Newsletter 2011
Newsletter 2011
Businesses
Businesses
Print Full ArticleLast Reviewed: Jan 2012
Last Modified: Jan 2012
Hot Issues for Businesses
1099 Reporting Changes - Again. That's right, the rules for issuing 1099's have changed again. The threshold for issuing a 1099 remains at $600 of services rendered, but now only includes payments made by cash or check. Payments made by credit or debit card should NOT be reported on Form 1099-Misc, as the merchant service companies will now begin issuing Form 1099-K for those transactions. We anticipate a bit of a mess as many businesses miss that important distinction and inadvertently generate 1099-Misc forms that overlap the income shown on 1099-K. The good news is that the requirement that 1099's be issued to corporations has been dropped, along with the requirement that landlords issue 1099's for their rental units.
New Health Insurance Law. Pieces of the recent Federal legislation mandating health insurance coverage are being implemented as each year passes. Here is a summary of certain provisions implemented to date and those coming for 2012 and beyond.
The following benefits were available beginning in 2010: Insurance companies can no longer impose life time coverage limits; children under 27 can remain on their parents' plans; children cannot be denied coverage due to a pre-existing condition; a small business tax credit became available to help cover the cost of employee insurance premiums; a high risk pool has been created for anyone uninsured due to a pre-existing condition.
Starting in 2012, businesses that provide employees with health insurance benefits must track the cost for each employee and report the total amount at year-end in Box 14 of the employee's Form W-2. The payments remain a tax-free fringe benefit making rumors that employees will be taxed on their insurance benefit incorrect. Businesses with fewer than 250 employees do not have to comply with this provision until 2013.
In 2013 higher income earners will pay more Medicare taxes through payroll deductions and on their investment income.
In 2014 insurance companies can no longer limit the annual medical costs they will cover for each insured. The insurance mandate for individuals also begins. There will be modest penalties assessed for the failure to comply. We assume there will be reporting forms to complete and file each year showing your insurance coverage. Massachusetts currently uses this system. Also in 2014 certain employers will be required to pay health insurance costs for full time employees. This mandate applies to large employers (at least 50 employees) who will be subject to penalties if they do not comply with the coverage mandate.
The US Supreme Court will rule on the validity of this health insurance law in 2012 or 2013. If the Court finds the legislation is unconstitutional we will be back to square one trying to resolve these difficult issues.
Retirement Plans for Sole Proprietors and Small Corps. For business owners without employees looking to make a retirement contribution in excess of the traditional IRA limits, we continue to recommend an Owner 401k. This type of retirement plan is easy and cheap to establish and allows you to contribute up to 25% of the business' net earnings as well as an "employee" share of up to $16,500 for 2011 and $17,000 for 2012. The two contributions together cannot exceed $49,000 plus $5,500 for employees over age 50.
Hire a Vet! There is a new credit available to employers to help pay the salary of war veterans hired between November 21, 2011 and January 1, 2013. The amount of the credit varies depending on how long the veteran has been out of work and is computed as a percentage of pay (e.g. 40% of first $14,000 paid to veteran unemployed for 6 months). If you had employees that qualified for the payroll holiday provisions of the Hire Act last year, they may qualify your business for a different credit if you retained them for more than 52 weeks. You should plan on discussing all new hires with your tax adviser to determine whether any of the multiple new-hire credits are available.
Asset Purchases. Although the amount of bonus depreciation for new assets placed in service in 2012 is dropping to 50% and the Section 179 deduction limits are also lowered, most businesses will still benefit from both of these accelerated depreciation methods. With profits down over the last few years it is not a bad idea to stretch the expense deduction from depreciable assets over a number of years anyway. When and how to deduct the cost of equipment and asset purchases is always an interesting and challenging question and it is good to have these different options to choose from.
Mileage Rates. IRS has published the mileage deduction rates for 2012. Business use of a vehicle is deducted at 55.5 cents per mile; a deduction of 23 cents per mile is available for medical and moving expenses and charitable miles are deducted at 14 cents per mile.
