Stortz and Associates
November 2008 Newsletter

thanksgiving holiday office hours

Our offices will be closed on Thursday, November 27th and Friday, November 28th in observance of the Thanksgiving holiday.  We will re-open for normal business hours on Monday, December 1st.

 

issuing form 1099

Employers – remember, you must issue a Form 1099 to each unincorporated entity to whom you pay:

  • Compensation as a subcontractor or independent contractor,
  • Rent,
  • Legal fees,
  • Interest.

    • These forms need to be provided to recipients by 01/31/09.

    Review your Form 1099 list of information PRIOR TO 12/31/08 to ensure that you have each entity’s name, address and social security number.  Provide us with this information and corresponding amounts paid to these entities at your earliest convenience after the close of 2008 to allow sufficient time for processing of your 1099's.

    peachtree users - upgrade now!

    Are you a Peachtree user who is frustrated with the limited financial reporting history available once you close a year?  Then don’t lose another day of reporting history, by upgrading to the 2009 version, you receive the new functionality in General Ledger reports and Financial Statements that allows you to generate reports on data outside of the two open years.  So then you can compare budgets and financial results in your open company from farther back in your company history.  Upon upgrading to Peachtree 2009, 3 years of converted data will be readily accessible, as well as any future closed years.

    Use this new functionality with existing capabilities on transaction reports to get improved trending analysis, better research, and more accurate forecasts based on prior year activity.  Once you start using this feature, your ability to see historical data will grow year-over-year, allowing you to see more real-time data within Peachtree.  But even with this increased access, you still retain the control to lock down prior years and purged data to prevent unauthorized or accidental alteration.

    Another reason to upgrade now; if you are currently using Peachtree Release 2006, or earlier, the support will cease by Sage after 11/30/2008.  If you are ready, please call your Account Executive to schedule an appointment – we will make the upgrade as seamless as possible for you.

    EMPLOYER ALERT: PA SMOKING BAN AFFECTS YOU!

    Effective September 11, 2008, employers are required to:

    • Be a smoke-free workplace, unless your business is covered by a few narrow exceptions.
    • Post “No Smoking” signs in your business.

    A “No Smoking” sign can be downloaded through the Department of Health’s website at www.health.state.pa.us or purchased online at www.PACTonline.org.

    “Smoking Permitted” signs must be prominently posted at every entrance to a public place where smoking is permitted under the Act.

    Violators face fines up to $1,000!!! 

    Guidance and a downloadable Business Owner’s Clean Indoor Air Compliance Toolkit, frequently asked questions and exception request formats are available at www.health.state.pa.us.

    Questions should be directed to a dedicated helpline at 1-877-835-9535.

     

    computerized bookkeeping: how to make an entity inactive

    Bombarded by having lots of old customers, vendors or employees still active in your system that you no longer need?  Your accounting software has a feature that allows you to make these items inactive.  Follow the instructions below to learn how to do so:

    If you are a Peachtree user: (version 2007 or higher) - Instructions may vary depending on your specific version.

    To update your Customers:

    • Go to MAINTAIN and select CUSTOMERS
    • Choose the Customer that you want to update by their Customer ID
    • On the right hand side of the screen, check the box to select INACTIVE
    • Click SAVE when you have finished.  NOTE: The Customer will still show up on your list of customers, it will just show that the record is now inactive
    • Repeat the same steps to update your VENDOR and EMPLOYEE lists by selecting VENDORS or EMPLOYEES from the MAINTAIN menu

    There is an option in your Peachtree system to hide your inactive records from your lists.  To do so:

    • Go to OPTIONS and select GLOBAL
    • On the ACCOUNTING tab under the title "Other Options" check HIDE INACTIVE RECORDS
    • Click OK to save your changes

    If you are a QuickBooks user: (version 2007 or higher) - Instructions may vary depending on your specific version.

    To update your Customers:

    • Go to CUSTOMER CENTER and on the left select the CUSTOMERS & JOBS tab
    • Double-click on the customer that you want to update
    • The EDIT CUSTOMER screen will open and on the right hand side of the screen click in the box "CUSTOMER IS INACTIVE"
    • Click OK to save your changes
    • Repeat the same steps to update your VENDOR and EMPLOYEE lists
    • There are different options of what records you want to view on your lists in the different centers (customer, vendor, employee).  Open the drop-down next to View and choose what records you want to display.

     

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    new tax tips feature on stortz website

    In an effort to provide you with even more up-to-the-minute, essential news regarding taxes, finances, and business, we've added a new feature to our website!  Monthly and weekly "TIPS" can be found at the top of this page and are updated on a regular basis.  Enjoy!

     

    eligible taxpayers should not shun the home office deduction

    Despite the large number of taxpayers who conduct businesses from home offices, the IRS reports that many eligible taxpayers fail to claim the home office deduction on their income tax returns.  Some believe the tax laws regarding the home office deduction are too complex, while others have an exaggerated fear of an audit.

