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 New Law Letter

Over the past 18 months, Congress has been passing tax legislation at a frantic pace. The primary “tax” themes underlying this legislation are Congressional attempts to provide temporary tax relief for both businesses and individuals and to spur a struggling economy by encouraging businesses to make capital investments. Examples of these tax relief provisions for Individuals include: extending all existing income tax rates for two years (through 2012); providing temporary estate and gift tax relief through 2012; extending a long list of tax breaks that would have otherwise expired; a “2011 only” Social Security tax cut of two percentage points; and an increased refundable adoption credit. Businesses also received their share of tax relief and incentives, including: a temporary increase