still in a fragile state and unemployment high.

The National Payroll Reporting Consortium’s president, Pete Isberg has now weighed in, writing that complex payroll systems may require “at least 90 days for a change of this magnitude for software testing alone, not to mention analysis, design, coding and implementation.”  The NRPC worries that a two month extension would be less feasible than at least a quarter of the calendar year.

At Glass Jacobson, we certainly cannot predict how this latest battle will shake out.  We are as frustrated with this “political” inaction as are all of our clients.  It is a real shame that given the real challenges in our economy that are truly beyond anyone’s control, our politicians continue to add problems that they could fix.  As more information becomes available, we will update and advise our clients accordingly.  Stay tuned.

Questions?

michael.cohen@glassjacobson.com

1. Capital Gains:

Long-term capital gains continue to be taxed at favorable rates through 2012, with middle- and higher-income investors taxed at a maximum rate of 15 percent. Low-income tax payers in the 10 and 15 percent brackets for ordinary income have a zero-percent rate, meaning they do not pay tax on any long-term gains or qualified dividends. Selling now (or in 2012) is sensible if the investor wants to cash in capital gains.

If you are looking for long-term rates, investors are required to hold an asset for longer than one calendar year.  It remains to be seen what Congress will do about the capital-gains increase in 2013, and absent of any action, tax rates will go up.  Investors may want to consider purchasing assets before the end of 2011 so they can sell before 2013, while they are still guaranteed favorable rates.

2. Stock Sales

Investors should remember that stock is treated as sold on the trade date.  So, if you sell stock on December 29, 2011 but the settlement date is not until January, the gains and losses from the sales would still be recognized on the 2011 tax return.

3. Retirement Account Contributions

One quick strategy to reduce tax liability is to make a contribution to a traditional retirement account (IRA, 401(k), 403(b), SIMPLE IRA or SEP plan) and take advantage of the deductions.  Traditional IRAs are particularly easy to set up.

4. Charitable Giving

If you plan on deducting a charitable contribution, remember that the IRS requires the taxpayer to maintain a bank record or receipt.

For any contribution of $250 or more, the taxpayer must obtain and keep records of written acknowledgment from the qualified organization. Documentation for property with higher values requires an appraisal.

Contact us if you need help with planning or have questions.  Now is the time!

Check out the webinar below to answer big questions like:

• how do I qualify and maintain 8(a) certification under the new rules?
• when do I want to transition out of the 8(a) program?
• how do I find primary decision makers in the government?
• how do I work with “influence clusters” to win government contracts?

Questions for Steve?   steve.cho@glassjacobson.com

Questions for Dave Lowe at isiFederal? dlowe@isiFederal.com

Glass Jacobson tax specialist Jeff Cohen will talk to small businesses about what they need to know to close out the year in a smart way, and get 2012 off on the right foot.

Tax topics will include depreciation, tax credits, deductions, planning tips…….. There are many tax laws about to expire, are you prepared?

Join us on December 8^th to hear these and other timely topics to plan for 2011 as it comes to a close and be prepared for 2012.  Click here for information on Year End Urgency for Small Companies.

To rsvp, email Jeff Cohen.

The second seminar in the Protect Yourself Series, Business 101 was fantastic! Thank you to all who joined us, and mark your calendars for Business 201 on March 20, 2012.

Here are three KEY TAKEAWAYS from each presenter on protecting yourself, your new business and your health:

From Lauren B. Ades, Esq, Hodes, Pessin & Katz, P.A.~

Incorporating your business entity is a priority. However, choosing an entity type is not black and white. There are pros and cons to LLCs, S Corporations, partnerships and all the others. You should not view your entity type as set in stone. As your business grows and changes, so might your entity type.

Download Lauren’s Business Question Check List. If you have started a business, or are planning to, you need to make sure you can check the “yes” box to all these questions.

Questions on how to make sure your new business is protected? Contact Lauren.

From Tammy Schneider, CPA, Director of Women in Business Practice, Glass Jacobson~

Know the difference between an employee and a contractor. If you dictate a “contractor’s” hours, provide them with equipment, outline their job duties. . . your contractor is probably an employee! The IRS is vigilantly looking for these “oversights.”

Check out other ways to practice safe tax in Tammy’s presentation:

Questions about setting up your business’s finances? Contact Tammy.

From Lynn Brick, RN, President & Founder of Lynn Brick’s Fitness and Brick Bodies~

First, you can do push ups in a suit and high heels. At least Lynn can. And the rest of us are now inspired to be able to as well.

Second, starting a business can cause stress. But, not all stress is bad:

Strength train at least 2 times per week

Take time for yourself every hour

Restore and rejuvenate your mind, body and soul with yoga, tai chi or spa treatments

Exercise your heart every day

Stretch your body

Surround yourself with positively positive people

This stress is good. Prolonged emotional, psychological or physical stress from extrinsic or intrinsic forces becomes chronic, which can be detrimental to your health.

Visit Lynn Brick’s Fit Tips to find out how you can better incorporate the good stress into your life to manage the bad.

Unfortunately, many of the characteristics that make a good employee are some of the same characteristics that are the earmark of the employee who’s committing fraud in your business.  Here are just a few.

• Employee wants additional hours
• Employee wants to work alone and will not delegate tasks
• Employee is very loyal
• Employee resents your lifestyle or apparent income
• Employee works late or comes in early
• Employee takes work home
• Employee refuses to take vacation
• Employee with lots of discretionary income.  Get suspicious if your single employee making $25,000 per year is driving a brand new Mercedes and has a five bedroom house with a pool and tennis court and does not have a large trust fund.
• Employee is a long-term employee.  Why would they want to leave your dental practice since you are their personal ATM machine?
• Employee does not want overtime

So what are you supposed to do now?  Do you instantly start suspecting each and every one of your employees of being a clandestine thief?  Of course not!  However, armed with the information from this and the previous post you should realize that you cannot just be a passive observer in your business.  You need to get involved in many of the business aspects of your company that you may have previously ignored.  YOUR money is at stake!  As we near the close of the year, look closely at your books with your CPA for anything suspicious.  If you suspect fraud in your practice, or want to set up preventative measures, contact us.  Glass Jacobson’s fraud prevention team can help.

Questions?

larry.goldberg@glassjacobson.com

But, it is better to be safe than sorry.  If you have not taken any preventative measures, contact our fraud experts for help.  In Part 1 of this 2 part series, “PREVENTING AND DETECTING FRAUD,” we discuss steps you can take to prevent fraud and embezzlement in your business.

As the owner of a small business with few employees there is just no way you can have the separation of duties needed to more easily prevent embezzlement.  You must get involved!  Here are 8  recommendations:

• Know your office software
• Know your vendors
• Look at invoices that are being paid
• Check your credit card statement each month
• Have your bank statements mailed to your home not your office
• Look at the cleared checks or, in this day and age, the copies of the cleared checks
• Compare the day sheet to the schedule
• Watch your employees at work every so often.  You don’t have to know exactly what they are doing, but just your presence can act as a deterrent.

Do not think you are immune to having one of your employees embezzle money or goods from your company!  I know getting involved in some of the more mundane aspects of your business can be hard, but if you don’t, you are just asking for trouble.

In the next post, we discuss ways to recognize fraud that may be happening.

Questions?

larry.goldberg@glassjacobson.com