S. Reichelt & Company, LLC
Certified Public Accountants

Tech Talk

Here's where we list helpful technical tidbits that are good to know!

For Businesses

1099k's

Payroll Tax Increase (effective 1.1.12)

For Individuals

Most tax documents have been issued at this point in time with the exception of 1099 investment statements which must be mailed by February 15th.

For those of you who have stock sales, be sure to obtain a gain/loss statement reflecting the cost of the securities sold. It is not always included with the year-end tax documents they send you.
Your investment advisor should be able to give you this information.

*Employee Social Security Payroll Tax

Applicable to both individuals and employers, Congress has passed a temporary 2 month extension of the reduced social security payroll tax. Currently the reduced payroll tax rate is 4.2%. Effective March 1, 2011 the rate will be increased back to 6.2%. However this temporary extension is in debate with Congress. We will keep you posted of any changes.

401k Contribution Increase

Applicable to both individuals and employers, the maximum amount allowed for contribution to your 401k plan has increase from $16,500 to $17,000 effective 1.1.12. If you would like to increase your contribution be sure to notify your payroll provider.

Check back for current changes and new technical tidbits!

1099k's

New for tax years 2011 is the issuance of Form 1099k's. A 1099k Form is issued to businesses who accept credit card payments from customers. The forms are issued by your merchant service provider. Typically you will have one provider that accepts Visa, Mastercard, and Discover which will issue you one 1099k for each account you may have with them. If you accept American Express they will issue you their own 1099k.

These forms will only be issued if you have more then $20,000 total credit card sales, and more then 200 transactions during the calendar year 2011. The forms should have been mailed by January 31, 2012.

How does this form impact you?

If you file a corporate or partnership tax return, included in line 1 (the total income line) there is now a new box where credit card sales must be reported. The IRS will be matching the amount reported on this line to the 1099k's reported to them by your merchant service providers. We feel that any amounts reported on your tax return that are less then the amounts reported to the IRS will generate an unreported income notice. These notices are usually difficult and time consuming to get resolved.

What we need from all our clients is for them to be proactive in getting ALL 1099k forms to us before the completion of your corporate or partnership tax return. We do not know who accepts credit cards nor how many accounts you may have. So its up to you to let us know.

Let's face it, IRS notices of any kind are unpleasant for you and us! Let's do our best to avoid them at all costs!

A Special Note
If your business files a Schedule C, E, F on your personal return for 2011, the IRS has postponed the reporting of 1099k on your tax return. Of course this still means you include all your income as usual, we just don't need to separate the credit card sales for 2011.

Payroll Tax Increase

Effective January 1, 2011 the social security taxable wage base will increase from $106,800 to $110,100 per year. Currently employee's pay 4.2% tax on this wage base and employer's pay 6.2% tax on their employees wages. The 4.2% was a reduced rate enacted in 2011 however it is not guaranteed that this reduced rate will stay intact for 2012. Congress is still pending on this decision, however the taxable wage bases have been accepted.