In a recent sales/use tax case Massachusetts high court held company did not need to produce the final product in order for it to qualify for the state's research and development manufacturing exemption.
Onex Communications Corp. v. Commissioner, Mass. (7/30/10). The Massachusetts Supreme Judicial Court affirmed that a microchip company’s purchased items constituted exempt materials, machinery and replacement parts used directly and exclusively in research and development (R&D), because the company qualified as a “manufacturing corporation.” Under the facts, the company’s engineers drafted intricate electronically-stored “blueprints” to direct the:
Physical construction of an innovative communications microchip from raw silicon, and Embedding of the software into the hardware.
The department argued that the company was not a “manufacturing corporation” during the audit period, because at the end of that period it had not achieved creation of its microchip “finished product.”
The Court agreed with Appellate Tax Board and Court of Appeals that such a “finished product” limitation does not exist under the R&D exemption statute and that a “manufacturing corporation” need only be engaged in activities that are essential and integral to the total manufacturing process to qualify.
Friday, August 6, 2010
Monday, July 19, 2010
Washington - Revised Rule Limits Bad Debt Refund
Washington Department of Revenue has issued an emergency amended rule (Rule 196), which limites application of bad debt refunds.
The new law which amends rule WAC 458-20-196, states that Washington’s sales tax “bad debt” deduction may only be claimed by the actual seller after June 30, 2010
The new law clarifies that the seller’s right to claim a credit or refund is not assignable. If the original seller in the transaction that generated the bad debt has sold or assigned the bad debt instrument to a third-party with recourse, the original seller may claim a credit or refund under statute, but only after the debt instrument is reassigned by the third-party to the original seller.
The amended rule specifically recognizes that only the original seller in the transaction that generated the bad debt, or a certified service provider used by the seller, may claim a retail sales/use tax credit or refund on or after July 1, 2010.
The new law which amends rule WAC 458-20-196, states that Washington’s sales tax “bad debt” deduction may only be claimed by the actual seller after June 30, 2010
The new law clarifies that the seller’s right to claim a credit or refund is not assignable. If the original seller in the transaction that generated the bad debt has sold or assigned the bad debt instrument to a third-party with recourse, the original seller may claim a credit or refund under statute, but only after the debt instrument is reassigned by the third-party to the original seller.
The amended rule specifically recognizes that only the original seller in the transaction that generated the bad debt, or a certified service provider used by the seller, may claim a retail sales/use tax credit or refund on or after July 1, 2010.
Monday, June 28, 2010
Colorado Reportable and Listed Transaction Disclosure
In today's Blog, I address the timing of taxpayer disclosure, highlighting the upcoming July 1, 2010 deadline for tax returns filed after June 1, 2009.
Overview
On April 2, 2009, Colorado adopted House Bill 09-1093, which require taxpayers to disclose participation in "reportable' and "listed transactions'. taxpayers subject to these disclosure provisions include corporations, individuals, estates, trusts, partnerships, S Corporations and other entities required to file an income tax return under Col. Rev. Sta. Sec. 39-22-601.
The new law also requires "material ad visors" to disclose reportable and listed transactions and maintain a list of persons advised with respect to such transactions. Significant taxpayers and material advisor penalties are imposed for failure to comply with these requirements.
Definition
Colorado Listed Transaction
For Colorado purposes a "listed transactions" also includes a "transaction" between a captive real estate investment trust and its more than 50% beneficial owner, and a transaction between a captive regulated investment company and its more than 50% beneficial owner. Pursuant to Colo. Code Reg. sec. 39-22-652(2)(b), these transactions are referred to as "Colorado Listed Transactions' where the relevant tax returns "reflect a Colorado tax benefit".
