Friedman, Cohen, Taubman and Company, CPAs

The Payroll Tax Holiday Will Last (at Least) Another Two Months

fctcpas — Wed, 04 Jan 2012 15:38:32 +0000

The “payroll tax holiday,” which was scheduled to end on December 31, 2011, was extended by Congress through the end of February. But with partisan politics playing a major role as national elections loom in 2012, the long-term outcome is far from certain.

New “Recapture” Provision

    Under the terms negotiated by Congress, the new law also includes a new “recapture” provision, which applies only to employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
    This additional tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax will be payable in 2013 when the employee files his or her 2012 tax return. With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, the IRS stated it will monitor the situation in case a new law changes the recapture provision.
    According to the IRS, it will issue additional guidance as needed to implement the two-month extension. For most employers, the quarterly employment tax return for the quarter ending March 31, 2012, is due April 30, 2012.

Two More Provisions in the New Law

1. Emergency federal benefits for the unemployed, which were scheduled to expire on December 31, were extended for two months.

2. Medicare payments to physicians, which were scheduled to be reduced 27 percent after December 31, will not be cut.

For the time being, let’s look at the way things used to be and the way things are now.

The way things used to be: There are two separate components of the federal payroll tax known as FICA (Federal Insurance Contributions Act) tax. The first portion, the 6.2 percent OASDI (Old Age, Survivors and Disability Income) portion, applies to amounts up to the annual “wage base” which is adjusted for inflation. The adjusted wage base for 2011 is $106,800 (increasing to $110,100 for 2012). In addition, the 1.45 percent HI (Hospital Insurance) portion of the tax applies to all wages. Thus, the FICA tax on amounts up to the wage base are taxed at a 7.65 percent rate.

Both the employee and the employer must pay FICA tax. Self-employed individuals effectively pay both shares of the tax, but they may deduct half of the tax payments on the income tax return for the year.

The way things are now: Under a tax law passed last year, the usual 6.2 percent OASDI rate for employees is reduced by 2 percent. A comparable tax break is available to self-employed individuals. However, employers aren’t eligible for any reduction. For employers, the 6.2 percent OASDI tax rate continues to apply to amounts up to the wage base.

The amount an employee saved in 2011 depended on the amount of his or her wages. For example, a worker earning $50,000 saved $1,000 (2 percent of $50,000) for the year. Someone earning $100,000 saved $2,000 (2 percent of $100,000). The maximum savings was $2,136 (2 percent of $106,800).

The payroll tax cut reduction was supposed to be in effect for 2011 only. But toward the end of the year, lawmakers began arguing about extending it for another full year. Political bickering ensued about how to finance the tax cut — through a new tax on wealthy Americans or through spending cuts.

On December 23, finally Congress passed a law extending the payroll tax cut through the end of February. The law is aptly named the Temporary Payroll Tax Cut Continuation Act of 2011.

Congress Will Revisit the Issue Soon

Therefore, if the tax holiday is going to last throughout 2012, Congress will have to take up the issue again when they get back to Washington after the holidays. Absent any new legislation, the OASDI tax rate for employees will revert to the 6.2 percent level on March 1, 2012 on wages up to $110,100.

So be aware that payroll tax withholding could still change in March. Consult with your tax adviser if you have questions about your situation or the impact on your business or organization.

Choosing the Right Legal Form for Your Business

fctcpas — Thu, 01 Dec 2011 17:17:34 +0000

Evaluate Your Choices

Choosing the appropriate legal form for a business is one of the first issues most entrepreneurs face. It is an important decision at the formation stage and also as a business grows. Sole proprietorships are generally the easiest. Corporations offer some different advantages, but often with additional complexity.

This article addresses some of the pros and cons of different types of legal structures for businesses. Even if your enterprise has been in existence for a while, it may be time to review your options. There can be many complexities in determining the best legal structure and a qualified attorney may be of value when evaluating your choices.

At a minimum, consider the following issues when evaluating the business structure decision:

Number of owners;
Personal liability of owners;

Tax treatment;

Control and management; and

Capital contributions.

Here is a chart that provides some of the basic information to consider.