    Statutory Requirements 

    Code Sec. 280A(c)(1) provides that taxpayers may deduct the expenses related to the business use of their home if a specific part of their home is set aside and used exclusively on a regular basis as:

    • Their principal place of business; or
    • A place used to meet with patients, clients or customers; or
    • A separate structure such as a freestanding garage or shed used in a trade or business and not attached to the taxpayer’s dwelling.

    If the taxpayer is an employee, the taxpayer’s business use must be for the taxpayer’s convenience and not merely appropriate or helpful.

    Home Defined 

    To be eligible for the home office deduction, the taxpayer must live in a dwelling unit, which includes a house, apartment, condominium, mobile home, boat or similar property which provides basic living accommodations such as sleeping space, toilet and cooking facilities.  All other structures next to or near the dwelling unit, such as a separate garage or shed in the taxpayer’s back yard, would also qualify.  Hotels, motels or inns do not qualify.

    Exclusive Use of Home Office Required 

    This is an all-or-nothing test.  “Exclusive use” means only for business.  If the taxpayer or any members of the taxpayer’s family use the home office for any personal purposes, then the taxpayer fails the exclusive-use test.  Even occasional personal use is enough to disqualify the home office.  The taxpayer must dedicate a room or some portion of his or her home to the home office and use it for nothing else in order to qualify for a home office deduction. 

    Exclusive Use When Two Businesses Are Involved 

    If the taxpayer uses his or her home office for more than one business, a home office deduction will be allowed only if each and every business satisfies all the home office tests discussed above.  Even if only one of the taxpayer’s two businesses fails one part of the test, the taxpayer will lose his or her entire home office deduction, even for the one business that otherwise satisfies all the requirements.

    If a taxpayer carries on a business from a residence, the taxpayer can claim deductions for space in his or her home that is used regularly for storing inventory or product samples (or both).  To claim the deduction, the taxpayer’s home must be the sole fixed location for the business.  The taxpayer must keep the inventory or product samples for use in his or her business.  The business must be in the wholesale or retail selling of products and the space used must be separately identifiable and suitable for storage.

    Principal Place of Business

    A home office can qualify as a taxpayer’s principal place of business if (1) the taxpayer uses it exclusively and regularly to conduct administrative or management activities of a trade or business, and (2) there is no other fixed location where the taxpayer conducts these substantial administrative or management activities of his or her trade or business.  Some of the activities that the IRS considers to be administrative or managerial in nature include billing customers, clients or patients, keeping books and records, setting up appointments and forwarding orders or writing reports.

    The bottom line is that a taxpayer will still qualify for the home office deduction even if the essence of their business is performed outside of the home.  This means that many business people and professional who administer their business from a home office location, but sell or provide goods or services outside of the home office can still claim a home office deduction.

    Source:  www.SageAccountantsNetwork.com/HomeOffice

     

    employee gifts

     

    Holiday time is fast approaching, and before you start doling out gifts to your employees take a moment to review the following scenario to see how gift giving could impact your employment tax responsibilities. 

    The Yellow Willow Company traditionally rewarded its employees with gifts for the year-end holidays (typically a turkey and a monetary award). These gifts were not based on employee performance or company profits but were instead due to Willow’s genuine interest in promoting goodwill with the workers. 

    Question: How will Yellow Willow’s gifts affect its employment tax responsibilities?  

    Answer: In general, any amount an employer transfers to employees (directly or indirectly) is taxable for social security, Medicare, income tax withholding, and federal unemployment taxes. Exceptions to this rule include de minimis (i.e. minimal) fringe benefits. A de minimis fringe benefit is any property or service (other than cash or cash-equivalents), the value of which (after taking into account the frequency with which similar fringes are provided), is so small as to make accounting for it unreasonable or administratively impracticable. 

    De Minimis Fringe Benefits: Traditional holiday gifts (such as a turkey) with nominal value are excludable from wages as “de minimis” fringe benefits. As such, no federal employment taxes or wage reporting is due from Willow for this item. Other de minimis fringe benefits include: the occasional typing of personal letters; coffee and soft drinks; and occasional meal money or local transportation fare paid to enable an employee’s overtime work. Further examples and information on de minimis fringes and other fringe benefit wage exclusions (such as transit passes and certain achievement awards for safety / length of service) are provided in section 2 of Publication 15-B, Employer’s Tax Guide to Fringe Benefits (www.irs.gov/pub/irs-pdf/p15b.pdf). 

    Cash or Cash-Equivalents Not Excluded: Cash (whether currency, check, direct deposit, etc.) and cash-equivalents (e.g. gift cards) are taxable compensation. Willow, accordingly, must report the monetary gifts it made as (supplemental) wages, regardless of the amount, and pay the employment taxes owing. Both the employee and the matching employer shares of social security and Medicare taxes are owed by Willow, even if it remits them without deducting the employee portion from the award. (Section 7 of Publication 15-A, Employer’s Supplemental Tax Guide, www.irs.gov/pub/irs-pdf/p15a.pdf, provides examples on how to figure the tax liability and the corresponding wage amounts in this situation). Similar computations can apply if an employer remits income tax withholding without deducting it from wages

    Source: SSA IRS Reporter- Fall 08

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