Happy Veterans Day! Did You Know Tax Credits are Available for Hiring Veterans?

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37738634Veterans, National Guard Members and Reservists remain key assets in helping meet workforce needs.

A free publication for employers, prepared for the Center for America, provides clear and concise understanding along with step-by-step guidance on four new federal tax credit programs: Returning Heroes; Wounded Warrior; Activated Military Reservist Credit for Small Businesses; and the Federal Empowerment Zone Employment Credit.

The guide includes links to the required Internal Revenue Service and Department of Labor forms employers need to submit. It features key eligibility and filing details, with guidance on eligibility and the specific steps to take to claim the credits.

American Jobs for America’s Heroes is a nonprofit campaign sponsored by Phillips 66 and foundations to encourage employers to post full-time jobs for veterans, National Guard members and Reservists. Access the guide and additional information.

Retirement Plan Sponsors: Feeling Out of the Loop?

ProCoursePrince is with ProCourse Fiduciary Advisors, LLC, a registered investment advisor.

Seventy-three percent of human resources professionals said they have needed to become experts on health care and retirement to do their job effectively. When was the last time you were comfortable stating that you understood all of the rules and regulations your job title or position requires you to comply with?

With regard to regulatory matters, one thing is constant: change. As regulators are starting to more closely examine retirement plans, it is important for those individuals who are responsible for overseeing their company’s retirement plan to pursue continuous training and stay up-to-date with industry-related best practices. Fortunately, you do not have to go far to seek this training as the Indiana Chamber of Commerce is hosting, “Best Practices for Retirement Plan Fiduciaries,” which will help you:

  • Learn from the mistakes of others by reviewing recent court cases (with an emphasis on what they should have been doing)
  • Review current trends from the Internal Revenue Service and the Department of Labor and know what to be on the lookout for
  • Identify how you can perform a self-audit of your retirement plan and potentially uncover easy fixes that could otherwise lead to costly errors
  • Hear about what politicians and regulators are considering changing with respect to your role in administering your retirement plan

Our goal is to help retirement plan sponsors obtain a better grasp on their roles and responsibilities and determine areas where they can improve their efforts so to better protect themselves as a fiduciary and, in the end, provide a better retirement plan for their employees.

IRS Decision Good News for Small Businesses

You don’t hear this often: Kudos to the IRS. They’ve stopped plans that would have been a nightmare for small business recordkeeping. The Phoenix Business Journal reports:

The Internal Revenue Service has dropped plans to require businesses to reconcile their receipts from credit card transactions with reports filed with the IRS by third-party payment entities.

Legislation enacted in 2008 requires these third parties to report how much every merchant is paid each year through credit cards, debit cards or services like PayPal. For the 2012 tax year, the IRS planned to require businesses to reconcile their records with these third-party reports when they file their tax returns.

The IRS decided to drop this requirement after complaints from small-business owners, who said it would pose a significant burden on them. They noted that the amount recorded on credit or debit card purchases often does not equal the revenue a business receives from the transaction. For example, customers often get cash back on debit card purchases or receive cash when they return merchandise purchased with credit cards.

Legislation to overturn the requirement recently was introduced in the House. On Feb. 9, however, the IRS told small-business groups it would not impose the reconciliation requirement for 2012 tax returns, “nor do we intend to require reconciliation going forward.”

“We appreciate your work with us in this and other areas as we continually seek to improve our processes and to minimize compliance burden on taxpayers,” wrote Steven Miller, the IRS’ deputy commissioner for services and enforcement.

Business groups praised the agency’s decision.

“The IRS did the right thing, and they should be applauded for listening to the concerns of the small-business community,” said Giovanni Coratolo, vice president of small-business policy at the U.S. Chamber of Commerce.

“We were very pleased that the IRS took time to listen and work with us to resolve this matter in a satisfactory manner,” said Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association. “This will relieve retailers of an unnecessary burden while still providing the IRS with the tools it needs to ensure tax compliance.”

Dan Danner, CEO of the National Federation of Independent Business, called the IRS reversal on the reconciliation requirement “a small, but important victory for small business."

