Small Businesses

IRS Small Business Tax Return Tip 14_2012

Written by Sacramento Tax Return Help CPA

Tuesday, 06 March 2012 08:11

What Sacramento and Auburn Employers Need to Know

About Claiming the Small Business Health Care Tax Credit

If you are a small employer in Sacramento or Auburn with fewer than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and you pay at least half of employee health insurance premiums…then there is a tax credit that may put money in your pocket.

The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizationsin Sacramento and/or Auburn. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.

Here is what Sacramento and/or Auburn small employers need to know so they don’t miss out on the credit for tax year 2011:

Qualifying businesses can use Islip + Company as their tac calculator to compute the small business health care credit. Credit for Small Employer Health Insurance Premiums, and claim it as part of the general business credit on Form 3800, General Business Credit, which they would include with their tax return.
Sacramento and/or Auburn Tax-exempt organizations can use Islip + Company as their tax calculator to compute the credit and then claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, Line 44f.
Businesses that couldn’t use the credit in 2011 may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

For tax years 2010 to 2013, the maximum credit for eligible small business employers is 35 percent of premiums paid and for eligible tax-exempt employers the maximum credit is 25 percent of premiums paid. Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.

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Additional information about eligibility requirements and calculating the credit can be found on by contacting Islip + Company or you can read the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.

YouTube Video:

Small Business Health Care Tax Credit | English

Self-Employment Tax – California does NOT Conform to Federal

Written by Sacramento Tax Return Help CPA

Saturday, 03 March 2012 09:29

The federal 2010 Tax Relief Act increased the amount of self-employment tax that may be deducted in computing federal adjusted gross income.

California has not conformed to this change.

For state income tax purposes, taxpayers may only deduct 50 percent (50%) of the self-employment tax paid in computing state adjusted gross income.

The majority of self-employed taxpayers have not yet filed their 2011 tax return. We have updated forms and instructions and contacted all software companies to make this update. Make sure your tax preparation software allows for the Schedule CA line 27 adjustment if necessary. The following example shows how to compute this deduction:

Self-Employment Taxes Paid, Form 1040 line 56(or 1040NR line 54) $2,000

Federal Deduction Allowed, Form 1040/1040NR, line 27 $1,150

Less: California Deduction Allowed, 50% of self-employment taxes paid $1,000

Schedule CA, line 27 (column b) adjustment $ 150

You will need a tax calculator for this. We can be your tax calculator!

PLEASE NOTE: Self-employed taxpayers who have already filed a return using the higher federal rate do not need to file an amended return. In order to reduce taxpayer burden, FTB is sending a letter to a limited number of taxpayers based on available information and considering the time and effort involved to revise this deduction. The letter will include an explanation of the issue, proposed corrected amounts, and allow taxpayer response before issuing a tax bill. Taxpayers who have already filed and are not contacted by FTB do not need to file an amended return.

iF THIS SITUATION IS YOURS THEN PLEASE CONTACT THE Sacramento cpa and Auburn cpa: islip + company, tax return preparation experts with offices in sacramento and auburn california, watching out for our clients taxes and your taxes both IRS tax and FTB tax. The well informed make better decisions...Let islip + company be your tax calculator helping you to maximize your tax returns, islip + company will find every legal item and deduct it... the legal minimum tax is the maximum you will pay at islip + company...

What Health Insurance Coverage Must Be Reported on Form W-2?

Written by Sacramento Tax Return Help CPA

IRS issues chart to help employers determine what health insurance coverage must be reported on Form W-2

Sacramento CPA, Islip + Company has found the IRS chart that lists various types of health insurance coverage, and whether that coverage must be reported on Form W-2 by many employers beginning with the 2012 calendar year.

Background. Sacramento CPA, Islip + Company found Code Sec. 6051(a)(14), which was added to the Internal Revenue Code by §9002 of the Patient Protection and Affordable Care Act (Health Care Act, P.L. 111-148), generally provided that the “aggregate cost” of employer-sponsored health insurance coverage must be reported on employee W-2 forms. In 2010, the IRS issued a notice that made this new reporting requirement optional for all employers on 2011 W-2 forms. In 2011, the IRS issued a notice that made the reporting requirement optional for small employers at least through the 2012 calendar year. In January 2012, the IRS issued a notice that provided interim guidance on the information reporting requirements for employer-sponsored health coverage.

The chart. The new chart has the following four columns: (1) Coverage Type; (2) Report on Form W-2; (3) Do Not Report on Form W-2; and (4) Optional Reporting.

