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Category Archives: Tax

Tax Help for Small Businesses from the IRS

The IRS Small Business and Self-Employed Tax Center, available on the IRS website, offers extensive resources and online tools designed to help small businesses and self-employed persons. Among the information and resources available on the website are:

The site provides important tax information for all stages of owning a business. Other resources available on the IRS website include the following:

The IRS Video Portal: Learn about tax topics through video and audio presentations. The video portal contains archived versions of live panel discussions, archived webinars, video clips, and audio archives of national phone forums.

IRS Audits Video Series: “Your Guide to an IRS Audit” takes the viewer through the steps of an audit from notification to closing. The video series is composed of scenarios that demonstrate the stages of each type of audit: correspondence, office and field. The scenarios address issues that are common to audits of small businesses.

Virtual Small Business Tax Workshop: An interactive resource to help small business owners learn about their federal tax rights and responsibilities. The workshop contains nine stand-alone lessons that can be selected and viewed in any sequence. The workshop is available online 24 hours a day, seven days a week from any computer. It can also be ordered
on CD.

Tax Calendar for Small Business Taxpayers: This 12-month calendar is filled with information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small-business owners, with room on each month to add notes, state tax dates or business appointments. You can also download the tax events into your calendar or subscribe to the tax calendar events.

To access the IRS Small Business and Self-Employed Tax Center, please click here.

State Taxation of Benefit Coverage for Adult Children

The tax treatment of the value of benefit coverage for adult children varies by state. The states listed below have recently provided guidance or clarification on this issue. If you have employees with health care coverage for adult children in any of the states listed below, you should make sure that your payroll system is handling the taxation correctly.

California: The Franchise Tax Board confirmed that the value of health coverage for adult children is considered state taxable income to the employee and should be included in Box 16 of Form W-2.

Maine: The governor signed legislation conforming to the Internal Revenue Code (IRC) effective December 31, 2010, thereby adopting conformity to the federal tax treatment and excluding the benefit value from state taxable income.

Mississippi: The Department of Revenue explained that although no guidance has been published, the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

Pennsylvania: The state conforms to the current IRC and therefore excludes the benefit value from state taxable income.

Virginia: The Department of Taxation determined that until this issue is addressed by the General Assembly, the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

West Virginia: The State Tax Department explained that the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

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IRS Announces 2011 Standard Mileage Rates

IRS Standard Mileage Rates 2011

The Internal Revenue Service has announced the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are:

  • 51 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. The IRS is requesting public comments on whether taxpayers should be allowed to use the business standard mileage rate in this circumstance.

Other Changes Regarding Standard Mileage Rates in 2011

Beginning in 2011, a taxpayer may use the business standard mileage rate for vehicles used for hire, such as taxicabs.

Also beginning in 2011, the standard mileage rates are announced in a separate notice, which also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost for automobiles under a fixed and variable rate (FAVR) allowance. The IRS plans to discontinue publishing the standard mileage rate revenue procedure annually but will publish modifications as required.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

For Additional Information

Revenue Procedure 2010-51 and Notice 2010-88 contain additional details regarding the standard mileage rates.

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Small Business Health Care Tax Credit Help From the IRS

The Internal Revenue Service released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. The release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.

What is the small business health care tax credit?
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

Small businesses can claim the credit for 2010 through 2013 and for any two years after that.

  • For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations.
  • Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.

The maximum credit goes to smaller employers – those with 10 or fewer full-time equivalent (FTE) employees – paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.

What information does the new guidance include?
The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.

How does a company claim the tax credit?

  • Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on their income tax return.
  • Tax-exempt organizations will first use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.

Additional information

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