6,000 Hoosier Non-Profits No Longer Tax Exempt

Our friends at Inside INdiana Business ran this release Tuesday, explaining how legislation passed in 2006 is now having a major impact on non-profits across the country:

The Internal Revenue Service today announced that approximately 275,000 organizations under the law have automatically lost their tax-exempt status because they did not file legally required annual reports for three consecutive years. The IRS believes the vast majority of these organizations are defunct, but it also announced special steps to help any existing organizations to apply for reinstatement of their tax-exempt status.

Congress passed the Pension Protection Act (PPA) in 2006, requiring most tax-exempt organizations to file an annual information return or notice with the IRS. For small organizations, the law imposed a filing requirement for the first time in 2007. In addition, the law automatically revokes the tax-exempt status of any organization that does not file required returns or notices for three consecutive years.

For several years, the IRS has made an extensive effort to inform organizations of the changes in the law through multiple outreach and education avenues, including mailing more than 1 million notices to organizations that had not filed. In addition, last year the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file required notices and come into compliance. About 50,000 organizations filed during this extension period. Overall, the IRS believes the vast majority of small tax-exempt organizations are now in compliance with the 2006 law.

“During the past several years, the IRS has gone the extra mile to help make tax-exempt groups aware of their legal filing requirement and allow them additional time to file,” IRS Commissioner Doug Shulman said. “Still, we realize there may be some legitimate organizations, especially very small ones, that were unaware of their new filing requirement. We are taking additional steps for these groups to maintain their tax-exempt status without jeopardizing their operations or harming their donors.”

As part of this, the IRS issued guidance today on how organizations can apply for reinstatement of their tax-exempt status, including retroactive reinstatement. In addition, the IRS announced transition relief for certain small tax-exempt organizations – those with annual gross receipts of $50,000 or less for 2010 – that were made subject to the new "postcard" filing under the PPA. The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100 rather than the typical $400 or $850 fee. Full details are available in Notice 2011-43, Notice 2011-44 and Revenue Procedure 2011-36, issued today.

Ah, But Ain’t That America: A Journalist Deals with the IRS

While I would argue government does provide many worthy functions in a civilized society, those who depend on its efficiency to help them solve problems have a tendency to be disappointed (read: enraged). Here’s the story of (former Reason magazine/soon-to-be Huffington Post) writer and native Hoosier Radley Balko and his dealings with the IRS this past year… and it sounds like he’ll get to relive this for years to come (warning: a little salty language, but you may have expected that):

So I never got around to updating you on my feud with the IRS. (See here, here and here.)

Quick summary to catch you up: Last year, the IRS rejected my tax return due to a “faulty Social Security number”. Apparently, someone else had also filed under my number. I then engaged in an increasingly frustrating series of letters and phone calls to try to get the damn thing straightened out. All on my own time, and at my own expense. But it wasn’t my mistake. The whole situation was complicated by the fact that I moved a couple weeks after filing, and no matter how many times I told them this, no matter how many times I asked them to change my address in their files, they kept sending all updates and notices to my old address.

After my last update, many of you suggested I call the IRS help line. I did. It was a really frustrating conversation. I explained the situation to the woman, who then replied, “Well what do you want me to do?”

I replied, “I’d like you to help me get my refund, and to get this corrected so I don’t have to go through it next year.”

To which she replied, “Oh, you’ll almost certainly have to go through it again next year.”

“Why?”

“Because if someone filed under your Social last year, they’ll probably use it again.”

“But that’s why I’m calling. Once I prove I’m the rightful person using that number, can’t they make a note to make sure that in the future, the return with my name on it is the only return they’ll accept under that Social Security number?”

“They can’t do that.”

“Why not?”

“Because they can’t.”

Pause, as I bite my lip.

“So what would you like me to do?”

“I want you to help me get my refund, and make sure I don’t have to go through this crap again next year.”

“Yes, but what do you specifically want me to do?”

“Well, I don’t know. I don’t know what you can do. I don’t know how the IRS works. Clearly they have my address wrong. I’d like them to change it. And I’d like them to make sure whoever filed under my number this year doesn’t do it again.”

