office hours - tax season 2008

Emmaus Office

• Mon:  9 AM – 6 PM
• Tues – Thurs:  8 AM – 6 PM
• Fri:  8 AM – 5 PM
• Sat:  9 AM – Noon

Bethlehem Office

• Mon – Thurs:  9 AM – 6 PM
• Fri:  8 AM – 5 PM

Both offices are closed daily for lunch from Noon – 1:00 PM.

retirement age

The full retirement age for people born in 1942 is now 65 years and 10 months.  There is no limit on employees’ earnings beginning with the month they reach full retirement age.  When they reach full retirement age, they can work and received unreduced Social Security retirement benefits.

If your employees are less than full retirement age when they begin to receive benefits, they can earn more in 2008 without their benefits being reduced. 

For more information on wages base and benefits increases, see the Social Security press release at http://www.socialsecurity.gov.

Source:  “Reporter”, Winter 2007

How to keep track of 1099's

Issuing 1099’s to vendors can be a simple procedure in your software, if your vendors are set up correctly. Please follow the instructions below to set up your vendors in the right manner. If you have Peachtree:

• Go to MAINTAIN
• Select VENDORS
• Enter a new vendor ID and name, or pull up a vendor that you currently use.
• On the right hand side of the screen, there is a field that says “1099 Type”. Change that field to whatever is appropriate, i.e. are they an independent contractor, did you pay interest expense to a contractor, etc
• Next, click on the purchase default tab and enter the vendor’s tax ID, either an EIN number or Social Security Number
• Click SAVE
• Setting this up correctly allows you to pull a 1099 vendor report before you print your 1099’s.

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Weekly Tax Tips

September 6, 2010
August 30, 2010
August 23, 2010
August 16, 2010

Monthly Tips

Business September 2010
Financial September 2010

IRS ELECTRONIC FEDERAL TAX PAYMENT SYSTEM (EFTPS) MANDATE LETTERS

The EFTPS deposit threshold remains at $200,000 in aggregate federal tax deposits for 2008.  The term “aggregate deposits” refers to the total amount of all taxes deposited during the calendar year.  Employers who either exceeded the threshold in 2006 or made electronic deposits in 2007 are required to make deposits using EFTPS beginning January 1, 2008.  Employers who exceeded the threshold in 2007 will be required to make deposits using EFTPS beginning in the second succeeding calendar year.

Employers who are mandated for EFTPS must be enrolled.  Non-compliance penalties will be assessed by the IRS if an employer does not file through EFTPS and is mandated to do so.

If you receive an IRS EFTPS mandate letter, please send us a copy of the letter, as well as proof that you have independently enrolled your company.  These documents allow us to ensure that you are in compliance with IRS requirements.

TAX MISTAKES TO AVOID DURING A DIVORCE

By working together with a financial planner and/or accountant during your divorce proceedings, you can minimize total taxes you and your ex will pay during separation and after divorce and use the money you save to improve your lifestyles.  Here are a few common mistakes:

1.  Failing to negotiate dependency deductions: In 2008, the exemption amount for each dependent will be $3500.  In a divorce or separation, the custodial parent specified in the agreement is entitled to the exemptions or without an agreement, the parent with physical custody gets the exemptions.  The lower income parent can sign over the exemption to the higher income parent using IRS Form 8332, resulting in greater tax savings to the higher income parent.  For example, a $3500 exemption for a person in the 33% bracket would save over $1100 while a person in the 15% bracket would save approximately $525. The value of exemptions starts to phase out for income above $159,950 for a person filing as single, so the exemption may only be effective for a lower earning spouse.  Don’t forget to factor in the child tax credit ($1000 for each child under age 17) and dependent care credits for up to 2 children under 13 ($960 or more).

2.  Not using IRS Code Section 72t(2)c to get distributions from Qualified Plans:  More often than not, couples in the process of a divorce have severe cash flow problems.  Income stays the same, but expenses increase dramatically because there are two households to support.  Changing or downsizing one or both parties’ lifestyles often requires a cash infusion to purchase, set up, or carry a second residence.  Section 72t(2)c allows the alternate payee (the spouse who is not the employee) to take distributions from a qualified plan (not an IRA) without paying the 10% early distribution penalty, even if they are younger than 59 ½ .  The distribution is still subject to income tax.

3.  Not following the rules for Alimony:  Alimony is deductible to the payor and taxable to the payee.  Where alimony is given there is usually a significant disparity in incomes.  Alimony results in tax savings since the higher income individual is able to deduct payments at a higher tax rate while the ex-spouse pays taxes at a lower rate.  Section 71 of the Internal Revenue Code defines certain rules for payments to be considered alimony.  If these conditions are not met then the tax benefits of alimony could be revoked by the IRS.

4.  Alimony payments must be in cash, to your ex-spouse, designated in a divorce or separation agreement, and you must live in separate residences.

5.  Payments must terminate on death of the recipient; alimony cannot end on dates corresponding to dependents 18th or 21st birthdays.

6.  Alimony cannot be front loaded over the first three years (much larger amounts paid in the 1st year, compared to the 2nd or 3rd year).

7.  Not writing off the cost of your divorce:  The portion of the cost of your divorce which relates to tax and financial advice is deductible on Schedule A of form 1040.  To substantiate this deduction, you should obtain a statement from your attorney or mediator delineating the cost of legal services and the amount attributable to tax and financial advice.

Please don’t hesitate to call our office if you are currently in the process of getting a divorce.

macungie relay for life

Here’s a great way to get some exercise AND do something for a good cause.  Join the Stortz team at the 2008 Macungie Relay for Life!  This 24-hour walk-a-thon benefits the American Cancer Society and is ALWAYS a ton of fun!  There’s music, food & games for the whole family to enjoy – in addition to walking for a cure!

Date:  4:00 pm on Friday, May 2nd, 2008 – 4:00 pm on Saturday, May 3rd, 2008

Log onto http://main.acsevents.org/site/TR/RelayForLife/RelayForLifePennsylvaniaDivision?team_id=185238&pg=team&fr_id=7044 to sign up to join our team for the Relay or to make an online donation – OR BOTH!

See you at the Relay!