The IRS had to delay the start of this year's tax filing season until it completed programming changes made necessary by the late passage of the "American Taxpayer Relief Act of 2012" (signed into law on January 2, 2013).
Normally, farmers and fishermen are not required to make quarterly estimated tax payments if they file their tax return and pay taxes due by March 1 of the following year. The filing delay created by the new law meant that several tax forms needed by these taxpayers would not be ready on time.
As a result, the IRS has announced an extension of the March 1 filing deadline for farmers and fishermen to April 15.
The filing extension will apply to all farmers and fishermen, not just to those who use late-released IRS forms.
To qualify as a farmer or fisherman for 2012, at least two-thirds of the taxpayer's gross income for 2011 or 2012 must have come from farming or fishing.
The IRS is warning people to be aware of fraud connected with Hurricane Sandy. As is usually the case following a natural disaster, scam artists are impersonating charities to get money or financial information from those wanting to help victims of the storm. The scammers contact people by phone, social media, e-mail, or in person. To avoid falling for a scam, donate only to recognized charities, and avoid those with names that are similar to real charities. Do not give personal information to those seeking contributions, and don't give cash donations. Contributions by check or credit card provide greater security as well as a record for tax purposes.
To encourage taxpayers with offshore accounts to get current with their tax obligations, the IRS has reopened its “offshore voluntary disclosure program (OVDP).” Similar programs in 2009 and 2011 resulted in the collection of more than $4.4 billion of taxes owed.
The 2012 program will be similar to the 2011 program; however, one difference is that there is currently no deadline by which taxpayers must apply.
The IRS has announced the launch of a new Voluntary Classification Settlement Program (VCSP) that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law. Under the VCSP, which is a part of the IRS’s "Fresh Start" initiative, employers can become compliant by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.
A worker's classification, as either an employee or independent contractor, impacts the amount of payroll tax for which the business is responsible. An employer must withhold income and FICA tax, as well as pay the employer share of FICA tax, on the wages of a worker who is an employee. A worker who is an independent contractor is solely responsible for the payment of self-employment and income taxes on his or her earnings. The cost of misclassification to employers in additional taxes, as well as administrative time, or the loss of tax-favored status for employee benefit plans, can be steep.
However, the IRS now offers the VCSP that allows businesses to voluntarily reclassify their workers at a relatively low cost. To be eligible for the VCSP, an employer must: (1) consistently have treated the workers in the past as nonemployees; (2) have filed all required Forms 1099 for the workers for the previous three years; and (3) not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees. Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
If you are interested in this program or would like additional information on the correct classification of workers, please call our office.