“Yes, but what do you want me to do? You have to tell me specifically what actions you want me to take.”

“Again, how would I know that? You’re the taxpayer advocate. Aren’t you supposed to know that?”

These quotes are taken from memory. So they’re obviously approximate. But it went on like this, with me getting increasingly angry, she getting increasingly obstinate. I finally gave up. (I am proud to say I didn’t use a single, goddamned profanity during the entire conversation.)

A few days later, my refund came in the mail. It had been sent to my old address, of course. A former neighbor was kind of enough to forward it to me. Which means it had actually been sent before I called the taxpayer advocate. Yet it still wasn’t noted in whatever computer screen she was looking at. Or it was, and she didn’t tell me. This was last December. So it took eight months to get all of this straightened out. They also paid me about 15 dollars in interest.

A couple weeks later, I got another notice from the IRS. This one was sent directly to my new address. Hey, they got it right! What did it say? It was a reminder that on my 2010 return, under penalty of law, I am required to report and pay taxes on that 15 dollars I “earned” in interest while the federal government held my refund.

Here’s the punchline:  I just learned tonight that my 2010 return has again been rejected due to a “faulty Social Security number.”

Which I guess means I’ll now get to do this all over again.

If you’re looking for a bright side here, the “taxpayer advocate” did correctly warn me that the IRS would once again screw up this year. So if nothing else, I guess federal employees are at least pretty competent when it comes to predicting the incompetence of other federal employees.

Advocate Calls for Taxpayer Receipts

Do you know where your federal and state tax dollars go? Not too many Americans do. One man wants to change that by having the IRS (and state tax departments) send out a receipt with your tax return — letting you know just how your dollars were used. California, of all places, appears to be ahead of the curve. Governing has the story:

As Americans spend the next three weeks rushing to file their income taxes before the April 18 deadline, most will likely come to the realization that the amount they paid the federal government is greater than any other purchase they made that year. There’s a good chance their state income taxes will rank high on the list too.

Although each taxpayer transfers thousands of dollars to the federal and state government, they’ll get nothing to show for it. Sure — there’s roads, education programs, a standing military and things like that. But they don’t get a tangible piece of paper that comes with nearly every other purchase, large or small: an itemized receipt.

David Kendall, a fellow at the think tank Third Way, hopes to change that. He’s urged the IRS to send Americans an itemized receipt breaking down how much of their money funded various activities like defense, education and low-income assistance, and he says state tax departments should consider doing the same thing.

His organization already has already created a web-based tool that anyone can use to make the calculations, but he wants the IRS to automatically mail out individualized data…

So far, California appears to be the only state that’s doing anything like that. Residents can visit the state tax board’s website, enter the amount they paid in state income taxes and find out just what their money bought.

For example, a single person living in California earning $50,00 would pay $2,485 in taxes. Of that:

•$747.49 paid for health and human services for at-risk Californians
•$730.84 funded K through 12 education
•$250.49 went toward higher education

California’ receipt calculator — similar to the federal one posted on Third Way’s website — isn’t tremendously complicated. Each calculates a spending item’s percentage of the overall budget, and then multiplies that by an individual’s tax burden. It’s relatively simple stuff. But Kendall says it’s a powerful tool, and the IRS and states should consider automatically mailing those receipts to taxpayers every year.

For starters, it would help increase civic engagement and contribute to a meaningful debate about taxes spending. It could also help with tax compliance.

“Some people don’t feel like they’re getting good value for their money,” Kendall tells Governing. “It’s just one more reason not to comply.” Giving taxpayers a receipt would show them that their money, is in fact, funding specific activities and may make the payments matter more to citizens.

Do You Know About These Tax Write-Offs?

‘Tis the season to file your taxes. Even though Vice President Joe Biden says it should make you feel "patriotic," it’s possible you may feel a little like something else when you see how much you owe. Entrepreneur.com has at least a few useful tips for business owners that may help you get a little back.

Entrepreneurs might find tax time a bit less taxing this year and next due to some new write-offs covering a range of common expenses for growing businesses.

