Small Business Credit

Small businesses can claim a credit up to 35% of the health insurance premiums they pay for their employees.  The employer needs to have fewer than 25 employees and an average salary of less than $50,000.  The employer must pay more than 50% of the medical insurance premiums.  The credit is refundable, so even if you don't owe any taxes you can get a refund.

The government came up with the plan so there are a lot of technical issues and calculations to arrive at the total.  If you fit the rough outline give us a call at 702-796-1040 so we can work the numbers with you.

Tax Law Changes

Changes to the tax law in the bill just passed were minimal.  Some of the expiring tax cuts were extended for 2 more years.  Standard deduction amounts were increased by $200 for the married filing joint and $100 for every other filing status.  Personal exemptions were increased by $50.  For a married filing joint return with the standard deduction the changes reduce their taxes by $45.  Business mileage rates were reduced to 50 cents per mile.  Contributions to retirement plans and IRAs remain unchanged.  No increase to contributions for the past two years now.  Changes to the Hope and Lifetime Learning credits covered both increases in the credits and increased earnings before the phaseout starts.  AMT has another patch to increase the income level before the AMT kicks in. 

Cancellation of Debt Income

When your credit card company cancels the balance in full or in part on your credit card that creates income to you.  You need to report the amount on your tax return and pay the tax due.  The cancellation of debt on credit cards or most other loans is treated as income.  If your credit card company offers a $10,000 discount if you pay the remaining $5,000 on the bill, then that $10,000 is income.  Lenders and credit card companies issue a 1099C.  A portion of the form goes to the IRS so they are looking to your tax return to see if you reported the income. 

If you have more questions please call us at 702-796-1040

1099s for Schedule E filers

If you have rental property then you file a Schedule E with your tax return.  Effective January 1, 2011 you must issue a 1099 to any service provider that you pay $600 or more to over the course of the year.  Service providers include lawn maintenance, pest control, pool maintenance or anyone doing repairs.

All service providers need to complete a W9 form (available at www.irs.gov) which has their name, address and social security number or EIN for their business.  Without the 1099s the IRS will not allow you to write off of the expenses on your tax return.  The 1099s need to be mailed by January 31, 2012 for the 2011 tax year. 

Need help or have other questions call us at 702-796-1040 or email us at kathy@kattax.biz or larry@kattax.biz.  Thanks

No More 941 Payroll Tax Coupons

No more taking a 941 Coupon and a check to the bank to pay your payroll taxes.  Effective January 1, 2011 the payment of federal withholding taxes, social security and medicare taxes can only be done on line through the federal EFTPS system.  If you have not paid with the EFTPS program in the past you need to go to the EFTPS website and register.  Once registered you will receive a PIN in the mail. 

Need more help, give us a call at 702-796-1040. 

Registering tax return preparers

IRS for the first time will require the registration of paid tax return preparers.  About 1,000,000 individuals are paid to prepare tax returns.  Enrolled agents, CPAs and Attorneys have been registered all along.  About 700,000 paid preparers are not registered.  Yes, Kathy and Larry are both registered and have been for years.  Starting on January 1, 2011 the IRS will no longer be required to accept tax returns from unregistered preparers.  If you are not using KatTax to prepare your tax retun make sure the preparer has registered.  If they have their PTIN will be listed after their sighnature line on page 2 of the 1040 form.

Tax Laws

Lots of rumors but little action by congress.  As you may or may not be aware many of the existing tax laws are due to expire as of December 31, 2010.  The last comprehensive tax cut bill was passed when George W. Bush was in office.  When the bill was passed, most of the provisions were set to expire on December 31, 2010 and the tax rates starting in 2011 would return to the rates in effect in 2000.  Across the board the tax rates will increase unless action is taken in the Congress.  More to follow.

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