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Friday, September 30, 2011

Is the new Voluntary Settlement program for independent contractors a good idea?

Is the new Voluntary Settlement program for independent contractors a good idea?

An article at Forbes says no:

Where Section 530 of the Revenue Act of 1978 applies, reclassification of a worker from independent contractor to employee for tax purposes can only have prospective effect. There is no legal basis for assessing employment tax, penalties, or interest with respect to such worker for a prior period.
Why, then, would an employer voluntarily agree to pay any employment tax with respect to a worker classified as an independent contractor for a prior period for which the worker was classified as an independent contractor? Why, too, would the employer voluntarily agree to extend the assessment period for employment taxes with respect to such worker for each of the next three years?


Click here for the article: Employers Beware of IRS' Illusory Worker Classification Program

Moreover, such a reclassification could lead to negative actions from other government agencies, since the amnesty only applies to the IRS. Employees could also use entry into the program as evidence of wrongdoing by the employer and thus sue for benefits that weren't provided.

However, there are risks in not entering into the program:

Yet given the fact that the Labor Department has teamed up with the IRS and a growing number of states in a renewed effort to penalize businesses for wage theft, employers should weigh their options carefully. According to the Associated Press, the IRS collected $4 million in back wages on behalf of about 6,500 employees who were misclassified in 2010. With 300 new investigators in the agency this year – all of whom will focus exclusively on probing wage theft complaints – we will likely see a significant increase in those numbers, along with the fees and penalties that accompany them.


Click here for the article: Experts Weigh in on the IRS’s New Voluntary Classification Settlement Program

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IRS Announces New Voluntary Worker Classification Settlement Program; Past Payroll Tax Relief Provided to Employers Who Reclassify Their Workers

IRS Announces New Voluntary Worker Classification Settlement Program; Past Payroll Tax Relief Provided to Employers Who Reclassify Their Workers


IR-2011-95, Sept. 21, 2011

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
Not currently be under audit by 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, will be available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64.



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Tuesday, September 20, 2011

Eat the Rich

Article from Roth & Company:
ONE TOO MANY TRIPS TO THE BUFFETT.

Anyone up for a 134% tax rate?

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Are You Considering Law School?

Then check out this rather controversial blog about law school and the misleading statistics regarding the percentage of graduates who get jobs.

http://insidethelawschoolscam.blogspot.com/

What percentage of the time is still quite obscure, because we don't have good stats. Although the Law School Transparency people are doing fantastic work with the data available to them, that data is quite bad. We don't know the answer within a tolerable degree of accuracy to such basic questions as "what percentage of graduates of ABA-accredited law schools, and of particular schools, have full-time salaried (aka. real) jobs that require a law degree (i.e., law jobs) nine months after graduation, and what do these jobs pay?" We have even less information about people further down the line, which is actually even more crucial.


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Sunday, September 18, 2011

Cell Phone Tax Breaks

Where employers provide cell phones to their employees or where employers reimburse employees for business use of their personal cell phones in accordance with these new IRS guidelines, tax-free treatment is available without burdensome record-keeping requirements.


http://www.sjfpc.com/IRS_Tax_Deduction_Reimbursement_Cell_Phones_IRS_Notice_2011-72.html


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Off The Shelf Operating Agreements

The focus of the court’s analysis seemed to be on the “off-the-shelf” nature of the FLP. They apparently believed that if the FLP were intended for a business or other nontax purpose, more care would have been put into drafting it. Although the Turners provided a laundry list of nontax reasons for forming and funding the FLP, the structure of the partnership and the Clyde Sr.’s relationship with the FLP did not bear out those purposes.


http://www.advisorone.com/2011/09/17/how-to-build-a-foolproof-family-limited-partnershi

Cases like this aggravate me. How many legitimate businesses use off the shelf operating agreements? How many businesses actually use care in drafting their documents? For that matter, how many attorneys use any care at all? Most operating agreements I see have partnership tax language even if it is taxed as an S Corp or a disregarded entity. In the real world, many businesses forget to even pay their annual fee to the secretary of state....

Of course, it would be much better to draft documents with care. My argument is that this case uses a fictional measure of what actual businesses tend to actually do.....

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Mortgage Cancellation of Debt Tax Relief

The Mortgage Relief Act , which effects debts discharged on or after Jan 1, 2007 and before Jan. 1, 2013, generally allows taxpayers to exclude up to $2 million per married couple of mortgage debt forgiveness on their principal residence (does not include second homes or income property).


http://www.lodmell.com/protect-wealth/strategic-defaults-mortgages

Many people discover to their dismay that when a loan debt is forgiven by a lender, not only can this impact a credit report, it can result in additional taxes. This provision provides some relief.

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For those of you who have ever done tech support this is funny

Check out this article:
apple-tech-support-at-its-very-finest

This reminds me of when I worked in a Macintosh computer lab in the early to mid-1990s. I remember when a person came in and asked how to use the foot pedal (meaning the mouse). People would put all sorts of things through the laserwriters which messed them up, including one person who wanted to print what lunch they had packed on a paper bag.