Here’s a quick look at five breaks aimed at certain businesses that you’ll want to know about:

1. New-job creators
A new-hires tax credit can give employers a break on their payroll tax if they hired new workers into new job slots between Feb. 3, and Dec. 31, 2010. These workers can’t have replaced people who left. They have to add to your headcount. And they have to have been unemployed for 60 or more days prior to you hiring them.

If your business qualified for this deduction, which amounts to 6.2% of your payroll tax, you should have taken from your quarterly payroll tax estimates during 2010. But if you missed it, it’s worth going back and amending those quarterly payments to account for the credit, says Jeff Anderson, a partner who works with entrepreneurs at Padgett Stratemann, an accounting firm based in Austin, Texas.

What’s more, an additional $1,000 general business tax credit may be available in 2011 if you keep these new employees for 52 weeks or longer. So if you qualified for the first credit, make sure you qualify for the second one as well, says Stan Ginsberg, a partner in New York with the accounting firm Metis Group.

2. Cell-phone users
Mobile phones used to be counted among items the Internal Revenue Service refers to as "listed property," such as laptops or cars that might be purchased for work or provided by an employer but that lend themselves to personal use. Users had to keep track of their business and personal use for these items and write off the former proportionally.

The IRS has removed cell phones from this onerous list, which means that if you provide employees with cell phones or use one for business yourself, "Your business can write it off directly," says Anderson.

3. Large sport-utility vehicle buyers
This is a great break for entrepreneurs who need an SUV that’s heavier than 6,000 pounds for their business, such as a Chevy Tahoe or Ford Explorer. If you bought or plan to buy a new one between Sept. 8, 2010, and Dec., 31, 2011, you may be able write off the full value in a single tax year, rather than having to depreciate it over a few years, as has been the case previously.

"This is a loophole for a lot of taxpayers," says Anderson.

If you really do need this kind of horsepower, this credit could go a long way toward defraying the cost of owning one of these gas guzzlers.

4. New-equipment buyers
In a bid to get business owners to open the till and spend a little, the IRS is offering "bonus depreciation," which is the temporary ability to write off more equipment in a bigger way.

If a business bought or buys new equipment between Sept. 8, 2010, and Dec. 31, 2011, it may be able to write off 100% of the cost all at once. We’re talking big items like computers, office furniture and manufacturing equipment. "This was enacted to help manufacturers and help to spark the economy," Anderson says. For this reason, the items have to be purchased new, not used, and put into use during that same period.

Better still, the write-off has no limits on how much you spend and isn’t capped by your taxable income, as is the case with the write-off rule this one temporarily supersedes, says Anderson.

5. Employee health-insurance buyers
The small employer health-care credit lets very small businesses write off 35% of the premiums you pay for employees’ health insurance. It sounds great, and it is, if you qualify, but there are limits, says Anderson.

To qualify, a business must have fewer than the equivalent of 25 full-time workers. So, for example, you could have 50 part-time workers. The average annual salary across your employees can’t top $50,000, and you must be covering more than half of your workers’ health-care costs.

The credit will rise to 50% in 2014, but it will also phase out for employers who pay an average annual employee wage between $25,000 and $50,000. "It’s meant to give a tax credit to business owners who provide health insurance to lower-wage workers," says Ginsburg, "But it’s too onerous to qualify for it. It isn’t going to get a lot of play [in places where wages are high]."

Even so, with the number of new tax breaks this year, many entrepreneurs are likely to find at least one that could come in handy this spring.
 

UPDATED: Our Congressmen Agree on Something! (Paperwork is Terrible)

Any time eight members of a nine-person Congressional delegation can agree on something these days, it must be a good thing. That is the case with the Small Business Paperwork Mandate Elimination Act of 2011.

H.R. 4 is expected to be considered on the House floor today and the subject of a vote on Thursday. The 273 co-sponsors include all six Indiana Republicans (Larry Buschon, Dan Burton, Mike Pence, Todd Rokita, Marlin Stutzman and Todd Young) as well as Democrats Andre Carson and Joe Donnelly. Only Pete Visclosky is missing from the co-sponsor list, which, of course, doesn’t disqualify him from supporting the bill.