Business Structure Alternatives
Issues to Consider	Sole Proprietorship	C Corporation (Regular Corporation)	S Corporation (Sub-chapter S Corporation)	General Partnership	Limited Partnership	Limited-Liability Company (LLC)
Ownership Rules	One owner.	Unlimited number of shareholders with no limit on the classes of stock.	Up to 75 shareholders are allowed. Only one class of stock is allowed.	Unlimited number of general partners.	Unlimited numbers of general and limited partners are allowed.	Unlimited numbers of “members” are allowed.
Liability of Owners	Unlimited liability for obligations of the business.	Generally, no personal liability for obligations of the corporation.	Generally, no personal liability for obligations of the corporation.	All general partners are fully liable for obligations of the business.	Unlimited liability for the general partners and no personal liability for the limited partners.	Generally, no personal liability for obligations of the entity.
Tax Treatment	Entity is not taxed, all income and losses passed through to owner.	Corporation is taxed at the corporate level. Shareholders are taxed on any dividends received.	Entity is not taxed; profits and losses are passed through to the shareholders.	Entity is not taxed, all income and losses passed through to partners.	Entity is not taxed; profits and losses are passed through to the general and limited partners.	Entity is not taxed; profits and losses are passed through to the members.
Control and Management	Sole proprietor manages the business.	Board of Directors has overall management responsibility with officers having day-to-day responsibility.	Board of Directors has overall management responsibility with officers having day-to-day responsibility.	General partners have equal management rights unless they decide otherwise.	General partner manages the business subject to the Limited Partnership Agreement.	The Operating Agreement describes how it to be managed. A Manager is usually designated to manage the business.
Capital Contributions	Sole proprietor makes any capital contributions as needed. Easiest.	Shareholders usually buy stock in the corporation. Corporation can issue common and preferred stock.	Shareholders usually buy stock in the one class of stock issued by the corporation.	General partners contribute money or services to business and receive interests in profits and losses.	Both general and limited partners contribute money or services and receive interests in the profits and losses.	The members typically contribute money or services to the LLC and receive an interest in the profits and losses.
Ease of Establishing	Easiest.	Must file Articles of Incorporation with the Secretary of State.	Must file Articles of Incorporation with the Secretary of State.	No filing. But a partnership agreement is needed.	File an application with the Secretary of State.	File Articles of Organization with the Secretary of State.

For more information contact us at at info@fctcpa.com or 954-315-7100.

Protecting Your Financial Identity

fctcpas — Mon, 14 Nov 2011 21:51:41 +0000

No one expects it to happen to them. You think you’re careful with financial information, so how could someone steal your identity?

Very little information is needed to steal your identity — just your name, Social Security number, and birth date. Armed with that information, thieves can obtain credit cards, get loans, purchase a car, or apply for a job — all in your name.

Where do thieves get this information? Many people have their checks printed with their Social Security number, driver’s license number, and birth date. Stealing your mail often results in something with your Social Security number on it. A call to a credit bureau, posing as a prospective landlord, employer, or lender, often yields information. Computer-literate thieves can obtain information over the Internet.

If you are a victim of identity theft, inform the three major credit bureaus so a fraud alert can be placed on your account. That way, no new credit will be issued without first contacting you. Also file a report with the police in case a creditor wants proof of the crime. Make sure to file the Federal Trade Commission’s ID Theft Affidavit, which advises many companies and organizations about the theft.

While you typically won’t have to pay for anything charged by an identity thief, you will have to work to restore your credit and to ensure all fraudulent accounts are closed. That can be time consuming as well as expensive.

To help prevent your identity from being stolen, follow these tips:

Protect your Social Security number. Only give it out in situations where it is absolutely required, such as on tax forms, employment records, and for banking, stock, and property transactions. Request a personal identification number for phone access to financial information. Don’t print your Social Security number on your checks. Since so much financial information is linked to your Social Security number, ensure that it’s not readily available to individuals who could use it fraudulently.
Check your credit report annually. Under an amendment to the Fair Credit Reporting Act, the three nationwide credit bureaus — Experian, Equifax and Trans Union — are each required to provide you with a free copy of your credit report once every 12 months. There is one central Web site, toll-free phone number, and mailing address to obtain free annual reports. To order, go to www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. All credit bureaus also will provide a free copy if you were denied credit based on their report and request the report within 30 days of denial. Review your reports carefully for errors. It is not uncommon to find information on people with similar names or other family members in your credit file. If you find errors, report them immediately in writing. The credit bureau must then investigate the items and resolve those that can’t be verified. If the matter is not resolved to your satisfaction, you can submit a “statement of dispute” explaining your position, which must be included in your report.
Shred important financial records. When discarding old tax returns, bank statements, brokerage statements, and other financial documents, be sure to shred the documents.
Remove yourself from mailing lists. Pre-approved credit card offers are an easy way for thieves to obtain credit cards quickly. Credit bureaus frequently sell lists to companies making these offers. You can call the credit agencies and request your name be removed from these lists.