When I worked at the Department of Justice as an intern, one of the attorneys there (this was 1995) asked me to install the Internet (the entire internet, not just a browser) onto his laptop so that he could connect to it when the computer was not connected to the network. He thought it was just another program.

However, I don't think anyone came to ask me how to lift up a computer. I wonder if this was put on there as a joke.....


Gizmodo via Engadget

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Interesting Forbes Article on Gifting

6 Ways To Give Family And Friends Financial Aid

The best part of this article is that you can pay directly for medical, dental or tuition expenses in addition to the 13k a year that you are allowed to gift to a person without having to file a gift tax return (or pay a gift tax). Payment must be made directly to the provider.

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Sunday, September 4, 2011

Tips for iPad

I am a rather big Apple fan, and as such use my iPad all of the time.  Unlike many, though, I use it for more than just "consumption."  I frequently get asked what are the best Apps to install and the best way to use the device.  Some of these tips will work on the iPhone as well.  Here is my list:

Apps:
I like iTap RDP to use to connect with remote desktops.  My firm has virtual workspaces set up on our exchange server, and ITap RDP is the best way that I have found to access it.  One change I would suggest making in the settings to ITap RDP is to use the pointer instead of tapping to click.  The pointer is a bit more accurate,

Logmein is good choice for logging into specific computers.  Very well designed and easy setup on macs and PCs.

Simplenote: I use Simplenote on my Mac (using JustNotes) and PC (using ResophNotes) as well as on my iPhone 4 and iPad 2 (using the Simplenote App).  If find that this is a quick way to take notes, and syncs across all of my devices.  I use the tagging function to organize everything, generally by subject area and client name.  Much better than having stacks of yellow pads with my chicken scratch on them.

Reeder:  I use this app to keep track of all of my rss feeds from Google Reader.  This is a great way to keep track of all of your interests.  I have groups set up to monitor blogs relating to tax, estate planning, Apple products, and Thailand.

Omnifocus:  Simply the best todo list program I have ever used.  Organized using the Getting Things Done philosophy, I love how when I am sitting at the phone, it will list out all of the calls I need to make.

Dropbox:  A great file storage solution that works cross platform.  Free.  Best way to store your files.

AirPrint: this is built into the iPad, but unless you have an AirPrint compatible printer, then you will need software on either your Mac or PC.  For Macs, I definitely suggest Printopia.

Evernote: I love this program because whenever I see an article, pdf or something that I want to keep, say a great news article on an area of tax law, then this program makes it so easy to retrieve and sort and keep.  I subscribe to the premium, which is not expensive.  Works cross platform.  Allows you to email items to your account, and can be installed in browsers.

Fastcase, Black Law Dictionary (I love this for the Westlaw key number categories...a great way to search), Title 26 CFR and Title 26 USC, BNA Quicktax, 

iCatcher: A great way to keep track of podcasts.  There are many tax, estate planning, etc. podcasts, as well as some Apple related ones that I listen to....  Actually, I have a TomTom holder for my iPhone that goes into my car, and I plug it into my audio system.  That way, I can listen to these podcasts while driving.

Docs2Go:  My favorite editor for Microsoft Word on an iPad.

Keynote:  Great way to present from an iPad.  Don't forget to bring your adapters!  If you touch the slide when you have the iPad plugged into a projector, then your audience will see a laser pointer like dot on the screen.  Always seems to get some oooos and ahhhs....

Goodreader: great document viewer and organizer.  Cheap.

iAnnotate: great PDF annotator.

PowerOne:  Amazing calculator with many great downloads available.

Tips:

To use Westlaw on an iPad, I do the following: 1) go into the settings on Westlaw, and turn off link viewer, 2) Download iCab mobile (a web browser) from the App Store and set it to desktop Safari.  Use ICab to view Westlaw.  For some reason the normal mobile safari doesn't work well.  Remember to use two finger scrolling sometimes if the single finger doesn't work.  When you want to email an article to yourself, be sure to select rtf (rich text format) as the .doc version used by Westlaw doesn't seem to work well with the iPad.  These tips can save you from having to spend a lot of money on WestlawNext.

As stated above, sometimes you must use two fingers to scroll so that the entire page doesn't move.

Remember that if you have a web page you like, you can save it to your home screen.  I have BNA Tax Management Portfolios saved this way.

Remember that you can do a google search not only across the internet, but also right on the page as well.

If you are trying to make folder out of Apps, the easiest way is to drag right up under the App, otherwise the App might move to either side, and it can be frustrating then to make a folder.

If you tap at the top of the screen, you can scroll right back to the top...works in mobile Safari and in emails.

Remember in iTunes to check the box to encrypt your backup (I got this tip on Daring Fireball, my favorite Apple site).  By doing this, when you upgrade your iPad (or iPhone) software you won't have to reenter all of the passwords.

If you hold down some of the keys on the iPad, you will notice that some other characters pop up (such as a Section symbol, "§," if you hold down &).