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Federal Deposit Insurance Corporation (FDIC) Unlimited Protection on Non-Interest Bearing Accounts Set to Expire 12/31/2012

12/17/2012

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The FDIC is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by insuring deposits, overseeing financial institutions, and managing receipt of deposits from failed institutions.  In response to the credit crisis in 2008, the FDIC's Transaction Account Guarantee (TAG) Program extended and enhanced a number of insuring programs for United States deposits with financial institutions, most notably increasing the insurance level to $250,000 for each financial institution and providing unlimited insurance in non-interest bearing depository accounts.  So, in the event of bank failure, qualifying deposits within each financial institution would be protected up to $250,000, with separate  unlimited protection on non-interest bearing depository accounts -- payable from deposits in receivership, or by funds of the FDIC in excess of those deposits received from the failed institution.

The TAG program carry a built-in expiration on December 31, 2012 (after a 2010 extension), but it was believed upon enactment there was a good chance that it's provisions may be further extended.  However, a procedural motion fell short on Friday in the Senate that would have extended the TAG program two years, which effectively kills it.

What does that mean for businesses, non-profits, and governments?  Well, for governments, not much should change -- State laws in both Pennsylvania and Maryland provide that public funds be either fully insured or be secured with collateral equal to uninsured amounts deposited with the bank.  For non-profits and businesses, it means that every one dollar over $250,000 held in any financial institution in a depository account (demand [checking] and time [certificates of deposit]) would not be insured, and, in the event of a bank failure, there would be no guarantee that the amounts exceeding $250,000 would be returned to the business or non-profit.

With the end of 2012 in sight, take some time to review your depository situations to ensure that you will be properly protected moving into 2013, and contact our offices if you wish to discuss your depository situations and related planning in more detail.
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8 IRS-Focused Audit Areas for Small Businesses

11/13/2012

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The IRS announced several areas it is focusing on for audits of small businesses.

The announcement comes as the IRS said it is increasing its oversight of small businesses and the reporting of taxes. The IRS believes that small businesses routinely under-report, and that this under-reporting is responsible for 84% of the $450 billion tax gap, reports the Examiner.

Below are eight areas the IRS is targeting, as compiled by the Examiner:
  1. Fringe benefits. The IRS believes that employers are not reporting employee fringe benefits like personal use of company vehicles. 
  2. High income taxpayers. The IRS will focus on taxpayers with a total positive income of more than $1 million. Last year, the IRS audited 12.5% of all individuals with incomes of more than $1 million.
  3. Small business employee health insurance credit. This credit was first made available in 2010 and is now coming under IRS scrutiny. The IRS will look for compliance with eligibility requirements.
  4. International transactions. The IRS will focus on the international tax gap, individuals who hide assets overseas, and offshore transactions for large and small businesses.
  5. S corporations. The focus will be on deducting losses from S corporations and the use of S corporation distributions to avoid payment of Social Security taxes. 
  6. Worker reclassification. Businesses may have an incentive to misclassify workers as independent contractors rather than employees, and the IRS believes that there is significant noncompliance in this area. 
  7. Partnerships. This is a new area the IRS is targeting and the agency may take a look at large loss partnerships.
  8. Form 1099-K matching. The IRS announced that it will start Form 1099-K matching in late 2013. The IRS provided a reprieve from merchant card reporting on business returns for 2011 Schedule C and Forms 1065, 1120S and 1120; however, the IRS plans to change its approach after 2012 returns are filed. The IRS has indicated that it plans to pilot a business-matching program that can address a large amount of small business noncompliance.
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Changes to PA Earned Income Tax Collection Process Effective January 1, 2012

09/26/2011

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In 2008, Pennsylvania lawmakers passed Act 32, which completely restructured and significantly changed the withholding, reporting and collection of local earned income taxes.  Act 32 goes into full effect on January 1, 2012 and will have an impact on all business taxpayers. 

Prior to passage of the Act, the earned income tax collection process was complex and confusing.  The provisions of Act 32 will streamline this process by standardizing forms and definitions and by consolidating tax collectors.  All individual taxpayers in Pennsylvania will file the same local earned income tax return at the end of each year and all business taxpayers will file the same local earned income tax withholding returns each quarter or month, no matter where they or their employees reside.  In addition, each county will have one designated earned income tax collector.  This will decrease the number of tax collectors from about 560 to about 21!  The tax collector in each county will be responsible for forwarding tax payments received by each business to the appropriate municipalities.

All employers will be required to withhold and remit local earned income taxes for all employees.  Each employee will be required to complete a certificate of residency form.  The tax rate that each employer will use to withhold tax for each employee will also change.  The employer will use the higher of 1) the rate for the municipality in which the business is located or 2) the rate for the municipality in which the employee lives.

Pennsylvania’s Department of Community and Economic Development (DCED) oversees the implementation of the changes required by Act 32.  To obtain more information from the DCED, including access to the newly required Residency Certification Form, visit http://www.newpa.com/get-local-gov-support/tax-information/dceds-act-32-eit-collection-system.

If you have questions or would like assistance with the implementation of these changes in your business, please contact our office and we will be glad to help.

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