SEC Announcement

fctcpas — Thu, 27 Oct 2011 18:20:24 +0000

FCT is pleased to announce the expansion of its SEC practice

FCT is a member of the PCAOB (Public Company Accounting Oversight Board), an organization established by Congress to oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

Our firm has been assisting public companies with their annual audits and quarterly reviews for many years, and we have developed a keen set of skills and passion in this discipline.

We have been a member of the PCAOB since its inception, and are proud to report that we have never received any negative comments on our audit performance nor any criticisms of our Firm’s quality control system resulting from their inspections.

Although we are a local firm, we also are able to service large multi-national organizations due to our affiliation with Nexia International, a global organization comprised of over 150 CPA firms and consultants located in almost every major city around the world.

We will be providing in our biweekly newsletter, articles addressing hot topics and current accounting developments related to public companies. We always welcome your feedback on relevant issues. Please send your comments to ronf@fctcpa.com.

Please note that some of the services that we offer our SEC clients are follows:

10K AUDITS
10Q REVIEW
REVERSE MERGERS/SHELLS – ASSISTANCE/CONSULTING/AUDITS
S-1 REGISTRATIONS – ASSISTANCE/CONSULTING/AUDITS

For further information about our firm, please refer to our web site at www.fctcpa.com/SEC

Saving Property Tax Dollars

fctcpas — Thu, 27 Oct 2011 18:18:13 +0000

In Florida, most property owners should have received their property tax assessments from their respective counties by now.

If you believe that your real property or personal property has been assessed too high, you can possibly get a reduction in your property tax bill.

You will have to file a property tax petition with the County Court by approximately mid-September. You should check with your individual County for their exact deadline. There is a small filing fee (usually about $15).

There are specialized companies who we work with, who may handle your case for you, and many will work on a contingency fee which would be a percentage of the tax savings.

If you have any questions, feel free to E-mail or call me at JoelG@fctcpa.com or 954-315-7180. Remember, time is of the essence, since there is a deadline.

Tax Reminders for College Students

fctcpas — Thu, 27 Oct 2011 16:14:18 +0000

It’s That Time Again

With the summer nearly over, many a college student is in the process of getting their bags packed for a new semester at university. Others may be working and returning to college for career purposes. But one thing is for certain – the rising cost of getting an education is making everyone anxious. So, it’s wise to get a handle on the IRS tax benefits and implications of going off to the hallowed halls of college.

Here are just a few items to remember:

1. Don’t Forget Educational Tax Credits – The IRS allows for credits on your income tax through the American Opportunity Credit or Lifetime Learning Credit, but the credits are based on income levels. There’s also a deduction for tuition and fees, but you cannot take the education credit and a deduction for tuition and fees for the same student in the same year. Once you determine whether or not you qualify for both, then you can determine which one would be better to take. Call the IRS and your tax advisor for help and clarification. The credits or deduction can be taken for yourself, your spouse or your dependent. But, be warned – you can’t claim this deduction or credit if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return.

2. Understanding Scholarships and Fellowship s – If you or your child is fortunate enough to receive a scholarship or fellowship for higher education (undergraduate and graduate), there are certainly tax issues to consider. According to the IRS, scholarship and fellowship money is tax free if you are a degree candidate at an eligible educational institution and the money is used for qualified education expenses. Qualified expenses are tuition and fees, books, supplies and equipment required for a class. Surprisingly, qualified expenses for scholarships and fellowships DO NOT include room and board.

3. Understanding the 529 College Savings Plan - It’s more than likely if you’ve socked away money for college, it’s in a popular 529-college savings plan. The obvious benefit of a 529 plan is the ability to have tax-free withdrawals of the money, if and when it is applied to recognized college expenses.

4. Employer Educational Benefits - If your job pays you to go back to school (undergrad or grad), there are a number of IRS rules to remember and quite a few stipulations on the money. Qualifying benefits are generally not considered as wages, as long as they do not exceed $5,250 each year.

5. Work-Related Educational Expenses – If you are an employee and can itemize your deductions, you might be able to deduct work-related education expenses to a degree. Expenses should be greater than 2 percent of your adjusted gross income. For the self-employed, you might be able to deduct qualified work-related education costs from your self-employment income. The tuition and fees deduction and education credits mentioned in #1 above may also apply for employees and the self-employed, but check with the IRS for info on the requirements.

6. Student Loan Interest Deduction - The IRS does allow for a deduction for interest on your student loan, but there are income caps and other stipulations on this deduction.

These are just a handful of some of the things to consider. Contact the IRS and a reputable tax advisor for additional, complete and more detailed information on tax credits, deductions, and tax implications related to college savings and expenses for you, your spouse or child.