Taxpayer Disclosure Requirement
Disclosure Timing
Under the general rule, for each tax period in which a taxpayer participates in a Federal Transaction or a Colorado Listed Transactions, including participation for any prior period that is still open for assessment under the statute of limitations, the taxpayer is required to disclose that participation with its next filed tax return. For any return filed after June 1, 2009, a taxpayer should disclose with its return participation in any Federal Transaction or a Colorado Listed Transaction, including any participation for prior periods still open for assessment. For any return made after June 1, 2009, disclosure will be considered timely so long as that disclosure is made by July 1, 2010.
Taxpayer Penalties
A taxpayer who fails to disclose a reportable transaction is subject to a penlaty of up to $15,000. A taxpayer who failes to disclsoe a listed transaction is subject toa penalty of up to $50,000. these penalties are in additin to any other penalties that may be imposed, but may be wavied, reduced or compromised by the Colorado Department of Revneu upon showing of reasonable cause.
Overview
On April 2, 2009, Colorado adopted House Bill 09-1093, which require taxpayers to disclose participation in "reportable' and "listed transactions'. taxpayers subject to these disclosure provisions include corporations, individuals, estates, trusts, partnerships, S Corporations and other entities required to file an income tax return under Col. Rev. Sta. Sec. 39-22-601.
The new law also requires "material ad visors" to disclose reportable and listed transactions and maintain a list of persons advised with respect to such transactions. Significant taxpayers and material advisor penalties are imposed for failure to comply with these requirements.
Definition
Colorado Listed Transaction
For Colorado purposes a "listed transactions" also includes a "transaction" between a captive real estate investment trust and its more than 50% beneficial owner, and a transaction between a captive regulated investment company and its more than 50% beneficial owner. Pursuant to Colo. Code Reg. sec. 39-22-652(2)(b), these transactions are referred to as "Colorado Listed Transactions' where the relevant tax returns "reflect a Colorado tax benefit".
Taxpayer Disclosure Requirement
Disclosure Timing
Under the general rule, for each tax period in which a taxpayer participates in a Federal Transaction or a Colorado Listed Transactions, including participation for any prior period that is still open for assessment under the statute of limitations, the taxpayer is required to disclose that participation with its next filed tax return. For any return filed after June 1, 2009, a taxpayer should disclose with its return participation in any Federal Transaction or a Colorado Listed Transaction, including any participation for prior periods still open for assessment. For any return made after June 1, 2009, disclosure will be considered timely so long as that disclosure is made by July 1, 2010.
Taxpayer Penalties
A taxpayer who fails to disclose a reportable transaction is subject to a penlaty of up to $15,000. A taxpayer who failes to disclsoe a listed transaction is subject toa penalty of up to $50,000. these penalties are in additin to any other penalties that may be imposed, but may be wavied, reduced or compromised by the Colorado Department of Revneu upon showing of reasonable cause.
Thursday, June 24, 2010
Kansas: Amnesty Program Enacted
Kansas: Amnesty Program Enacted
TIME PERIOD
Legislation (Senate Bill 572, signed May 27, 2010) establishes a tax amnesty program to be held from September 1, 2010, through October 15, 2010.
APPLIES TO WHICH TAXES
The program applies to a myriad of Kansas taxes, including sales and use, income, and withholding taxes.
Amnesty is available for tax liabilities due and unpaid for tax periods ending on or before December 31, 2008.
TAXES NOT ELIGIBLE
Amnesty is not available for (1) taxes resulting from an audit if the taxpayer received notification as to the starting date of the audit prior to September 1, 2010, or (2) taxes due as a result of an audit that is underway as of September 1, 2010.
Also not eligible are taxes for which an assessment or proposed assessment has been issued as of September 1, 2010, or assessments that are being appealed administratively or judicially as of that date.
PROCEDURE
Eligible taxpayers that file all required returns and pay all taxes due by the close of the amnesty program will receive a waiver of all penalties and interest otherwise due.
Taxpayers should be aware that participation in the amnesty program constitutes relinquishment of all administrative and judicial rights of appeal with respect to taxes eligible for amnesty. In addition, no tax payments received as a result of the amnesty program are eligible for refunds or credits.
