A little history. In August 2009 the Florida UC Trust Fund became insolvent due to the recession and the unexpected high volume of claims. The State of Florida had no choice but to borrow the necessary funds from the Federal Government to pay unemployment compensation benefits. The State of Florida has not yet been able to pay back its loan from the Federal Government. The loan amount is an astounding $1.7 billion!

Florida law requires an annual adjustment to the unemployment tax rates to maintain a balance in the UC Trust Fund. This adjustment was suspended in 2010, because the legislators did not want to burden employers further with an additional tax. Unemployment tax rates were kept at a lower rate than would have normally occurred. In essence, the legislators wanted to buy employers enough time for the economy to recover.

Additionally, Federal law requires automatic increases in FUTA tax, as well as annual interest payments related to the loan.

Tax Increase #1 – Unemployement Tax Rate. For 2012 the trigger has been re-engaged in calculating the unemployment tax rates.

2012 UC Tax Rates (effective January 1, 2012)

• Minimum Rate: .0202 or $171.70 per employee
• Maximum Rate: .0540 or $459.00 per employee
• based on annual salary up to $8,500 per employee

2011 UC tax rates were:

• Minimum Rate: .0103 or $72.10 per employee
• Maximum Rate: .0540 or $378.00 per employee.
• based on annual salary up to $7,000 per employee

Generally unemployment tax rates are first increased for employers that have benefit charges. The more claims paid the higher the tax rates.

Tax Increase #2 – Interest on the UC Loan. On June 30, 2012 Employers will also be responsible for paying interest on the Federal government’s $1.7 billion loan to the UC Trust Fund. The assessment of interest will be sent to employers from the Department of Revenue in February. The form is called UCT-27FI. This assessment will be calculated as follows $7,000 taxable wages X .0092 additional rate=$6.44 per employee.

Tax Increase #3 – FUTA Tax Rate. Lastly, Florida employers will pay an additional $21.00 per employee for FUTA (Federal Unemployment Tax Act). Every year that the loan is not repaid FUTA will go up by $21.00 per employee. See our previous blog about the FUTA Tax Rate Increase.

The Bottom Line. As a result of all of this, 2012 will cost businesses owners an additional $127.04 per employee at a minimum. Even if you’re not a business owner, you should expect that these additional costs will no doubt be passed along to consumers. Economic recovery comes at a price.

You can visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!

You might also be interested in these articles:

1. Unemployment Tax changes affect Florida Businesses
2. New 2012 Mileage Rates
3. Unemployment Benefits: No Free Bailout For You

Part of the law that gives us this tax cut is a “recapture” provision to help the government get some of that money back from those who earn more than $110,100 per year. Since this only applies to the first two months of the year, that is prorated to $18,350. If you earn more than $18,350 during the first two months of 2012, you’ll have to repay that 2% in the form of an income tax increase on income earned during that period when you pay your 2012 federal income tax.

If that didn’t click, read it again. What it means is that if you pay yourself $9,000 per month during the months of January and February, you’ll save about $360 in Social Security tax and avoid the recapture that would require you to pay it back. So, if you normally pay yourself more than that, it would benefit you to be sure to pay yourself less for that period. And if you normally pay yourself less than that, you’d get the benefit by paying yourself more for that period. How much you pay yourself for the remainder of the year will not have an affect on this.

Aside from this small quirk, employers need to implement the new payroll tax rate as soon as possible in 2012 but not later than Jan. 31. For any Social Security tax over-withheld during January, employers should make an adjustment in workers’ pay as soon as possible but not later than March 31.

If you have any questions or need help with your personal or business taxes Contact us Today. We serve clients throughout the world through our virtual office. Read more about our Virtual Office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!

You might also be interested in these articles:

1. 1099 Reporting for Business and Rental Owners Repealed!
2. Small Business to be Hit Hard by New SECA Rules
3. New to Self-Employment Business Orientation: How to Avoid Tax Problems & Pave the Way to Success

What is a 1099-K and why am I receiving it?

