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.

Is Your Business Moving?

Whether you’re moving your business down the block or to a new city, there are things that need to be considered before the move:

1.      Space: Make sure that the space you are moving into is large enough for growth for your company, but not so large that you are struggling to pay the rent and utilities. Consider the layout of the building, and confirm that all furniture and offices will be laid out according to your vision before you begin the moving process.

2.      HVAC Requirements: Consider the HVAC requirements for any equipment your company uses, and address this with your architect or space planner before the move to eliminate last minute scrambling or expensive fixes.

3.      Marketing: When your business moves to a new location, you will need to replace any and all marketing materials, such as business cards, flyers, letterhead, pens, etc. You will also need to change the business address on your company website, Google, Yelp, Yellow Pages, Facebook, and anywhere else you have a business listing. You might also want to consider budgeting expenses for advertising your move. If you have a business that clients visit often, you will want to ensure that they are aware of the move and have the new business address.

4.      Address Change: When your business changes its address, all of your marketing materials will need to be replaced. But you also will need to change your address with the post office, the Internal Revenue Service, your state’s Secretary of State, your state’s Department of Revenue, and your city and county for licenses and permits.

5.      Cost of Moving: Calculate the cost of the move beforehand to confirm that your business can afford it. Consider the cost and time spent renting a moving truck, packing, unloading, and setting up the new office. Also, you need to consider the costs of marketing updates and address changes, as mentioned above.

IRS Says that Idle ITINS Expire After 5 Years

The Internal Revenue Service has announced that Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years. The IRS noted that it will not begin deactivating ITINs until 2016. This new policy applies to any ITIN, regardless of when it was first issued. This will ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in the likely eventual expiration of millions of unused ITINs. Only about 25% of the 21 million ITINs issued since the program began in 1996 are being used on tax returns.

This new policy replaces the previous policy in which ITINs would have automatically expired after 5 years, even if used properly and regularly by taxpayers. Under the new policy:

·         An ITIN will expire for any taxpayer who fails to file a federal income tax return for 5 consecutive years.

·         Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns.

·         The IRS will not begin deactivation of unused ITINs until 2016.

·         A taxpayer whose ITIN has been deactivated and needs to file a U.S. tax return can reapply using Form W-7.

For more information, contact us or visit www.IRS.gov.

Business Owners Becoming Increasingly Reliant on Mobile Technologies

Businesses of all sizes are becoming increasingly reliant on mobile technologies for many aspects of operations. Management, sales, client services and other departments all rely on mobile technology to operate smoothly and efficiently. Mobile technology has had many positive effects on businesses, such as the ability to perform business in the event of inclement weather, the increase in work and business to the company, and the ability to conduct meetings remotely. The 2014 Sage SMB Survey on Mobile Devices polled 1,090 small and midsized businesses (SMBs) in the United States regarding mobile technologies, and noted many positive effects that mobile technology brings to businesses. The biggest positive effect that respondents noted was the ability to provide superb customer service. Mobile technology empowers customer service by increasing productivity and by simply making business transactions easier. The survey also found that 51% of employees use a mobile device to access work-related information remotely and that two out of five respondents who used mobile applications used a work-related application on their mobile device (other than a laptop) that connects to the cloud. An article with more information about the Sage SMB Survey is linked here.

Could An Employee's Tweet Land Employers in Court?

“Employee Advocacy” is the practice of encouraging and enabling employees to serve as brand advocates for their organizations through posting and sharing social media on their company’s behalf. This practice is continually growing as companies strive to remain prevalent on social media websites. Practicing employee advocacy allows your company’s image to be personal and relevant, but it is important to be aware of what employees are posting, as the companies are ultimately responsible for the content. Recently, Duane Reed had been brought to court by charges stemming from content that an employee posted on the company’s Twitter account. Many other companies have also dealt with unapproved content being distributed by employees on the companies’ social media accounts. In order for employee advocacy to work for your company, and not land you in court or an embarrassing situation, provide clear training and guidelines for participation. Well-managed programs for social media amplification can increase your company’s reach, reputation, and even revenue when conducted properly.

Could You Inherit Deceased Parent’s Debts?

The death of a parent is a stressful experience made even worse by discovering that they passed away with large debts. Unless you cosigned one of your parent’s loans or accounts, it is usually the estate, not you that has to pay down the debts left behind. Usually, but not always, as the rules are complex and differ depending on the type of debt accumulated and where your parent lived. Creditors have a fixed period of time, commonly between two and six months, to make claims against your parent’s estate. If there are not enough funds in the estate to cover the debit, in many instances your parents debt will die as well. If there are funds or other assets available, they must be used to pay debts before anything is distributed to heirs. So although you may not be legally responsible to pay your parent’s debts, your inheritance could be reduced or wiped out to cover the payment of debts. CNN Money lists common debts that parents may leave behind and who is responsible for handling these.

·         Credit Card Debt: Unless you’re a cosigner on your parent’s credit card or the executor of the estate, you will not be held responsible to make credit card payments. Credit card companies are often low-priority creditors behind funeral homes, federal and state tax agencies and various lenders. If you are the executor of the account, credit card companies may be willing to negotiate lower payments.