TIME PERIOD
Legislation (Senate Bill 572, signed May 27, 2010) establishes a tax amnesty program to be held from September 1, 2010, through October 15, 2010.
APPLIES TO WHICH TAXES
The program applies to a myriad of Kansas taxes, including sales and use, income, and withholding taxes.
Amnesty is available for tax liabilities due and unpaid for tax periods ending on or before December 31, 2008.
TAXES NOT ELIGIBLE
Amnesty is not available for (1) taxes resulting from an audit if the taxpayer received notification as to the starting date of the audit prior to September 1, 2010, or (2) taxes due as a result of an audit that is underway as of September 1, 2010.
Also not eligible are taxes for which an assessment or proposed assessment has been issued as of September 1, 2010, or assessments that are being appealed administratively or judicially as of that date.
PROCEDURE
Eligible taxpayers that file all required returns and pay all taxes due by the close of the amnesty program will receive a waiver of all penalties and interest otherwise due.
Taxpayers should be aware that participation in the amnesty program constitutes relinquishment of all administrative and judicial rights of appeal with respect to taxes eligible for amnesty. In addition, no tax payments received as a result of the amnesty program are eligible for refunds or credits.
Friday, June 18, 2010
Georgia & Oklahoma Decouple From IRC Sec. 108(1)
State Tax Update - Income/Franchise Tax:
The States have spent their portion of the stimulus money and they are looking for new ways to get money. Georgia and Oklahoma recently passed legislation decoupling from select provisions of the federal American Recovery and Reinvestment Act of 2009 (ARRA) for state corporate and personal income tax purposes (i.e. ,deferral of recognition of income from discharge of certain business indebtedness under IRC Sec. 108(i)).The following summarizes the new laws:
Georgia:
Although Georgia’s legislation was signed into law on June 3, 2010, the new law applies to tax years beginning on Jan 1, 2009.
For taxable years beginning on or after January 1, 2009, the law specifically decouples from select provisions of the federal American Recovery and Reinvestment Act of 2009 (ARRA) for state corporate and personal income tax purposes, including the:
• Deferral of recognition of income from discharge of certain business indebtedness under IRC Sec. 108(i), and
• Expanded carry back period for net operating losses (NOLs) of certain small businesses under IRC Sec. 172(b)(1)(H).
Additionally, with respect to stock purchases and sales occurring on or after June 3, 2010, the new law also requires that all IRC Sec. 338 elections apply for purposes of calculating a corporation’s Georgia taxable net income.
Oklahoma:
Applicable for taxable years beginning on or after January 1, 2010, new law requires Oklahoma corporate and personal income taxpayers to add to their Oklahoma taxable income an amount equal to the amount of deferred income not included in such taxable income pursuant to Internal Revenue Code (IRC) Sec. 108(i)(1), as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
The new law correspondingly requires a subtraction from Oklahoma taxable income for the amount of deferred income included in their taxable income pursuant to IRC Sec. 108(i)(1), as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
The States have spent their portion of the stimulus money and they are looking for new ways to get money. Georgia and Oklahoma recently passed legislation decoupling from select provisions of the federal American Recovery and Reinvestment Act of 2009 (ARRA) for state corporate and personal income tax purposes (i.e. ,deferral of recognition of income from discharge of certain business indebtedness under IRC Sec. 108(i)).The following summarizes the new laws:
Georgia:
Although Georgia’s legislation was signed into law on June 3, 2010, the new law applies to tax years beginning on Jan 1, 2009.
For taxable years beginning on or after January 1, 2009, the law specifically decouples from select provisions of the federal American Recovery and Reinvestment Act of 2009 (ARRA) for state corporate and personal income tax purposes, including the:
• Deferral of recognition of income from discharge of certain business indebtedness under IRC Sec. 108(i), and
• Expanded carry back period for net operating losses (NOLs) of certain small businesses under IRC Sec. 172(b)(1)(H).
Additionally, with respect to stock purchases and sales occurring on or after June 3, 2010, the new law also requires that all IRC Sec. 338 elections apply for purposes of calculating a corporation’s Georgia taxable net income.
