Enhanced Work Opportunity Tax Credit: Hiring Veterans
The “VOW to Hire Heroes Act of 2011″ enhances the Work Opportunity Tax Credit (WOTC) and extends the tax credit through December 31, 2012. The bill provides for a maximum credit of $9,600 per qualifying individual hired. Click here for a summary of the credit.
Tax Tips for Professional Athletes
As an advisor or agent to professional athletes, one responsibility you might have it to provide sound tax advice to your clients. Through careful planning & compliance, unwanted tax burdens and risk for your clients can be minimized. Important tax questions to consider for professional athletes include:
- What states do they need to file in?
- What can be done to minimize the tax situation?
- What state are they a resident in?
- What items can be deducted from their return?
Click here for a checklist of items that professional athletes should consider when it comes to income taxes.
Online Retailers & Sales Tax
There is a continuing debate about what to do with online retailers and collecting sales tax. Many of the top “e”-tailers do not collect sales tax in states in which they have no physical presence. For consumers, it is becoming more and more popular to shop online to save money and avoid paying any sales tax.
Should online retailers be collecting sales tax? Do online retailers have a built in advantage over local stores? Click here for an article discussing these questions and items to keep in mind related to sales tax if your company buys or sells over the internet.
Long-term Care Insurance & Your Business
Owner-Employees of S Corporations vs. Owner-Employees of C Corporations
Providing fringe benefits such as long-term care insurance to owner-employees can be an effective way to add value to your company. In general, the Internal Revenue Code allows employees to exclude certain fringe benefits from gross income and deduct the fringe benefit as a business expense. However, there is a difference in the treatment to owner-employees depending upon what type of entity structure your business is operating under.
Below is a comparison of the tax impact to owners of C corporations vs. owners of S corporations when providing long-term care insurance as a fringe benefit:
Rules for C Corporation Owner-Employee
- Nondiscrimination rules do not apply to LT care insurance plans that are in separate plans from other health benefits. (The insurance company may require the employer to define the classes of employees eligible. If the employer intends to provide coverage to key employees, it may be beneficial to buy individual policies rather than having a group plan).
- Individual contracts purchased for key employees are fully deductible by the business and no income is reported to the employee.
- They are not subject to ERISA since individual policies are not group plans.
- Language in employment contract stating that LT care insurance is being provided may be a good idea.
- No limitations apply in the amount of LTC insurance that can be provided for tax free to an employee.
Rules for S Corporation Owner-Employee
- Greater than 2% shareholders must include the premiums paid on their W-2.
- Income is not subject to FICA tax and are excluded from boxes 3 and 5 of the W-2.
- An above-the-line deduction is allowed on the shareholder’s Form 1040.
- The amount that is deductible on Form 1040 is limited based upon the age of the shareholder.
- Under age 40, the limit is $340
- 41-50 it is $640,
- 51-60 it is $1,270
- 61-70 it is $3,390
- over 70 it is $4,240.
President Obama’s Proposed Deficit Reduction Plan
On September 19, 2011, President Obama proposed a $3 trillion federal budget Deficit Reduction plan, including $1.5 trillion in tax increases. Although this is just a proposal and not yet law, it is important to stay informed of the items included in the proposed Deficit Reduction Plan.
Click here to view the White House Tax and Deficit Reduction Proposals Special Report
The Special Report highlights the following proposals:
- Repeal of Bush-Era Tax Cuts for Higher Income Taxpayers
- The Warren Buffet Rule
- Estate Tax Reform
- Elimination of Oil, Gas and Coal Preferences
- LIFO Repeal
- Permanent FUTA Surtax Extension
- International Tax Reforms
Feel free to contact Froehling Anderson at 952.979.3100 with any questions you may have on the proposed Deficit Reduction Plan.
