Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 

 

Household Employees: 
What You Need To Consider

Many families hire household help, either of house work or for childcare. There are many issues to consider when deciding to hire an individual to work in your home.

The responsibility of an employer does not start with the first paycheck. It’s a daunting and grueling process which will require the assistance of a professional to ensure that you are following the right procedures when it comes to the hiring and firing employees.

When it comes to your employees there are numerous issues to be addressed. With the proper planning and preparation, you, as the employer should start protecting your family even before allowing the help into your home. This does not only apply to domestic help, but also the hiring of independent contractors. Procedures and practices for employees who operate in your home should be established to maintain your safety and security.

There is a long list of responsibilities associated with being a household employer, as well as the fear of subjecting the family to personal and financial risk. Employers need to educate themselves on the process for hiring, maintaining and firing employees.

When hiring an employee it is very important the position be clearly outlined and detailed expectations provided. In order to make the work arrangement effective, a written and agreed upon job description should be signed by the employee.

Another important document to consider would be a confidentiality agreement. Each employee should be asked to sign one. Signing of a confidentiality agreement prevents the employee from using the family’s personal and financial information for profit.

In addition to the written job description, the employer should identify and confirm the qualifications of the employee. The hiring process should include a comprehensive background check performed by a professional. This should be done even though the employee has provided documents that prove they are a US citizen, etc. This investigation process will help verify references, previous employment records, education, criminal records, credit, etc, in order to alleviate the concerns of the employer and help ensure your family’s safety.

Many families, especially those with more than one home in more than one location and extremely busy lifestyles, have turned over the management of their household to a professional search firm. As with the hiring of an employee, the client needs to do an equal amount of due diligence in order to make sure that their personal information is not exposed. The family’s privacy must be protected until the employee is hired. The client should review all of the new hire’s documents that the search firm has compiled before the interview. If this route is taken, the staffing service acts like the employer and is responsible for the payment of taxes and processing of payroll.

Once the employee is hired there is also the need to make sure that your “home” is secure. Valuable personal and financial information could very easily be stolen off your own computer. Allowing your employee to have online access could also lead to identity theft. It would be wise to speak with a security/risk consultant to make sure that your computer systems have the highest level of encryption to protect the family’s personal information.

Now that the employee has been hired, the employer has to consider the paying of payroll taxes, of which there are various types which the employer is directly responsible for remitting. The employer is responsible for various types of payroll taxes. There are required Federal withholdings from the employee and taxes to be paid by the employer. Depending on the state in which you employ, there may be state and local payment and filing requirements.

In addition to the Federal and State withholdings, an employer also has to consider Worker’s Compensation and Disability Insurance. Worker’s compensation is a form of insurance that provides compensation medical care for employees who are injured in the course of employment. It is required by law for employers to have in place for employees. Disability insurance is also a form of insurance that provides policyholders with coverage that replaces a portion of an employee’s income if he or she becomes too sick or disabled to return to the job. Each state has its own Disability insurance requirements and should be reviewed when hiring.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 

New York Youth Works Program

On December 9, 2011, Governor Andrew M. Cuomo signed into law "The New York Youth Works Program" in an effort to combat excessively high unemployment rates among inner city youths. This statewide initiative is designed to encourage businesses to hire disadvantaged and unemployed youth by allowing tax credits of up to $4,000 for hiring eligible individuals during 2012. To be eligible, employees have to be between ages 16 to 24, certified to participate in the program and live in one of the following areas of New York State:

Cities of:

• Albany
• Buffalo
• New York City
• Rochester
• Schenectady
• Syracuse
• Mount Vernon
• New Rochelle
• Utica
• Yonkers

Towns of:

• Brookhaven
• Hempstead

To participate in this program, businesses must have certification from NYS Department of Labor, which can be obtained at www.jobs.ny.gov/youthworks. To qualify for certification, businesses must satisfy eligibility requirements which include:

• to be in good legal standing
• situated within a reasonable commuting distance for youth who live in specified areas and
• fill job openings that meet one of three conditions: 

1. Considered an in-demand occupation,
2. Located in a regional growth sector,
3. Deemed a priority for the area's Regional Economic Development Council.

Tax credits vary depending on the type of position.  For full-time employees, (35 hours or more a week) eligible businesses may be entitled to credits up to $4,000 as follows: $500 per month for the first six months of the year and additional $1,000 if the youth is employed for the remaining six months.  For part-time employees, (20-34 hours per week) the maximum tax credit allowed is $2,000, which consists of $250 per month for the initial six months and $500 more if the youth is employed beyond first six months of the year.