Oklahoma:
Applicable for taxable years beginning on or after January 1, 2010, new law requires Oklahoma corporate and personal income taxpayers to add to their Oklahoma taxable income an amount equal to the amount of deferred income not included in such taxable income pursuant to Internal Revenue Code (IRC) Sec. 108(i)(1), as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
The new law correspondingly requires a subtraction from Oklahoma taxable income for the amount of deferred income included in their taxable income pursuant to IRC Sec. 108(i)(1), as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009 (P.L. No. 111-5).
Friday, June 11, 2010
Florida Enacts Amnesty Program
The Governor of Florida signed H5801 into law on May 28, 2010 which created an Amnesty Program.
The amnesty program runs from July 1, 2010 to September 30, 2010. Under the program, eligible taxpayers may satisfy their state tax liabilities and avoid criminal prosecution and penalties. In addition, interest may be decreased up to 50% in certain cases.
Eligible Taxes
The taxes eligible under the program are: sales tax, fuel tax, corporate income tax, communications services tax, gross receipts tax, and Florida intangible tax.
Taxpayers Under Audit
Taxpayers who are currently under audit or have been contacted for audit, may still apply for amnesty; however, taxpayers will be required to pay the tax and 75% of the interest due.
Taxpayers Who Have Not Been Contacted
Taxpayers who have not been contacted by the state of Florida and come forward during the amnesty period, will be required to pay the tax and 50% of the interest due.
The amnesty program runs from July 1, 2010 to September 30, 2010. Under the program, eligible taxpayers may satisfy their state tax liabilities and avoid criminal prosecution and penalties. In addition, interest may be decreased up to 50% in certain cases.
Eligible Taxes
The taxes eligible under the program are: sales tax, fuel tax, corporate income tax, communications services tax, gross receipts tax, and Florida intangible tax.
Taxpayers Under Audit
Taxpayers who are currently under audit or have been contacted for audit, may still apply for amnesty; however, taxpayers will be required to pay the tax and 75% of the interest due.
Taxpayers Who Have Not Been Contacted
Taxpayers who have not been contacted by the state of Florida and come forward during the amnesty period, will be required to pay the tax and 50% of the interest due.
Thursday, May 27, 2010
Florida Amnesty Program
Florida expects to generate $82.9 million in revenue from the state’s first amnesty program since 2003. House Bill 5801 was approved by both chambers on April 30, 2010, the closing day of the Florida Legislature’s 60-day session. It now awaits action by Florida Governor Charlie Crist.
House Bill 5801 directs the Florida Department of Revenue (“Department”) to conduct a tax amnesty from July 1 through September 30, 2010 applicable to tax liabilities due prior to July 1, 2010.
The Program will apply to all income taxes, sales and use taxes, motor vehicle taxes, estate taxes, gross receipts taxes, excise taxes on documents, taxes on intangible personal property, communications services taxes, severance taxes, and insurance premium taxes. It will not apply to local option taxes administered by local governments unless the local government elects to participate and notifies the Department by June 1, 2010.
All taxpayers are eligible for the Program, except those currently under criminal investigation, indictment, information, or prosecution regarding a Florida revenue law. Taxpayers who have entered into settlements of liability for state or local option taxes before July 1, 2010 are also ineligible to participate, whether or not full and complete payment of the settlement amount has been made.
Taxpayers who are under audit, inquiry, examination, or civil investigation by the Department may participate and are responsible for the full amount of tax due but receive a 25% reduction in interest. A taxpayer who initiates contact with the Department is responsible for the full amount of tax due but receives a 50% reduction in interest. Late penalties are waived on any tax paid pursuant to the Program.
Participating taxpayers are required to waive any right to claim a refund, protest, or initiate any administrative proceeding that challenges any assessment administered under the Program. Pre-existing protests or administrative or judicial proceedings must be dismissed. The bill permits the Department to rescind a grant of amnesty in the event of fraud, misrepresentation, or mutual mistake of fact.
