Reporting Issues

Year End Tax Reporting Reminders

By now, you should have provided your employees with their copy of Form W-2 (wage and tax statement), and your independent contractors with their copy of Form 1099-MISC (nonemployee income). These forms were due to the recipients by January 31, 2011. The filing deadlines for submitting the 1099’s to the IRS is March 1, 2011 (if submitting the forms by paper). If you are filing over 250 forms, you must submit them electronically by March 31, 2011. The W-2 forms must be filed with the Social Security Administration by February 28, 2011. If filing electronically, the due date is March 31, 2011. Late penalties apply if forms are not filed by the due date.

Relief for Some on Foreign Bank Account Reporting

As you may know, the IRS now requires more persons who own or have signature authority over foreign bank accounts are required to file a Form TD F 90-22.1, foreign bank account report (FBAR) by June 30 of each year. This requirement impacts organizations and their officers who have overseas activities and accounts. Due to the complexity of the new reporting rules, the IRS has announced limited relief for some filers effective for the 2009 calendar year:

1. Signature authority only. Persons with signature authority only, but no financial interest in a foreign account, will now have an extra year to file the report. The report originally due on June 30, 2010, will now be due on June 30, 2011.
2. FBAR-related questions on tax forms. A taxpayer who qualifies for the additional one-year filing deadline, provided they have no other reportable foreign accounts, should check “NO” in response to the FBAR-related questions on their 2009 federal tax forms (those questions that ask about the existence of foreign financial accounts).

For more information see IRS Notice 2010-23 at http://www.irs.gov/newsroom/content/0,,id=104345,00.html

Bill Allows 2010 Haitian relief contributions to be deducted on 2009 returns

President Obama has signed into law a bill that allows donors who contribute to the Haitian relief effort to elect to deduct their 2010 contributions on their 2009 returns. The election would apply to those contributions made in cash after January 11, 2010 and before March 1, 2010.

The bill also relieves recordkeeping requirements for these contributions, in that a telephone bill would satisfy the Code Sec 170(f)(17) recordkeeping requirements if it shows the name of the done organization, the date of the contribution, and the amount of the contribution.

Form 5500 Reporting Relief for 403(b) Plans

As you may already know, new regulations require that all organizations and churches establish a written plan document for 403(b) plans (tax-sheltered annuity plans) by no later than 12/31/09. In addition, the Department of Labor has revised the Form 5500 annual filing for benefit plans to require expanded reporting for 403(b) plans. Plans filing the Form 5500, even small plans, must report aggregate financial information regarding the assets of the plan. This can be difficult, or even impossible, for some plans because some accounts are controlled by the employee, and the organization may not have any knowledge that the account exists, especially if they are no longer making contributions to that specific account.

Health Care Reform Proposals

For a comparison of the current health care reform proposals from the three Congressional committees, go to www.kff.org/healthreform/sidebyside.cfm. The current proposals generally focus on forced coverage for employees, with penalties for employers who do not comply. For example, House Democrats propose a penalty of 8% of payroll for employers who fail to fund 65% of employee insurance premiums. Small employers would be exempt – depending on the proposal, a ‘small employer’ could mean fewer than 25 employees, or total payroll less than $250,000. The plans would also require all individuals to have insurance, or face penalties.

IRS Announces 2009 "insubstantial benefit" amounts for token goods or services given by charities

The IRS announced their official computation of inflation-based tax figures for tax years beginning in 2009 in Rev-Proc 2008-66. For 2009, a token gift value may be $9.50 (up from $9.10 in 2008) for contributions of $47.00 or more (up from $45.50), or not more than the lesser of 2% of the contribution or $95 (up from $91.00).

Yearend Tax Traps: Fringe Benefit Reporting and 1099’s

Fringe Benefits: The IRS requires reporting of certain fringe benefits as income to employees on their W-2. These include 1) personal use of company vehicles; 2) group life insurance in excess of $50,000; 3) expense allowances for which employee has not provided supporting documentation; 4) country club dues; etc. Most of are well aware that these type items represent taxable compensation to the employee; however, there is another danger in failing to report these items. The “excess benefit” rules include a safe harbor for items contemporaneously reported as compensation to the employee.

Control Risk - #3 Risk Definition Series

Control Risk (CR) - is the level of risk that a misstatement will occur and not be detected by the entity's internal controls.

IR (inherent risk - defined in previous post) x CR (defined above) = Risk of Material Misstatement

Contributions/Event - #4

As we have discussed in our three previous posts, donors may receive something in exchange for a contribution. Whether it is a meal, a book, a video, all of these items are treated similarly. Remember the criteria for financial reporting?

What has been communicated to the donor and what is the donor’s intention in responding to the solicitation?

As we discussed in post #3, the direct donor benefits can be treated similar to cost of sales OR as a program or supporting service. Showing the expense as gross or disclosing the components of the value is the preferred reporting,

#5 Contributions - Deductible Amounts

Over the past several weeks we have described the requirements for deducting and recording charitable contributions.

In this post we will discuss calculating the deduction...

The amount of charitable contributions that may be deducted by a taxpayer is limited based on adjusted gross income, the type of property contributed or the nature of the charity.

Limitations: