Visit her website for more details and to sign up: http://www.symmetryconsult.com/webinars.html

WASHINGTON – The Internal Revenue Service today launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.

This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.

“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees. 

To be eligible, an applicant must:

• • Consistently have treated the workers in the past as nonemployees,
• • Have filed all required Forms 1099 for the workers for the previous three years
• • Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64, posted today.

Business Mileage – from 51 cents to 55.5 cents
Medical/Moving Mileage – from 19 cents to 24.5 cents
Charitable Mileage remains the same at 14 cents

These new rates refelct the increased gas prices this year,  but it means that small business owners ABSOLUTELY must track their mileage on a regular basis in order to properly classify their mileage and be able to take advantage of the increased mileage rates.

Under the reporting requirement, businesses would have been required to issue a Form 1099-MISC to corporations as well as non-corporate entities for the purchase of tangible goods and services over $600. The tax filing requirement did not directly relate to health care but was initially included as a funding measure for the health care bill by reducing un-reported and under-reported income that would otherwise be taxable. However, small firms and self-employed individuals voiced concerns that the requirement would bury them in paperwork.

 In addition, the law also repeals the expanded Form 1099-MISC reporting under the Small Business Jobs Act of 2010 that required individuals who receive rental income from real estate to report rental property expenses on Form 1099-MISC.

If you’re interested in joining the class, please email cpa@cpamichele.com to register.

If you need our assistance with these, please send the name, address, tax ID# and amount paid for any contractor hired.  (Just a note…the healthcare bill currently imposes a new law that starting in 2012 you need to file 1099-MISC for all goods that you purchase (i.e. office supplies), as well as service providers…there is hope, but no guarantee, that this law will be repealed).

ICE (Immigration and Customs Enforcement) has increased inspections since July 2009 in a “long term strategy to address and deter illegal employment”.  Employers can face stiff penalties for I-9 violations which include substantial fines and also debarment from government contracts. Penalties can be imposed for hiring unauthorized workers as well as simply for committing paperwork violations even if all workers are authorized to work.

Penalties can include $250 to $3,000 for improper completion of the I-9 form. Paperwork violations, mistakes or missing items such as a date missing, can result in a $100 penalty up to $1000 for each form. Improper completion, retention or making it available for inspection fines range from $100 to $1,100 for each I-9. Knowingly hiring or continuing to employ unauthorized workers fines range from $250 up to $11,000 per violation. Firms who show a pattern of hiring unauthorized workers are liable for criminal penalties of as much as $3,000 per employee and may be subject to six months in prison. Investigators have considerable discretion in assessing fines and will look at factors like the size of the company, the seriousness of the violations, whether the employer was trying to comply in good faith and the pattern of past violations.

Has your business had a compliance check lately?  The employment laws continue to change and I recommend to all my clients that they work with an HR Specialist occassionally…what better time than now?

The biggest relief for taxpayers is that the Alternative Minimum Tax patch is in place once again for 2010, sparing over 20 million taxpayers from facing a huge surprise bill.  If you’ve paid AMT in the past, you’ll most likely still pay it, but at least millions of new taxpayers won’t be pulled into it.  The “Bush Tax Cuts” have also been extended two years, so tax rates will be staying the same through 2012.  And, the estate tax is going to remain at 35% for amounts over $5 million through 2012.

Working American’s will see another form of tax relief in lower payroll taxes.  Each pay period, workers are forced to pay 6.2% Social Security tax on their first $106,800 of income, which is withheld from their gross pay.  For 2011, this rate drops to 4.2%, so it’s the equivalent of a 2% raise for all working American’s.  I haven’t been able to determine if this applies to self-employed workers as well, but hopefully the details will be hammered out soon.  The last form of benefits applies to the unemployed.  These individuals receive another 13-month extension on their benefits.

There is no doubt that this tax bill is highly favored by the Republican’s and goes against the Democrat’s agenda.  It will actually cost lower-income earners money because they benefited more from last year’s Making Work Pay Credit than they do from the lower taxes.  And, wealthy individuals making $500,000 and up will save almost $4,000 over their last year’s tax bill.  Since some of the provisions, such as the AMT patch, expire at the end of 2010, and others such as the tax cuts expire at the end of 2011, we still don’t have a solid picture of what the future holds.  But, we can still be thankful that our government was able to come together at the 11^th hour and prevent an across the board tax increase!