The 1099-K is a new form for 2011 for reporting payments to the IRS that are received by a person or a business from a Merchant (Visa, Mastercard, American Express, Discover) and/or a Third Party Network, (PayPal, Google Checkout, etc.) when the total gross payments are greater than $20,000 and there have been greater than 200 transactions.

For those who exceed those criteria, the IRS now requires Merchants and Third Party Networks to report all gross amounts paid, defined as “the total dollar amount of aggregate reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts”. What does this mean you ask? This means all sales are reported on accounts which exceed $20,000 and 200 transactions.

This can get a little fuzzy in some cases. Like, if you charge a customer credit card for $500.00 for merchandise and the customer comes back and returns $100.00 of merchandise 3 days later, then “the total dollar amount of aggregate reportable payment transactions” is $500.00. The IRS is going to leave it up to you to keep good enough records to prove “adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts”. So, if this new requirement is likely to affect you, you need to be sure that you have an adequate record-keeping system.

So what do I do now that I have this Form 1099-K?

There won’t be a specific line on 2011 tax forms for recording 1099-K amounts, however, the IRS requires that the person or business report any income reported to you on Form 1099-K along with any other income on Line 1b (Form Sch C, Form 1120S, Form 1120, Form 1065 ). Reporting the “adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts” should be done on line 1d (Form Sch C, Form 1120S, Form 1120, Form 1065 ).

If you have any questions or need help with your personal or business taxes Contact us Today. We serve clients throughout the world through our virtual office. Read more about our Virtual Office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!

You might also be interested in these articles:

1. 1099 Reporting for Business and Rental Owners Repealed!
2. IRS Working Out the Kinks in New 1099 Reporting Requirements
3. 1099-C & 1099-A: Bad Debts Gone Wild – Part I

How are they collecting, and how does it affect Florida business owners?

The current Federal Unemployment Tax Act (FUTA) tax rate is 6.0%** for the first $7,000 of wages earned by each employee. This rate is modified by a 5.4% credit for those employers who pay their FUTA tax on time. What is changing is the amount of that credit, reducing it by a 0.3% “reduction rate” from 5.4% to 5.1%, so it will directly affect (increase) the amount of FUTA that businesses must pay per employee.

Simply Stated:

Currently, the 6.0% FUTA rate less the 5.4% credit results in an actual 0.8% FUTA rate. Calculating 0.8% of $7,000, that’s $56 per employee. The decrease in credit results in an actual 1.1% FUTA rate, which raises the tax paid to $77, an additional $21 per employee!

New tax form to be aware of! To help you correctly calculate the amount of your FUTA “credit reduction”, the IRS has added Form 940 Schedule A. If you are using QuickBooks, you can find this form in Federal Forms under Payroll Forms. Contact us if you need help.

QuickBooks users BEWARE!

QuickBooks has a major flaw in its calculation of FUTA tax in the payroll module! The makers of QuickBooks (Intuit) did not update the program to calculate the additional tax credit reduction of .3%. We contacted Intuit and reported the issue on 1/13/2012 and were told that there is no fix for the problem in the works. What this means is that you may have paid your FUTA tax in the payroll module but when you print the 940 report it will show an amount due! Don’t ignore this amount due, you MUST pay it or suffer the IRS consequences of penalties and interest. Here is what you do in QuickBooks and EFTPS:

1. Preview your 940 in QuickBooks and make a note of the tax due on line 14
2. Make a Payroll Liability Adjustment in QuickBooks
3. Make the additional 940 payment through the EFTPS government website
4. Make the payment in QuickBooks

Looking ahead

This 0.3% FUTA tax credit “reduction rate” (a convoluted way of saying “tax increase”) will increase by another 0.3% each year until the debt is paid. So, Florida businesses will likely see a similar increase in actual FUTA tax paid at the end of 2012. (another $21 per employee)

You can visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!

