Brian Borawski CPA, PC

Archive for the ‘Payroll Taxes’ Category

Here it is, January 15 and we’re about a quarter way through the two month payroll tax cut extension with no word as to whether it’s going to be extended or not.  We have a lot of news on the Republican nominee for president and if you head over to C-Span, I’m not seeing much on the schedule other then….primary stuff.  President Obama is talking about combining agencies in his latest move but I can’t find anything about extending the payroll tax through the end of the year.

When I searched for “payroll tax cut” on Google News, you can see what I get.  There’s a story from Friday where John Boehner talked about circumventing the Tea Party contingent of his party to get the tax cut pushed through and it talks about a new round of talks “in the coming days.”  Not sure what that means.  There are also a few stories about that make it sound like we should be surprised the mortgage fees went up to pay for two month tax cut (this was part of the deal).  Finally, this Washington Times piece talks about how most Congressman won’t even be back from their recess until later in the month and one of the quotes talk about the talks going down to the wire.  The House starts back up with the Thursday and the Senate doesn’t return until January 23.

Let’s get right to it.  Taxgirl is one of the first places to go.  She’s been penning her “My Best Tax Advice Ever” pieces and she’s up to Part 2.  And in case you missed it, here’s Part 1.

Good news for procrastinators out there.  With it being Emancipation Day, tax returns won’t be due until Tuesday, April 17, 2012.  Throw in the fact that this is also a leap year and it means you have a few extra days to get your tax return done this year.  This is particularly cool for preparers and I know those extra days will come in handy.

In case you missed, I went into some of the changes on the new Form 1040, Schedule E.  If you’re a renter, you won’t want to miss this.

Extenders is the word on the street over at Congress.  With the lame and confusing two month payroll tax extension, Congress has that and a bunch of other things to take a look at preferably sooner rather then later.  Here’s the rundown on what has to be decided.

Finally, if you’re a part time or even professional gambler, here’s a decent column on tax rules for gamblers.

It’s a new year so time to get serious.  I shouldn’t be going more then two weeks without posting and there’s no excuses.  Things will improve.  Anyway, here is what’s going on in the tax world.

We got the two month extension to the payroll tax cut but buried in there is a provision that stops people from front loading their salary to take advantage of the lower rate.  This recapture becomes moot if, as I expect, the tax cut is extended through the end of the year but for a solid explanation, I’ll send you over to Tax Girl.

Since we’re visiting Tax Girl, I’d also check out her piece on 11 life changing events.  If one of these applies, you should be talking to someone.

The IRS issued some guidance on the Savers Credit. Depending on your income level, taxpayers can get a dollar for dollar credit for contributing to a tax deferred savings account.  If you’re part of a 401k, you missed the contribution deadline but if you have an IRA, you can contribute up until April 17, 2012.

Also over at the IRS, Tax Preparers will need to start filing a due diligence checklist with every earned income credit claim.  This has been a major area of abuse in the past but the checklist is the one we’re used to, it just never had to go with the return.

In an interesting piece here, we learn where payroll taxes actually go.  This is pretty basic stuff but a good link to send someone new to the subject.

Yes, I know it’s Tuesday.  but here’s what’s been in the news lately.

The infamous payroll tax cuts will go through another political vote today as the House is tying it to an oil pipeline deal that they know won’t pass the Senate or President Obama’s desk.  My guess is it passes, the Senate nixes it but this is too political of a topic to let it slide.  We’ll still be talking about this in two weeks but I think they’ll eventually get it done.

Taxgirl has a lot of good stuff this past week but I particularly liked her discussion on getting paid under the table.  She goes into how a person can dispute their classification and a lot of the tax implications and she does it in typical taxgirl style (i.e. easy to understand and informative).

The IRS is looking at a real time tax system and they have hearings coming up on the subject.  Basically they want to match everything up on your tax return with the source documents when it comes in so you have time to fix any discrepancies.  Sounds like a solid system, but I have a feeling that, to go along with it, there will probably be more information reporting down the road.

Finally, last week some of the more left leaning states are looking to tax the wealthy even more.  New York and California are both looking to raise marginal rates on their top earners.  Be on the lookout for this kind of thing in your state.

Congress is back to locking in on a payroll tax cut of course both sides of the aisle are arguing both the extent of the cut and how to pay for it.  Two different bills were looked that came from the House and neither were able to get the votes from the Senate to turn it into law.  Let’s take a look at the specifics of each plan.
Democrats

Cut payroll taxes for employees from 6.2% to 3.1% and the same cut would apply to employers who had wages under a set amount.  This would be paid for by a 3.25% surtax on people making more then $1 million.

Republicans

They basically wanted to extend the current law for another year, meaning the employee tax would be 4.2% for another year.  They wanted to pay for this by freezing the pay of federal workers for three years and eventually cutting the government workforce by 10% through attrition.

Of course now we’re looking at the Senate to come up with a compromise.  From what I’ve heard, some of the ideas that came out out of the Super Committee might be used to pay for some kind of tax cut.  Of course there’s plenty of sides to appease.  You also have to deal with the issue that time is running out and when it comes to payroll, making a retroactive adjustment could be an administrative nightmare.  Of course a lot of that would fall on the shoulders of the ADPs and the Ceridians of the world.