Posts Tagged ‘small businesses’

Recent changes to the Texas tax laws may affect your business. The late filing penalty for many Texas taxes has been increased and will be assessed. The one million threshold for Franchise Tax has been extended through December 31, 2013.

The Texas Comptroller’s Office has transitioned from its original WebFile Sales Tax System to the new MyCPA WebFile system for sales tax.  The “CPA” in MyCPA stands for Comptroller of Public Accounts, not Certified Public Accountant.  It is for use by all taxpayers, not just Certified Public Accountants.

MyCPA is a secure login portal that allows an individual or authorized representative to set up one user account with access to multiple taxpayer IDs and their related taxes and business accounts.

To reflect changes in the employee rate for social security and the elimination of advance payment of the Earned Income Credit*, there have been big changes to form 941, Employer’s QUARTERLY Federal Tax Return.  Form W-2, Wage and Tax Statement, now includes a new code for reporting designated Roth contributions under a governmental section 457(b) plan.

But the IRS will no longer send you forms or instructions in the mail.

With the increased emphasis on e-filing, the IRS has been implementing plans to stop mailing tax packages to business taxpayers. Last fall, the IRS announced it would no longer mail annual income tax returns to businesses. In early March, the IRS added several forms and instructions to the list of discontinued mailings, most notably the Form 941, Employer’s QUARTERLY Federal Tax Return.

*EIC-eligible individuals can claim their credit when they file their 2011 federal income tax returns. Employees who expect to be eligible for the EIC and who will have income tax withheld from their wages in 2011 may reduce their withholding. This option allows those employees to receive a portion of the credit throughout the year.

On April 5, the Senate approved H.R. 4 by a vote of 87-12.  The new law will effectively revert reporting  to the requirements in place before enactment of PPACA and the Small Business Jobs Act of 2010.

H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” was previously passed by the House on March 3 by a vote of 314-112 and will retroactively repeal the new and unpopular Form 1099 information reporting rules. The White House has indicated that the President will sign H.R. 4 into law. A press release dated April 5 declares that “Small businesses are the engine of our economy and eliminating the 1099 reporting requirement is the right thing to do.”

Before amendment by the Small Business Jobs Act of 2010 (P.L. 111-240) and the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS.

Reporting on Form 1099 was required for payments by businesses in connection with that trade or business. The type of payment that most commonly required to be reported was payment for services. The most notable exception from Code Sec. 6041’s reporting requirements under prior law was payments to corporations (which were exempt under Reg. §1.6041-3(p)(1)).

In the prior legislation scheduled to begin in 2012, Sec. 9006 of PPACA added payments of amounts in consideration for any type of  goods or services—to the list of payments subject to information reporting.

Sec. 9006 of PPACA further provided that payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.

Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.

For payments made after Dec. 31, 2011, the new law will repeal the provisions in Sec. 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. (Code Sec. 6041(a), Code Sec. 6041(i), and Code Sec. 6041(j), as amended by Act Sec. 2)  For payments made after Dec. 31, 2010, the Act also repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. (Code Sec. 6041(h), as repealed by Act Sec. 3)

Congress just passed changes to the Federal Insurance Contributions Act (FICA) reducing the employee Social Security tax rate by two percentage points to 4.2%. Similarly, for self-employment income for tax years beginning in 2011, the Act reduces the Social Security tax rate under the Self Employment Contributions Act (SECA) tax by two percentage points to 10.4% percent. (Act Sec. 601)

If you are an employer, all your employees will receive a 2% increase in their paychecks on wages paid in 2011. This will cost you, the employer, nothing but there are some potential bookkeeping hassles.

As a result, for 2011, employees will pay only 4.2% Social Security tax on wages up to $106,800 and self-employment individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $106,800. The maximum savings for 2011 will be $2,136 (2% of $106,800) per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,272.

If you use a software package like QuickBooks to do your payroll, you may have to manually override the employee portion of the Social Security if the software update is not available by the time you pay your first wages in 2011. If you are one of the many small business who manually calculate payroll, you will have a few extra steps to figure the amount of your payroll tax deposits.