Businesses interested in participating in the program, should keep in mind that NYS has set aside only $25 million in available tax credits for this program. Those considering applying should act quickly in order to meet the deadline which is set for November 30, 2012.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


Tax Consequences of Short-Selling Stock



An Individual investor who engages in the practice of short-selling stock encounters several complex reporting issues when it comes time to prepare their individual income tax return. Investors who sell short stock believe the price of the underlying security value is going to decline. Typically, a brokerage firm lends the investor the underlying stock and it is then sold and converted to cash. The investor is charged margin interest on the value of the borrowed securities. If the stocks pay a dividend, the investor is required to pay over the dividend to lender or broker.

For example, 100 shares Company XYZ, Inc. are sold short at $60 per share, the investors borrows the shares and immediately sells them for $6,000. As hoped, the shares decline to $40 per share resulting in a profit a $20 per share. The investor covers the position by buying the shares at $40 and delivering the securities back to lender for a gain to the account of $2,000. The short seller loses money when the price of the shares goes up and is open to potentially unlimited losses until the position is closed.

The holding period of the securities used to cover determines whether the gain or loss is reportable as short-term or long-term. However, special holding period rules apply to prevent taxpayers from using short sales to convert short-term gains into long-term gains and long-term losses to short-term losses. If on the date of the short sale the investor owns or acquires substantially identical property before closing the short any gain is deemed short-term regardless of how long the underlying securities used to cover the position have been held. If on the date of the short sale the underlying security used to cover was held more than one year any loss from the short sale will be deemed to be long term regardless of the holding period of the securities used to cover.

When the short-sale transaction is closed, the sale is reported on Form 8949, Sale and Other Disposition of Other Assets, If the 1099-B issued by the broker shows the short sale proceeds in a tax year other than the year gain or loss is properly recognized it is necessary to reconcile the difference between amounts reported on the Form 1099-B and the proceeds shown on Form 8949.

The margin interest paid on the loan is a deductible as an itemized deduction as investment interest expense reportable on Form 4952, Investment Interest Expense Deduction, subject to the limit of investment income.

Investors also need to be careful to avoid constructive sale rules requiring the recognition of gain at the time of the short sale and not the time of the close of transaction.

When a dividend is paid on a stock that is sold short, the short seller must make a payment in lieu of dividends to the lender. The payment is deductible investment interest expense to the extent of investment income. If the short position is closed within 45 days in lieu of dividend payment is not deductible, but is added to the basis of the stock used to close the short sale.

Wash sale rules also apply to short sale loss transactions when another short sale of the same security is entered into within 30 days after the closing of the sale given rise to a loss. The loss will be deferred and added to the basis of the second transaction. The wash sale rule is the same whether it is a short sale or long sale.

When entering into short sale transactions, Investors need to pay close attention to complex tax reporting requirements. 

Healthcare & Benefit Services

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC

Big dogs play nice with reform

UnitedHealthcare started it. Aetna and Humana soon followed.

Wellpoint’s waffling, holding out for the Supreme Court ruling.

What are they doing? Well, as we reported here, ("Other carriers jump on reform bandwagon") some of the largest insurers in the business have come out to say they’ll still abide by some of the aspects of PPACA regardless of what the court does.

Three of the top five insurers in the country plan to carry on with preventative care coverage – such as immunizations and screenings – without a copay. They also said they’ll keep covering those older children under their parents’ policies – until they hit 26, anyway. They’re also gonna maintain a more streamlined appeals process for denied claims.

United and Humana actually stepped out a little further, insisting they wouldn’t enforce lifetime dollar limits on claims.

All in all, it sounds like they’re playing nice even if they don’t have to. Because there’s still a real chance even these earlier regs could get tossed. We’ll find out soon enough.

But as we reported, these are the most popular provisions of the law, anyway, and the carriers have already done the math, lumping the extra costs into the last round of premium bumps. If anything, dropping these provisions might be a bigger headache at this point. So they can score a public relations win without taking a hit on their bottom line. Nothing wrong with that. Although it will be interesting to see if Wellpoint faces any backlash for dragging its feet on this while its competitors come out looking like humanitarians.

And, honestly, why wouldn’t they? Have we already forgotten how the carriers jumped on board this legislation early on – after the public option died, of course. And while I think it’s a stretch to say these carriers are “embracing” reform as a few mainstream media outlets are pointing out, it’s safe to say they’re simply accepting a new reality – something brokers need to start doing, as well.