·         Medical Debt: “If your parent received Medicaid, the insurance program for people who can't afford care, the state where your parent died can recover the payments it made from the time your parent was 55 until death. A house is the only substantial asset a person may keep and still qualify for Medicaid. So the state may place a lien on your parent's home to recover payments. Some states, however, may be willing to negotiate and let the executor pay less than the total due” (CNN Money).  States may not ask you to use your own funds to pay the bill, however, and they also are not allowed to pursue payments during the lifetime of the surviving spouse. If your parent was not on Medicaid but died with unpaid hospital or doctor bills, the estate is responsible for payment if funds are available. “But check state law. Close to 30 states have what's known as "filial responsibility" statutes. Those require adult children to pay for a deceased parent's unpaid medical debts, such as those to hospitals or nursing homes, when the estate cannot.”

·         Mortgage Debt: Generally, if you inherit your parent’s home and it still has a mortgage on it, the lender may not demand that you pay off the mortgage immediately, but you will be responsible for making payments on it going forward. If the mortgage is worth more than the property when you want to sell the home, ask the bank if it will agree to a short sale; if the bank will not agree, you can tell the bank to foreclose. Either way, you should not have to pay the bank the difference between the sales price and the money still owed on the loan. The foreclosure should not affect your credit score, so long as your name is not on the mortgage, but it all depends on how the mortgage company reports the transaction to the credit bureaus. You also have the option to disclaim your inheritance.

·         Taxes: The estate is responsible for paying any property and income taxes, delinquent or otherwise, and tax agencies are usually given top priority as creditors. If federal estate tax is due but property is distributed before it’s paid, the Internal Revenue Service may put a lien on the property and collect on it.

The article from CNN Money is linked here. If you have any questions about estate planning or managing, please contact us.

IRS Adopts Taxpayer Bill of Rights

The Internal Revenue Service has created a “Taxpayer Bill of Rights” that will become their guiding focus when it comes to assisting taxpayers gain a better understanding of their rights. The Taxpayer Bill of Rights pulls existing rights already embedded in tax code and groups them into 10 broad categories, making them easier to understand. This Bill of Rights was released following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. The IRS website now has a special section to highlight the 10 rights, and will add posters and signs in upcoming months to its public offices so that visiting taxpayers may easily see and read the information. The Taxpayer Bill of Rights are listed below:

1.      The Right to Be Informed

2.      The Right to Quality Service

3.      The Right to Pay No More than the Correct Amount of Tax

4.      The Right to Challenge the IRS’s Position and Be Heard

5.      The Right to Appeal an IRS Decision in an Independent Forum

6.      The Right to Finality

7.      The Right to Privacy

8.      The Right to Confidentiality

9.      The Right to Retain Representation

10.  The Right to a Fair and Just Tax System

IRS Expanding Holds on Tax Refunds for Delinquent Taxpayers

The Internal Revenue Service is currently considering expanding their tax refund delay program, which delays tax refunds for up to six months for delinquent taxpayers. The Treasury Inspector General for Tax Administration has released a report that noted that the IRS has the authority to delay issuing income tax refunds to delinquent taxpayers for up to six months, while the agency investigates tax return delinquencies from other tax years. The report states that holding the tax refund encourages taxpayers to resolve their delinquent filing obligations earlier than they normally would.

“In 2012, the Delinquent Return Refund Hold Program collected nearly $242 million, which was applied to balances due on delinquent returns. From 2008 to 2012, the program held an average of 156,422 tax refunds per year. During that same period, the program secured an average of 64,222 returns from taxpayers per year and coordinated with the IRS’s Automated Substitute for Return program to prepare and post an additional 117,895 substitute returns per year” (Accounting Today).

For additional information, the full article from Accounting Today is linked here.

Businesses Losing 5% of Revenue to Fraud

Organizations around the world lose an estimated five percent of their annual revenues to occupational fraud, according to a survey of Certified Fraud Examiners. Occupational fraud occurs when an employee intentionally misuses or abuses their position for their own enrichment at the cost of company assets. When this percent is applied to the estimated 2013 Gross World Product, the figure translates to a potential fraud loss of more than $3.5 trillion. The 2014 Report to the Nations on Occupational Fraud and Abuse contains the survey results as well as data compiled from 1,483 cases of fraud that were submitted by Certified Fraud Examiners. The report finds that:

·         Fraud schemes are very costly. The average loss caused by occupational fraud cases was $145,000. 24% of the cases examined caused losses of at least $1 million.

·         Schemes can continue on for months or even years before they are detected. Many fraud cases examined in the study lasted an average of 18 months before being caught.

·        Small business face increased risk. The small organizations in this study suffered disproportionately, with an average loss of $154,000, which is higher than the overall average loss for fraud cases examined in the study.

The Association of Fraud Examiners has conducted research into how occupational fraud is committed. To read their observations, click the link here.