Archive for the ‘Small Business Finances’ Category

Recent federal legislation can mean tax savings for employers and may have an impact on your business and your payroll activities.

HIRE Act

The Hiring Incentives to Restore Employment (HIRE) Act that was signed into law on March 18, 2010.  It provides financial incentives for employers who hire unemployed workers and retain those workers for at least one year. If you are hiring, you could benefit from two provisions in the bill: Social Security Tax Exemption and Business Tax Credit. You can also find information from the IRS at http://www.irs.gov/newsroom/article/0,,id=220326,00.html.

Proposed IRS regulations address reporting requirements for credit card and third-party network transactions (IR-2009-106; NPRM REG-139255-08). The IRS plans to require credit card and other firms that process transactions to report the annual gross network transactions to participating merchants and to the IRS.

Information reporting will begin to apply to 2011 transactions. Form 1099-K has been proposed for this purpose and is now available in draft form. Form 1099-K will be prepared for each calendar year and report the gross amount of transactions for the year and for each month of the year. The inclusion of monthly amounts on the return filed with the IRS and the copy furnished to the payee will help fiscal-year payees reconcile payment card and third-party network transaction receipts.

The gross amount of a transaction is not reduced by fees, charge backs, refunds, or any other amount. The IRS will use the reports as it does W-2s and 1099s. A company reporting gross receipts different from those in these reports can be subjected to auditing to explain the differences.

To narrow the federal deficit, the IRS plans to add new 1099 reporting requirements, according to a report from the American Institute of Professional Bookkeepers.

These include:

• Payments to corporations would require a 1099 when they exceed $600 annually.
• Independent contractors would be subject to withholding if they do not provide a valid TIN—i.e., employers would have to verify TINs.
• Landlords would have to file 1099s on payments to service providers such as plumbers and carpenters.

What records do you need to keep and for how long? This matrix shows you.

Here are some useful tips to help manage your company’s losses in the recession. Although the downturn has changed normal payment patterns, when you see any of these signs, you should act before it is too late.