* States affected are AR, CA, CT, FL, GA, IL, IN, KY, MI, MN, MO, NC, NV, NJ, NY, OH, PA, RI, VA, WI & VI.
** In addition to this changing credit amount, the FUTA rate itself changed from 6.2% to 6.0% mid-year in 2011, this change appears on the 2011 Form 940.

You might also be interested in these articles:

1. Ignorance Is Not Bliss: What Tax Records Businesses Need to Keep
2. Unemployment Benefits: No Free Bailout For You
3. New to Self-Employment Business Orientation: How to Avoid Tax Problems & Pave the Way to Success

• Business Miles: 55.5 cents per business mile
• Charitable Miles: .14 cents per charitable mile
• Medical Miles: .23 cents per medical mile
• Moving Miles: .23 cents per medical mile

It is important that you document the following items for all mileage that you intend to deduct for tax purposes.  There are 6 pieces of information needed to document your mileage and tax deduction:

1. Who: The client’s name that you drove to for business purposes. The charity’s name that you drove to for charitable purposes. The company’s (new employer) name that you drove to for moving purposes.
2. What: What was the business purpose of the miles? What was the charitable purpose of the miles? What and who did you move for your new job?
3. Where: Where did you go for business purposes? Where did you go for charitable purposes? Where was your old job located. Where was your old home located? Where is the new job located?  Where is your new home located?
4. When: What date did you drive the business miles? What date did you drive for charity? What date or dates did you move?
5. Beginning and ending mileage
6. Receipts (if any, for additional documentation and deductions): Tolls (additional deduction to the miles), Charitable Letters (to prove you were a volunteer), Moving Receipts (fuel, meals, storage)

With the documentation listed above you will have everything you need to claim your tax deductable mileage and make your tax accountant smile.

You can visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!

You might also be interested in these articles:

1. IRS Announces a Medical & Moving Mileage Rate Increase for 2011!
2. Top 5 Most Missed Tax Deductions
3. Tax Day – Gone Today But Not Forever

The Internal Revenue Service announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business purposes.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

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1. Adoption: Good for the Heart, Soul and Tax Returns?
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To get started, when you win the lottery the best thing to do is to contact professionals such as an attorney, an accountant and an advisor.

The attorney should specialize in Estate Law and have a thorough understanding of the tax implications involved when dealing with lottery winnings. The attorney will review your options on how you will receive the lottery winnings based on personal preferences such as whether or not you want the fact that you won the lottery to be public or not. For example a revocable blind trust or a foreign trust may be set up through your attorney to manage your funds which may offer you the confidentiality desired and without having to release information to the public.

The accountant should specialize in gambling taxation, estate taxation and personal financial statements with an emphasis on investment accounting. The tax accountant will work with the estate attorney and financial advisor in putting together a plan designed to reduce the taxation of your lottery winnings. The accountant will also put together personal financial statements in an effort to keep track of your income, expenses, assets, liabilities and net worth.

The financial advisors should specialize in wealth preservation of estates and have a solid record of creating wealth. The financial advisor will put together a sound financial plan, organize the wiring of the money to the various financial institutions, assist the accountant with the organization and maintenance of a reasonable budget and the financial advisor can ultimately help you to remain anonymous if needed.

The choice of professionals that will help you manage your lottery winnings is one of the most pivotal decisions that you will make. Your team of professionals should be willing to work together and should communicate with each other often. Once your team is put together and your estate plan, financial plan and tax plan is in place; it is time to educate yourself financially so you can work with your trusted advisors to preserve and grow your wealth for generations to come.

If you have any questions or need confidential help, feel free to contact us.

You might also be interested in these articles:

1. Winning the Lottery: Taxes and Strategies

So what happens if you do win the lottery? What do you do first? The best answer is contact a professional who will guide you through what to do so that winning the lottery is not the worst thing that happened to you. What do I mean by the worst thing that could happen to you? There are a lot of things that happen when you win the lottery and everybody finds out: Uncle Sam wants his tax money, friends and family pop out of the woodwork for handouts, you may get sued, you will get asked for loans, people want you to be their new business partner and on and on it goes.