For those who don’t recall the provision or prefer to block it out in order to try and get a good night’s sleep, a section of the Patient Protection and Affordable Care Act mandates that small business owners file a 1099-MISC with the IRS for all payments of $600 or more to a vendor in a tax year. In other words, just about everything. In a regulatory world gone awry, this might be the biggest nightmare of all if allowed to proceed.

The repeal earlier passed the Senate 81-17. Let’s hope common sense prevails in the House this week. The Small Business & Entrepreneurship Council has additional background and facts.

UPDATED: Thankfully, the U.S. House has voted to repeal this ridiculous measure. Surprisingly, despite being listed as a co-sponsor, Indiana Rep. Andre Carson voted against the measure. All eight other Hoosiers representatives sided with the majority in a 314-112 vote. The Senate has passed a slightly different version, so a compromise will need to be reached. Journal of Accountancy has the story.

ISRs Mean JOBS for Someone

When the IRS comes calling, most people are worried. Switch two letters to ISR and the tone switches from potential tax troubles to economic opportunity.

Although health care reform still dominates the discussion in Washington, those engaged in the military are preparing for a 30,000-troop expansion in Afghanistan. And they will need ISRs — intellligence, surveillance and reconnaissance products. Those are vehicles, manned and unmanned, and the accessories that go with them that can be deployed quickly.

In fact, Army General Stanley McChrystal, the top commander in Afghanistan, told a Senate committee, "There’s almost no amount of ISR, in my view, that would not be value added to my effort in Afghanistan."

Indiana has a growing defense industry, with state officials recently compiling more expansive information on the key players and their assets. Will the state benefit directly from this opportunity? I’m not sure our capabilities are at that level, but maybe I’m off base. I do know of some Hoosier companies that have been big beneficiaries of military contracts in other areas. Can anyone provide more insight?

Let’s leave the "should we be there or not?" thoughts out of this discussion. We are, products are needed to support our troops, our state makes things and I don’t think anyone is in a position to turn down development that means more jobs and healthier businesses.

Dems’ Health Care Preposal Draws Fire from U.S. Chamber

Pres. Obama and House Democrats have constructed a health care plan with the intent to cover 97% of Americans by 2019. Obama asserts the plan would "begin the process of fixing what’s broken in the system." The U.S. Chamber of Commerce — to whom we have no affiliation but do share many of the same goals — claims the proposal would hit business owners at the worst possible time.

House Democrats plan to fund the broadest U.S. health-care expansion in four decades by increasing taxes on the wealthiest Americans, imposing a surtax of 5.4 percent on couples with more than $1 million in income.

The legislation unveiled yesterday would place additional taxes on households with more than $350,000 a year in income and calls for further increases if the measure doesn’t hit a target for cost savings. The provisions are intended to raise $544 billion over 10 years…

The plan drew fire from the U.S. Chamber of Commerce, the nation’s biggest business lobby.

“The intention of this plan is to tax high-income households, but the real victims would be America’s small business owners,” the Washington-based group’s president, Thomas Donohue, said in a statement. “Since when does our great free-market country punish success?”

The legislation would raise taxes on larger corporations as well. Among other things, it would make it easier for the Internal Revenue Service to prosecute tax shelters, and deny certain cross-border deductions that some companies are able to claim through tax treaties.

The House is also proposing a mandate on Americans above a certain income level: People would be penalized as much as 2.5 percent of their income for failure to buy health insurance. Most employers would be required to insure their employees or pay a penalty equal to as much as 8 percent of their payroll.

And wouldn’t you know it, health care is the topic of this month’s Policy Issue Conference Call — a free benefit for Indiana Chamber members. The call is this Friday (July 17) at 9:30 a.m. and members are welcome. Just register here.

UPDATE: House Republicans have also released their interpretation of a bureaucratic nightmare that would ensue under the proposed health care plan. View that here. (Hat tip to Chamber intern Daniel Latini.)