Karen Lake
305-960-1202
klake@bdpb.com
House Bill 5801 directs the Florida Department of Revenue (“Department”) to conduct a tax amnesty from July 1 through September 30, 2010 applicable to tax liabilities due prior to July 1, 2010.
The Program will apply to all income taxes, sales and use taxes, motor vehicle taxes, estate taxes, gross receipts taxes, excise taxes on documents, taxes on intangible personal property, communications services taxes, severance taxes, and insurance premium taxes. It will not apply to local option taxes administered by local governments unless the local government elects to participate and notifies the Department by June 1, 2010.
All taxpayers are eligible for the Program, except those currently under criminal investigation, indictment, information, or prosecution regarding a Florida revenue law. Taxpayers who have entered into settlements of liability for state or local option taxes before July 1, 2010 are also ineligible to participate, whether or not full and complete payment of the settlement amount has been made.
Taxpayers who are under audit, inquiry, examination, or civil investigation by the Department may participate and are responsible for the full amount of tax due but receive a 25% reduction in interest. A taxpayer who initiates contact with the Department is responsible for the full amount of tax due but receives a 50% reduction in interest. Late penalties are waived on any tax paid pursuant to the Program.
Participating taxpayers are required to waive any right to claim a refund, protest, or initiate any administrative proceeding that challenges any assessment administered under the Program. Pre-existing protests or administrative or judicial proceedings must be dismissed. The bill permits the Department to rescind a grant of amnesty in the event of fraud, misrepresentation, or mutual mistake of fact.
Karen Lake
305-960-1202
klake@bdpb.com
Wednesday, May 19, 2010
North Carolina - Internet Transaction Resolution Program
The North Carolina Department of Revenue ("Department") recently announced the "Internet Transaction Resolution Program" ("Program") designed for remote sellers affected by the remote seller nexus law enacted by the State in August 2009.
Under the terms of the Program, as applied to eligible participating retailers, the Department will agree not to assess sales and use tax, franchise tax, penalties, and interest due prior to September 1, 2010. Also, the Department will agree not to excise its authority to obtain consumer information from retailers to collect tax liabilities for tax liabilities for periods prior to September 1, 2010.
To participate in the Program, eligible retailers must submit an election form to the Department not later than June 30, 2010. Any retailer that failed to register for the sales and use tax as a result of having operated an affiliate program in North Carolina at any time is eligible to particulate in the Program.
Karen Lake
klake@bdpb.com
305-960-1202
Under the terms of the Program, as applied to eligible participating retailers, the Department will agree not to assess sales and use tax, franchise tax, penalties, and interest due prior to September 1, 2010. Also, the Department will agree not to excise its authority to obtain consumer information from retailers to collect tax liabilities for tax liabilities for periods prior to September 1, 2010.
To participate in the Program, eligible retailers must submit an election form to the Department not later than June 30, 2010. Any retailer that failed to register for the sales and use tax as a result of having operated an affiliate program in North Carolina at any time is eligible to particulate in the Program.
Karen Lake
klake@bdpb.com
305-960-1202
Friday, May 7, 2010
Arizona: Decouples From §108(i) and five year NOL carrrybacks
Arizona: New law updates Internal Revenue Code conformity date; decouples from §108(i) & five-year NOL carrybacks
Effective on 7/29/10, Arizona's decouples §108(i)& five-year NOL carrybacks.
Deferral of recognition of income from discharge of certain business indebtedness as enacted by the federal American Recovery and Reinvestment Act of 2009 (ARRA) under IRC Sec. 108(i), with necessary adjustments in current and future years provided in the addition and subtraction provisions for both individuals and businesses; and
Five-year net operating loss (NOL) carryback provisions for businesses under both the ARRA and the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA).
Effective on 7/29/10, Arizona's decouples §108(i)& five-year NOL carrybacks.
