Social Security Benefits to Increase in 2015

Beginning in January, benefits from the Social Security Administration will increase by 1.7%. The increase coincides with the increase in cost of living expenses that have showed a constant increase of 1.7% over the last twelve months. The average worker will receive roughly $1,328 a month, which translates to about $15,936 a year. The Social Security Administration has also announced that the amount of income that workers pay Social Security taxes on will also increase due to the increase in average wages. This amount was $117,000 in 2014, but will increase to $118,500 for 2015.

Which Sales Tax Exemption Forms Should Businesses Accept?

Sales tax exemptions forms offer protection should your business face a tax audit. But if you have incorrect or incomplete forms on file, they will not help you. In fact, if the forms on file are deemed invalid, your company may be held liable for the uncollected sales tax. The first step to making sure sales tax exemption forms are valid is to make sure they are filled out correctly. Some of the most common errors that cause forms to be invalid are missing signatures and dates, incorrect claim type listed, and the form not being recognized by the state authority.

Sales tax exemption forms, along with any other important forms, will not benefit your business unless they are properly completed and filed. If you have any questions about sales tax exemptions, please contact us.

Simplified Home Office Deduction: What are the Benefits?

If you use a part of your home for business, you may be able to deduct expenses for the business use of your home and claim the home office deduction. The Tax Adviser notes that “Sec. 280A © permits self-employed individuals and employees who work out of their home to deduct business expenses relating to the part of their home that is exclusively used on a regular basis to carry on a trade or business, or, in the case of an employee, the person has no other fixed location to perform his or her job duties”. This space must only be used for business purposes. Traditionally, this deduction required taxpayers to complete complex computations and allocations, and perform extensive recordkeeping. Starting with the 2013 tax year, taxpayers have the option of applying the simplified method in which taxpayers multiply the total square footage of the business portion of the personal residence, up to a maximum of 300 square feet, by $5. Although this method sounds much easier, there are costs and benefits that should be considered when deciding which method to use.

The advantages of the simplified method:

• The method greatly reduces the recordkeeping burden.
• The simplified method may offer a larger home office deduction.
• If the simplified method produces a smaller home office deduction, increase in self-employment income may lead to slightly higher Social Security benefits at retirement.
• Taxpayers may change from the actual-cost method to the simplified method on a year-by-year basis.
• In any year that the simplified method is used, the depreciation taken in that year is presumed to be $0, so there would be no recapture of depreciation for those years upon the sale of the home.
• The method allows for no reduction for home mortgage interest and property tax itemized deductions.

The disadvantages of the simplified method:

• The maximum deduction allowed is $1,500.
• The simplified method may increase self-employment taxes.
• If the home office deduction causes a loss from the related business, that loss may not be carried over to future years.
• While the simplified election is made on a year-by-year basis, once an election is made, it is considered to be irrevocable and may not be changed on an amended return.

For more information about the simplified home office deduction, click this link. If you have any questions or would like another blog post on the home office deduction, let us know in the comments below!

Latest Income Tax, IRS Scam Targets Retirees

The Internal Revenue Service has recently issued warnings of phone scams, specifically those that target retirees and the elderly. Scammers will call victims and present themselves as IRS agents, claiming that without immediate payment of back taxes through wire transfers or pre-loaded debit cards, the victims could face arrest and/or hefty fines. The IRS reports that they have received more than 20,000 reports of these types of phone calls. “The Treasury Inspector General for Tax Administration has estimated thousands of victims have paid more than $1 million to people claiming to be IRS agents” (CPA Practice Advisor). If you are contacted by someone who claims to be an IRS agent seeking payment for back taxes, hang up the phone and contact the IRS directly to speak with an agent. The IRS sends notifications and notices through the mail, and does not contact taxpayers through phone or email messages. The only time you should receive a phone call from the IRS is when an IRS agent is returning your call, or you have already received multiple notices. If you have received a suspicious phone call or have any questions, please contact us.

Form I-9 Requirements- Are you compliant?

Although an I-9 form may seem like a simple piece of hiring paperwork, there are many rules and regulations that must be followed in regards to this form. Employers that fail to complete and maintain I-9 documentation correctly may fall out of compliance with Immigration and Customs Enforcement (ICE), and suffer harsh financial penalties. Fines for I-9 errors begin at $110 dollars per error, and climb to tens of thousands of dollars per error for repeat and grave offenses. If an employer has one form per employee and multiple mistakes on each form, the financial penalties could quickly escalate into six or seven figures. To avoid the potentially high costs of an I-9 violation, employers should keep these six common I-9 processing errors in mind:

1.      Incorrect or Missing Forms: Common I-9 documentation mistakes include incorrect dates, missing signatures, transposed information and incomplete check boxes. Employers also sometimes fail to complete an I-9 form altogether, or misplace a completed form during filing. Another challenge that employers face is recording the correct document codes for each identification method. If an employer asks for too many identifying documents from list A or lists B and C, that could expose the employer to discrimination allegations. On the other hand, asking for too few documents could result in an incomplete form violation.