Here is a quick list that I will go over in more detail over the coming weeks to help you make winning the lottery all that you ever dreamed it to be:

1. Don’t contact the lottery officials or claim your prize until you contact a professional who understands the lottery, the tax implications, the legal implications and can advise you on what to do next.

2. Don’t change anything in your life just yet. Don’t quit your job. Don’t go on a spending spree, it will tip off your friends and family. Don’t tell anybody about your lottery win, your privacy is valuable.

3. Hire a good tax accountant who will help you account for your lottery winnings and who will advise you on the tax implications of lottery distributions. Your accountant should be well versed on lottery winnings and the tax implications. He should also have the ability to refer you to a good estate attorney and several financial advisors.

4. Hire an estate attorney who will work with your accountant to establish the right legal entity for your needs.

5. Hire several competent financial advisors who has proven track records of helping their clients grow and preserve their wealth. Diversification in the portfolios and financial advisors is the key here since you don’t want to put all of your eggs in one basket.

6. Start learning about your money. Start taking a couple of financial courses to learn about what your accountant does. Take a few investment classes to learn about what your financial advisors do. Take a few legal courses’ to learn about the law and how it pertains to your estate. The idea is to learn as much as possible so you know what questions to ask and when to ask them. A good tax accountant, financial advisor and attorney will see your involvement in a positive light and will want to teach you about what they are doing.

Next week we will go over the tax implications of winning the lottery and some of the tax strategies designed to keep your lottery winnings where it belongs…In your pocket.

If you won the lottery and need confidential help, feel free to contact us.

No related posts.

Fred Daus, CEO of Fredrick James Accounting, Tax and Consulting stated: “In essence, this law would have required that a business or landlord send a 1099  to Best Buy for the purchase of a $649 laptop used for their business”.  “Imagine Best Buy’s response to a small business owners request for a W-9 so it can mail a 1099 to them for their purchases in 2011!”.  “Most business’s, big and small, had no idea how to deal with the new 1099 filing requirements”. “This is a big win for all of the Small Business’s and Mom and Pop Landlord’s who would have had to pay the tremendous costs of preparing the 1099’s”.  “We made our opinion heard, fought hard and our lawmakers listened to us!

You might also be interested in these articles:

1. IRS Working Out the Kinks in New 1099 Reporting Requirements
2. Bad Debts Gone Wild: Part III, Business Debt
3. 1099-C & 1099-A: Bad Debts Gone Wild – Part I

It is truly amazing to come to the end of the 2011 tax season and be greeted by satisfied customers with kind gestures and appreciative phone calls.

The photo to the left is a display of one of those kind gestures of gratitude from a satisfied client that wanted to show Fredrick James just how much they appreciated our services.

Believe it or not, the calculator on the left is a unique cake which was crafted, baked and personally delivered to Fredrick James by a thankful client who Fredrick James had helped to navigate through the turbulent waters of this past tax season.

Here are the top 5 insights as to how Fredrick James has kept their customers satisfied in 2011.

1. Always treat your clients as if they are your most important asset, because they are.
2. Be at the top of your game and stay there by staying current with the latest technology and business insights.
3. Always operate with integrity and the same level of service that you would expect to receive.
4. Go the distance when helping your customers reach their desired goals by making yourself readily available to answer questions and offer support when needed.
5. Be relational and realize that your clients need to know you care for them as people rather than just customers that need be handled. Believe me, they will know the difference.

If you neglect to practice great customer service, you are neglecting to increase your client base and overall revenue. Putting these proven practices into place are sure to bring the increase you desire, and who knows, maybe the measure of customer service success means being able to have your cake and eat it too!

You might also be interested in these articles:

1. Finding the Right Accountant to Help Build Your Business
2. Tax Day – Gone Today But Not Forever