Deferral of recognition of income from discharge of certain business indebtedness as enacted by the federal American Recovery and Reinvestment Act of 2009 (ARRA) under IRC Sec. 108(i), with necessary adjustments in current and future years provided in the addition and subtraction provisions for both individuals and businesses; and
Five-year net operating loss (NOL) carryback provisions for businesses under both the ARRA and the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA).
Tuesday, April 20, 2010
Pennsylvania: Amnesty Program
Pennsylvania's amnesty program that will run from April 26, 2010 through June 18, 2010.
The amnesty program applies to liabilities for all taxes administered by PA. Department of Revenue that were delinquent as of June 30, 2009. To be eligible, to partcipate in the program taxpayers must file an amnesty application plus all applicable tax returns, and pay the tax and 50% of the interest due. The remaining 50% of interest and any penalties will be abated.
Additionally, if the taxpayer is fully compliant with the program, any “unknown liabilities” (i.e., unreported or underreported amounts that the department is unaware of) of tax, interest and penalty of the same type will be waived for amounts due prior to July 1, 2004.
Delinquent taxpayers that do not participate in the 2010 amnesty program will be subject to an additional 5% penalty on amounts that would have been eligible.
The amnesty program applies to liabilities for all taxes administered by PA. Department of Revenue that were delinquent as of June 30, 2009. To be eligible, to partcipate in the program taxpayers must file an amnesty application plus all applicable tax returns, and pay the tax and 50% of the interest due. The remaining 50% of interest and any penalties will be abated.
Additionally, if the taxpayer is fully compliant with the program, any “unknown liabilities” (i.e., unreported or underreported amounts that the department is unaware of) of tax, interest and penalty of the same type will be waived for amounts due prior to July 1, 2004.
Delinquent taxpayers that do not participate in the 2010 amnesty program will be subject to an additional 5% penalty on amounts that would have been eligible.
Friday, April 9, 2010
South Carolina Decouples from IRC Sec. 108(i).
Effective immediately, South Carolina's new law (S.B. 1174, signed by gov. 3/31/10), decouples from the deferral of recognition of income from discharge of certain business indebtedness as enacted by the federal American Recovery and Reinvestment Act of 2009 under IRC Sec. 108(i).
Friday, April 2, 2010
The Extended Federal NOL Carryback Period—State Tax Considerations
On November 6, 2009, President Obama signed H.R. 3548, The Worker, Homeownership, and Business Assistance Act of 2009. Under the legislation, certain businesses may elect to carry back federal net operating losses (NOLs) for up to five years for losses incurred in tax years beginning or ending in either 2008 or 2009 (at the election of the taxpayer), but not for both years. In this blog series, we address common questions regarding state tax consequences of carrying back a 2008 or 2009 loss.
Could state taxable income increase as a result of carrying back an NOL for federal purposes?
As odd as it sounds, a taxpayer might actually find that its state taxable income increases as a result of availing itself of the federal NOL carryback provisions. For example, if the taxpayer is permitted to take an IRC Section 199 deduction for “qualified production activities,” the taxpayer’s state taxable income could increase. The Section 199 deduction is limited to the lesser of (1) “qualified production activities income” and (2) a certain percentage of Line 30 (i.e., federal taxable income after application of NOLs and special deductions). Accordingly, if Line 30 income decreases (as a result of an NOL carryback), the Section 199 deduction may decrease.
The Section 199 deduction is generally allowed by a state simply by starting the computation of state taxable income with federal taxable income (either Line 28 or Line 30 of Form 1120) and not requiring the taxpayer to add back the deduction. When a Section 199 deduction decreases (due to application of the federal NOL carryback), federal taxable income increases. If a state does not require the Section 199 deduction to be added back, a taxpayer’s state taxable income (and ultimate state tax liability) could increase as a result of the decrease in the Section 199 deduction.
Could state taxable income increase as a result of carrying back an NOL for federal purposes?