2.      Out of Compliance with the Three-Day Rule: ICE rules mandate that I-9 forms must be completed within three business days of the employee’s first day of work. If an employer fails to meet the three-day deadline, it could result in hefty fines.

3.      Failure to Re-verify: For employees of certain citizenship statuses, employers will need to track and update the employee’s supporting I-9 documentation. For example, a work-authorized alien will provide documentation showing their eligibility to work in the United States. This supporting documentation includes an expiration date, and it is the employer’s responsibility to monitor that date and request new documentation prior to the document’s expiration.

4.      Invalid Identifying Documents: Employers must check that all necessary documents are presented and valid. If an employer fails to obtain the right combination of identifying documents from lists A, B or C, the I-9 documentation will be considered incomplete and the employer will become subject to fines.

5.      Improper Document Maintenance: ICE rules do not require employers to maintain I-9 forms either one year after the date of termination, of three years after the date of hire, whichever is greater. Purging outdated forms can help businesses free up storage space and protects the sensitive information of previous employees. If an employer fails to destroy I-9 forms within the outlined time frame, then that employer could be subject to fines. In addition, if an employer is audited and has not destroyed outdated I-9 documentation, any errors found on those outdated forms will also be subject to fines.

6.      Lack of Supporting Documentation for E-Verify Photo Matching: In 2010, E-Verify introduced photo matching as a way to prevent employees from using false identifying documents. For passports, passport cards, permanent resident cards and employee authorization cards the E-Verify system will require employers to compare the document photo with an onscreen photo as an additional security measure. ICE also mandates that employers must maintain a copy of the employee’s photo identification as a supporting I-9 document. Since the E-Verify photo matching is a newer measure, it is likely that a majority of affected employers are not aware of the additional requirement to keep a copy of a photo I.D. on file. Any employer who fails to maintain a copy of a photo I.D. as a supporting document will be in violation and could be subject to fines.

If you have any questions about I-9 requirements and/or compliance, please contact us!

Should you pay your employee overtime? What is the difference between an exempt and nonexempt employee?

Figuring out whether or not it’s necessary to pay an employee overtime can be a confusing task. The main deciding factor of whether or not you should pay overtime is the status of the employee. The Fair Labor Standards Act (FLSA) requires that employers classify jobs as either exempt or nonexempt. Nonexempt employees are covered by FLSA rules and regulations, and exempt employees are not. Generally speaking, nonexempt employees receive more protection under federal law than exempt employees, but most employers treat their exempt and nonexempt employees in a similar manner. The primary pieces of federal legislation that apply to the workplace are the right to a safe and healthful work environment, the right to equal employment opportunities, and the rights provided under the Family and Medical Leave Act and federal child labor laws. These laws apply to exempt and nonexempt workers alike.

Exempt positions are excluded from minimum wage, overtime regulations and other rights and protections afforded nonexempt workers. Employers must pay a salary rather than an hourly wage for a position in order for it to be exempt. Generally, only executive, supervisory, professional or outside sales positions are exempt.

Nonexempt employees are not exempt from the FLSA requirements. Employees who fall within this category must be paid at least the federal minimum wage for each hour worked and given overtime pay of not less than one-and-a-half times their hourly rate for any hours worked beyond 40 hours each week. For further information about exempt and nonexempt employees, visit the Department of Labor’s website. If you have any questions about paying your employees overtime, please contact us and we will be happy to assist you.

Important Notice: Davidson County Sales Tax Increase

The sales and use tax rate in Davidson County, North Carolina, will be increasing from 6.75% to 7.00%. This change takes place on October 1, 2014. Any retailers or facilitators required to collect local and transit sales and use tax in more than one county must complete Form E-536 (Schedule of County Sales and Use Taxes) and submit it along with their sales and use tax return.

For more information on the administration of the sales and use tax rate increase for Davidson County relating to leases, rents, construction contracts, layaway sales, gross receipts, taxable service contracts, etc., visit the North Carolina Department of Revenue website.

If you have any questions about this sales tax rate increase, please contact us.