Tool Reimbursement Plans – Do You Meet the IRS Guidelines?

If you do not have a tool reimbursement plan for your employees you may wish to incorporate this if you require them to supply their own hand tools on the job site.  The tax code allows properly configured tool reimbursement allowances to be tax free to the employee and deductible to the employer. Tool reimbursements are also not subject to payroll taxes if it is made under an accountable plan.  To be treated as an accountable plan, an expense reimbursement must meet all of the following requirements: Business connection – the reimbursed expense must be allowable as a deduction and it must be paid or incurred while performing services as an employee of the employer. Substantiation – the employee must

S Corporation Health Insurance

This letter is to advise you of the tax benefits available to certain S corporation shareholders for health insurance costs.  Heath and accident insurance premiums paid on behalf of the more than 2% S corporation shareholders are included in the recipient’s Form W-2 as taxable wage income and the S corporation takes a compensation deduction.  The S corporation cannot take the deduction as a direct health insurance expense for the more than 2% shareholders.  These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, issued to the shareholder, but would not be included in Boxes 3 and 5 of Form W-2.  Payments

New 1099 Questions on Business Returns

NEW 1099 QUESTIONS ON BUSINESS RETURNS   Generally, any trade or business that makes payments in the course of that trade or business of interest, rents, compensations, remuneration for services, annuities, etc. aggregating $600 or more for the year to a single payee is required to report the payments to the IRS and to the recipient of the payments by filing Form 1099. This reporting requirement generally does not apply to payments to corporations. However, the 1099 reporting requirements do apply to payments made to corporations for attorneys’ fees, and to amounts paid to corporations providing medical or health care services. In addition, if a business makes a payment otherwise required to be reported on Form 1099, the payment is

2011 Q4 A Year of Uncertainty?

2011 Q4 A Year of Uncertainty?

Officially, year-end tax planning is fairly straightforward in 2011. At year-end 2010, Congress extended many of the income tax laws that were in place at the time. Some laws were changed, especially in the estate planning area. For the most part, the tax law passed at the end of last year is effective for two years: 2011 and 2012. Therefore, you may expect to plan for year-end 2011 and for 2012 with some certainty. As this issue is written, however, the news from Washington is far from certain. President Obama and Congressional leaders are attempting to resolve federal budget and debt issues. Tax changes are possible, and such changes may affect year-end planning in 2011. Our office will keep you