As odd as it sounds, a taxpayer might actually find that its state taxable income increases as a result of availing itself of the federal NOL carryback provisions. For example, if the taxpayer is permitted to take an IRC Section 199 deduction for “qualified production activities,” the taxpayer’s state taxable income could increase. The Section 199 deduction is limited to the lesser of (1) “qualified production activities income” and (2) a certain percentage of Line 30 (i.e., federal taxable income after application of NOLs and special deductions). Accordingly, if Line 30 income decreases (as a result of an NOL carryback), the Section 199 deduction may decrease.
The Section 199 deduction is generally allowed by a state simply by starting the computation of state taxable income with federal taxable income (either Line 28 or Line 30 of Form 1120) and not requiring the taxpayer to add back the deduction. When a Section 199 deduction decreases (due to application of the federal NOL carryback), federal taxable income increases. If a state does not require the Section 199 deduction to be added back, a taxpayer’s state taxable income (and ultimate state tax liability) could increase as a result of the decrease in the Section 199 deduction.
Monday, March 29, 2010
Hiring Incentives to Restore Employment (HIRE) Act
Last week, President Obama signed the $17 billion Hiring Incentives to Restore Employment (HIRE) Act. The act is part of the economic stimulus effort to encourage businesses to hire more employees. We wanted to make you aware of some of the incredible benefits for which your clients may be eligible.
The following are some key points you should be aware of:•
Social Security Taxes: Employers will not have to pay this tax — which amounts to 6.2% of wages up to $106,800 — for hiring someone after February 3, 2010 and before January 1, 2011. To qualify, the employer will have to certify that each employee they hired was employed for no more than 40 hours in the 60-day period ending on the date that employment begins. This must be verified with a signed affidavit (pending further detail from the IRS). However, there will still need to be withholding for the employee's share of the Social Security tax (which is also 6.2%). The law change will have no impact on an employee's benefits.
• Business Retention Credit: For employees that qualify for the HIRE Act, there is an additional $1,000 or 6.2 percent of wages income tax credit for new-hires that are retained for a minimum of 52 weeks. This credit applies if the wages paid in the last 26 weeks are at least 80% of what they were for the first 26 weeks.
• Extension of Business Expensing: The increased threshold Section 179 expensing has been extended for another year. IRS Section 179 allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business.
The aforementioned provisions are effective immediately. The HIRE Act provides that businesses will prepare their first quarter 941's as if the law was not in effect. Employers will claim any qualifying payroll tax relief earned in the first quarter as a credit on their second quarter 941. The $1,000 retained worker credit is earned only after the qualified worker has been employed for at least 52 weeks. Considering this, calendar year employers will claim the credit on their 2011 returns.
We would be happy to help you explore your eligibility for these new credits. Contact us today to find out more.
The following are some key points you should be aware of:•
Social Security Taxes: Employers will not have to pay this tax — which amounts to 6.2% of wages up to $106,800 — for hiring someone after February 3, 2010 and before January 1, 2011. To qualify, the employer will have to certify that each employee they hired was employed for no more than 40 hours in the 60-day period ending on the date that employment begins. This must be verified with a signed affidavit (pending further detail from the IRS). However, there will still need to be withholding for the employee's share of the Social Security tax (which is also 6.2%). The law change will have no impact on an employee's benefits.
• Business Retention Credit: For employees that qualify for the HIRE Act, there is an additional $1,000 or 6.2 percent of wages income tax credit for new-hires that are retained for a minimum of 52 weeks. This credit applies if the wages paid in the last 26 weeks are at least 80% of what they were for the first 26 weeks.
• Extension of Business Expensing: The increased threshold Section 179 expensing has been extended for another year. IRS Section 179 allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes, as an expense (rather than requiring the property to be capitalized and depreciated). This property is generally limited to tangible, depreciable, personal property which is acquired for use in the active conduct of a trade or business.