Health insurance coverage that must be reported on Form W-2 includes: the

aggregate cost of major medical insurance; the health flexible spending allowance (FSA) value for the plan year in

+ excess of the employee's cafeteria plan salary reductions for all qualified benefits; the cost of hospital indemnity insurance, or the amount paid for a specified illness (insured or self-funded) through salary reduction (pre-tax) or by the employer; and

+ domestic partner health insurance coverage included in gross income.

Health insurance coverage that does not have to be reported on Form W-2 includes: health FSAs funded solely by salary reduction amounts; health savings arrangement (HSA) contributions (employer or employee); Archer medical savings account (MSA) contributions (employer or employee); the cost of hospital indemnity insurance, or the amount paid for a specified illness (insured or self-funded) on an after-tax basis; accident or disability income; long-term care; workers' compensation; automobile medical payment insurance; and payments/reimbursements of health insurance premiums for a 2% shareholder employee that was included in the employee's gross income.

It is optional for the employer to report the following health insurance coverage on Form W-2: dental or vision plan not integrated into another medical or health plan; dental or vision plan which includes the choice of declining or electing and paying an additional premium; health reimbursement arrangement (HRA) contributions; and self-funded plans not subject to the federal Consolidated Omnibus Budget Reconciliation Act (COBRA).

The chart also notes that it is optional to report the aggregate cost of employer-sponsored health insurance coverage on Form W-2 if: (1) employers are required to file fewer than 250 W-2 forms for the preceding calendar year; and (2) a W-2 form was furnished to an employee who terminated before the end of a calendar year, and the employee requested in writing a W-2 form before the end of that year. In addition, it is optional for third-party sick-pay providers that provide W-2 forms to employees of other employers to report the aggregate cost of employer-sponsored health insurance coverage on Form W-2.

Items listed on the chart as “optional” may be changed by future IRS guidance. However, any such change will not be applicable until the tax year beginning at least six months after the date of the issuance of such guidance.

The chart can be viewed on the IRS website at http://www.irs.gov/newsroom/article/0,,id=254321,00.html

sacramento cpa and auburn cpa: islip + company, tax return preparation experts with offices in sacramento and auburn california, watching out for our clients taxes and your taxes both IRS tax and FTB tax. The well informed make better decisions...Let islip + company be your tax calculator helping you to maximize your tax returns, islip + company will find every legal item and deduct it... the legal minimum tax is the maximum you will pay at islip + company...

Deserving Credit for being a Small Employer

Written by Auburn CA Tax Return Help CPA

In Sacramento and Auburn California...you are a small employer. . .

If you have:

fewer than 25 full-time equivalent employees
pay an average wage of less than $50,000 a year
And pay at least half of employee health insurance premiums

. . .then there is a tax credit that may put money back in your pocket.

What You Need to Know about the Small Business Health Care Tax Credit

How will the credit make a difference for you in sacramento and auburn?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

Let us break it down for you even more.

You are probably wondering: what IS a full-time equivalent employee. Basically, two half-time workers count as one full-timer. Here is an example, 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

Now let’s talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10 – the number of FTEs – and the result is your average wage. The average wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

If you need assistance determining if your small business or tax exempt organization qualifies for the credit, try this step-by-step guide

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.

Don’t forget … if you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

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How to prepare quickbooks for year end

Written by Sacramento Tax Return Help CPA

How to prepare quickbooks for filing taxes

A. Reconcile all bank and credit card accounts

B. Verify petty cash entries for the tax year

C. Make year-end accrual adjustments and corrections

D. Close your books

E. Adjust Retained Earnings

F. Review details of all new equipment purchased during year

G. Make all asset depreciation entries and adjustments

H. Review fringe benefits that need to be reported on Form W-2

I. Take a physical inventory and reconcile with book inventory

J. Print financial reports

K. Print income tax reports to verify tax tracking

L. Send your tax-related data to Islip + company, cpas either in sacramento or auburn ca

M. Print and mail Forms W-2, W-3, 1099, 940, 941 and 1096

N. Archive and back up your data

O. Order supplies and tax forms

How to prepare year end if you use subcontractors

A. Ensure that 1099 info is correct

B. Print & mail 1099s

How to prepare quickbooks year end if you have employees

A. Confirm you have current payroll tax tables (QuickBooks Payroll only)

B. Clear YTD payroll amounts - QuickBooks does this for you

C. Pay payroll liabilities

D. Review W-2 forms

E. Print & distribute W-2s

F. Print form W-3

G. Process Form 940

H. Process Form 941

I. Verify W4 information

Check with Islip + company, cpas for an extensive quickBooks working knowledge base

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