Work Opportunity Tax Credtis

I have been evaluating the Work Opportunity Tax Credit, and I am concerned that a lot of companies that may be due this credit are not realizing the credit (the horror!).  The class of workers who qualify for this credit are numerous including: veterans, long-term unemployed, vocational rehab referrals, food stamp recipients, and even kids home from college (IN Empowerment ZONES).
 
Here is how you get the credits:
1) Hire someone from those entitled to the credit.

2) Complete the needed forms. The dates for completing the paperwork are pretty onerous and include the requirement that the forms are mailed in within 28 days of the employees start date.
-Mail in the following forms:
a) Complete IRS form 8850, which is filled out by both the soon-to-be employee and the employer.
&
b) Complete ETA form 9061

4) Mail the forms to your state agency. 
In Florida, mail forms to the following:
FLORIDA
Gloria Harrison
Department of Economic Opportunity
WOTC Program
MSC G-300
107 EAST MADISON STREET
TALLAHASSEE, FL 32399-4140
Phone: 850-921-3299
Email: gloria.harrison@deo.myflorida.com

5) Try to make sure the soon-to-be employee works at least 120 hours and more preferably 400 hours.  400 hours is where the maximum credit is realized.

6) Once the employee is hired, make sure your tax prepare knows you have hired the eligible employee and have the prepared complete IRS form 5884 to get the credit.

We here at Nicholas J. Pennewell, CPA, LLC would enjoy the opportunity to talk to anyone who thinks they are entitled to this credit.

Late S corp Election

Recently, the IRS consolidated the provisions of a number of previous revenue procedures for requesting relief for late S elections. In SUM, The new procedure is now the exclusive simplified method for taxpayers to apply for relief for these late elections.  In general, the revenue procedure expands the time for requesting relief for these late elections to 3 years and 75 days after the date the election was intended to be effective. However, for a simple late S election request, if certain requirements are met, there is no deadline for requesting relief. Taxpayers that do not qualify for this simplified relief must submit a request for a letter ruling and pay a user fee. 

The revenue procedure contains general requirements for all the different elections within its scope, as well as specific requirements for each type of election. Among the general requirements is that the requesting entity must file a reasonable cause/inadvertence statement that is signed under penalties of perjury describing its reasonable cause for failing to timely file the S election on Form 2553, Election by a Small Business Corporation, or QSub election on Form 8869, Qualified Subchapter S Subsidiary Election, or that the failure to file the QSST or ESBT election was inadvertent and describing its diligence in correcting the errors after they were discovered. These statements must be attached to the applicable election form, and the election form must contain the statement, “Filed pursuant to Rev. Proc. 2013-30” at the top.
Under the new procedure, S corporations that meet the following requirements are not subject to the three-year, 75-day deadline, but instead have no time limit on requesting relief:

• The corporation is not seeking a late corporate entity classification election;
• The corporation fails to qualify as an S corporation solely because Form 2553 was not timely filed;
• The corporation and all of its shareholders reported their income consistent with S corporation status for the year the election should have been made and all later years;
• At least six months have passed since the corporation filed its first S corporation year tax return;
• The IRS did not notify the corporation and the shareholders of any problem with the S corporation status within six months after the return was filed; and
• The completed election form includes statements from all shareholders from the date the election was to have been effective to the date of the filing stating that they have reported their income consistent with S corporation status.    

The new rules are effective Sept. 3, the date they will be published in the Internal Revenue Bulletin, but they apply to requests pending on that date as well as requests received afterward.
Taxpayers that have ruling requests pending that they would like to withdraw to take advantage of the revenue procedure (and receive a refund of their user fees) have until the earlier of Oct. 18 or the date the ruling is issued to notify the national office that it will rely on the revenue procedure and withdraw the ruling request. 

Obama Care's Impact, financially speaking

5 Ways Health Care Reform Will Impact Your Finances and Taxes

You may be confused about how the law impacts you, your finances and taxes. Whether you already have health insurance or not, here are some things you should know.

1. The uninsured will have affordable options. Beginning Oct. 1, 2013, uninsured Americans can start shopping for affordable health insurance using online health insurance marketplaces. Most uninsured United States citizens and legal residents will be required to purchase health insurance by 3/31/14.  If you can't add another bill to your budget, the federal government might assist!  See #3. below.

2. Insurance coverage will be expanded. If you have pre-existing medical conditions, you cannot be denied coverage. The law also extends coverage to young adults who can stay on their parents' plan until they are 27. Medicaid will now be offered if you're under age 65 with a yearly income less than about $15,300, or $31,155 for a family of four.

3. You may be eligible for a government subsidy to help cover insurance costs. If you purchase health insurance through an online health insurance marketplace or exchange and have yearly income no greater than $45,960, or $94,200 for a family of four, you may be eligible for a government subsidy to help pay for health insurance. Again, the income levels only potentially qualifies you for the credit, you must purchase the health insurance through an exchange (or marketplace). The subsidy will be in the form of a tax credit. Unlike most tax credits, you will not have to wait to receive the credit or subsidy; it will be applied to your insurance premium when you purchase in 2014.

4. You may receive a penalty if not insured by March 31, 2014. If you are required to purchase health insurance and have not done so by March 31, 2014, you will receive a penalty on your 2014 tax return (filed in 2015). The penalty in 2014 is $95 per adult and $47.50 per child, and the fee is capped at $285 or 1 percent of household income. Each year the penalty increases; in 2016, the fine rises to $695 per adult and will be capped at $2,085 or 2.5 percent of income. There is no penalty for a gap in coverage for less than three months.  Interestingly enough, the IRS is not able to make you liable this penalty.  They can send you harsh, intimidating, letters but they can not treat it as tax due if you owe nothing else than the penalty.  The IRS can take it from your tax refund, if you have one. 

5. If you have health insurance, you are already covered under the law. Not everyone will need to purchase health insurance through the online marketplaces. If you already have health insurance through your employer, Medicare or Medicaid, you are all set.

Current guidance to Non Profits Financial Reporting

This is a product of the Tennessee's Comptroller, it contains a comprehensive (In plain, understandable language) guide to Not For Profit Financial statements and required disclosures (aka notes to the financial statements)

http://www.comptroller.tn.gov/la/nonprofitManual/nonprofits8to9.pdf

Overlooked Deductions on the 1040

Miscellaneous Deductions

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax.

Here are some things you should know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit.  You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

• Unreimbursed employee expenses. (Where to deduct-Schedule A)
• Expenses related to searching for a new job in the same profession. (Form 2106 and transfer to Sch A)
• Certain work clothes and uniforms. (Schedule A)
• Tools needed for your job. (Schedule A)
• Union dues. (Schedule A)
• Work-related travel and transportation. (Schedule A)

Deductions Not Subject to the Two Percent Limit.  Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

• Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art. (Actually subject to a 10% threshold instead of the 2% of AGI)
• Gambling losses up to the amount of gambling winnings. (subject to the amount of  Gambling Winnings)
• Losses from Ponzi-type investment schemes.

Many expenses are not deductible. For example, you can’t deduct actual personal living or family expenses (This is covered by the Exemptions Line on the 1040). Report your miscellaneous deductions on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

More fun reading about Miscellaneous Deductions in Publication 529, Miscellaneous Deductions.