The aforementioned provisions are effective immediately. The HIRE Act provides that businesses will prepare their first quarter 941's as if the law was not in effect. Employers will claim any qualifying payroll tax relief earned in the first quarter as a credit on their second quarter 941. The $1,000 retained worker credit is earned only after the qualified worker has been employed for at least 52 weeks. Considering this, calendar year employers will claim the credit on their 2011 returns.
We would be happy to help you explore your eligibility for these new credits. Contact us today to find out more.
Saturday, March 20, 2010
Hiring Incentives to Restore Employment (HIRE) Act
Present Obama on March 18, 2010, signed into law the Hiring Incentives to Restore employment (HIRE) Act, a 17.6 billion jobs creation package that provides a payroll tax holiday for employers who hire displaced workers, boosts the current year general business credit for employers who retain those workers, extends the increaszed smaill-business expensing limits under section 179, and expands the build America Bonds program.
Tuesday, January 26, 2010
New York's Penalty and Interest Discount Program (PAID)
New York's Penalty and Interest Discount ("PAID") program ends on March 15, 2010. The PAID program gives taxpayers with older unpaid bills the change to save up to 80% of the penalty and interest they owe.
To take advantage of the program's savings you must make all payments by the program's expiration date, March 15, 2010. If you do not pay in full by that date:
To take advantage of the program's savings you must make all payments by the program's expiration date, March 15, 2010. If you do not pay in full by that date:
- your opportunity for these saving will be lost forever.
- any unpaid tax debts will continue to accrue interest at the full statutory rate.
Why PAID Is Good For Your Company.
You can save:
- 80% of accrued penalty and interest on unpaid bills issued on or before December 31, 2003.
- 50% of accrued penalty and interest on unpaid bills issued after December 31, 2003 and on or before December 31, 2006.
- Unpaid tax bills are bad for the company's credit rating and can lead to liens and other enforcement actions.
- The State is increasing its efforts to collect unpaid bills. If you act now and pay what you owe, you can take advantage of the savings and avoid collection action.
Reminder New York Filing Fee Now Applies to Partnerships
Under New York's new tax law, the New York filing fee applicable to limited liability partnerships (LLPs) and limited liability Companies (LLCs), is not appliable to partnerships.
The filing fee for regular partnerships only applies is the partnership's New York sourced gross income is $1 million or more. The filing fee applies to tax years beginning on or after January 1, 2009, and is due within 30 days of the last day of the partnership's tax year.
The amendment to tax law does not change the filing fee requirements or the fee calculations for LLCs and LLPs treated as partnerships, or the fee that applies to LLCs that are disregarded for federal tax purposes.
The filing fee for regular partnerships only applies is the partnership's New York sourced gross income is $1 million or more. The filing fee applies to tax years beginning on or after January 1, 2009, and is due within 30 days of the last day of the partnership's tax year.
The amendment to tax law does not change the filing fee requirements or the fee calculations for LLCs and LLPs treated as partnerships, or the fee that applies to LLCs that are disregarded for federal tax purposes.
Wednesday, January 20, 2010
Eroding Conformity with Federal Tax Provisions
Two federal enactments in 2009 designed to provide economic stimulus raised conformity issues that increasingly pushed states further apart from the federal corporate income tax system. The American Recovery and Reinvestment Tax Act of 2009 ("ARRA") amended numerous provisions of the Internal Revenue Code ("IRC") including bonus depreciation, asset expending, cancellation of debt income, NOL carry backs, NOL limitations after a change in ownership, and S Corporations built-in gains.
The Workers, Homeownership, and Business Assistance Act of 2009 (WHBAA") provided taxpayers with an election to carry back NOLs for tax year beginning or ending in either 2008 and 2009 for three, four or five years.
Many states decoupled from these provisions, the resulting decoupling complicates matters for companies that operate in multiple states.
The Workers, Homeownership, and Business Assistance Act of 2009 (WHBAA") provided taxpayers with an election to carry back NOLs for tax year beginning or ending in either 2008 and 2009 for three, four or five years.
Many states decoupled from these provisions, the resulting decoupling complicates matters for companies that operate in multiple states.
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