I think this is a good move, though, and not just from a PR perspective. But what this really shows, is that, cynicism aside, while this legislation remains a convoluted mess, it does have its worthwhile provisions – even if they are buried under red tape and rampant spending. It also shows that no matter what happens to this particular law, some of the things it’s ushered in are here to stay, whether it’s as simple as coverage provision or as far-reaching as the state exchanges.

Source 

© 2012 BenefitsPro. A Summit Business Media publication. All Rights Reserved. 

Written by Denis Storey

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


Expanded Foreign Reporting Requirements for 2011 Tax Filings 

Individual taxpayers who own foreign financial assets should be aware that there are new and updated filing requirements.Individuals who have financial interests in foreign bank accounts, securities or other foreign assets may now be subjected to filing requirements with both the IRS and the U.S. Treasury. Each of these organizations has separate reporting thresholds and forms in order to comply with the foreign reporting requirements.



The IRS defines a financial interest as receiving any gains, losses or distributions from holding or disposing of the account or asset that would be required to be recorded on an income tax return. For this form, specified foreign financial assets includes financial accounts held in foreign accounts, securities issued by non-U.S. persons, interests in foreign partnerships, and other foreign assets not held in financial institutions. Form 8938 is required to be filed with the individual’s timely filed income tax return including extensions. Failure to comply with the requirements of Form 8938 may result in penalties. Those who fail to disclose a foreign financial asset can be fined up to $10,000 at the time of the discovery by the IRS. If failure to disclose continues, additional fines may be imposed. Taxpayers who willfully fail to file Form 8938 also face potentially criminal penalties.

U.S. Treasury Form TD F 90.22-1
The U.S. Treasury also requires the filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. This form is required for those with financial interest or signature authority over a foreign bank account in which the value exceeds $10,000 at any time during the calendar year. A financial interest includes owners of the account and anyone who has the authority to control the disposition of the assets. If a taxpayer is required to file this form, the maximum value of the financial account during the year must. Form TD F 90-22.1 must be received by the U.S. Treasury on or before June 30th.

Failure to comply with the Treasury requirements could potentially result in civil and criminal fines. Individuals willfully not reporting a foreign financial account may be faced with a fine equal to the greater of $100,000 or 50% of the unreported account balance. In addition to monetary penalties, criminal penalties of up to $250,000 or imprisonment for up to five years, or both can be assessed to those who willfully avoid reporting. If the individual failed to report in a non-willful manner a fine of up to $10,000 can be assessed.

Individuals who have previously failed to file Form TD F 90.22-1 for years prior to 2011 can become compliant by filing late returns and reporting income associated with the foreign accounts.   The IRS currently has a voluntary disclosure initiative in effect to assist taxpayers with this process. (An individual should seek tax advice before approaching the IRS.)

Conclusions
Based on the requirements of the IRS and U.S. Treasury, it may be necessary for individuals to file both Form 8938 and Form TD F 90.22-1. It is imperative that taxpayers access their holdings in foreign assets and accounts to determine if they are affected by these updated regulations.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 

State & Local Tax Credits and Incentives

New York City Green Roof Tax Credit 
You may qualify for a real property tax abatement if you constructed a "green roof" covering at least 50% of a building’s rooftop space on a class one, two, or four building.

Connecticut Enterprise Zone Credit And Exemption
If you have a qualified business located in an Enterprise Zone, you may be entitled to a tax credit for 10 years or be exempt from sales and use tax.

New York Brownfield Redevelopment Credit 
A 10% to 20% credit may be available to you for the costs of certain site preparation, tangible property, and ground water remediation.

New Jersey Enterprise Zone Tax Credit And Exemption 
You may be entitled to a tax credit for hiring new employees or investing within an Enterprise Zone (EZ) and may be exempt from sales and use taxes for certain purchases of property and services used within the EZ.

Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 

How do I...Obtain back tax returns or account information from the IRS?

A taxpayer who may have misplaced or lost a copy of his tax return that was already filed with the IRS or whose copy may have been destroyed in a fire, flood, or other disaster may need information contained on that return in order to complete his or her return for the current year. In addition, an individual may be required by a governmental agency or other entity, such as a mortgage lender or the Small Business Administration, to supply a copy of his or a related party's tax return.

In such circumstances, you may obtain a copy of your tax return by filing Form 4506, Request for Copy or Transcript of Tax Form, along with the applicable fee, to the IRS Service Center where the return was filed. Also, tax account information based on the return may be obtained free of charge from IRS Taxpayer Service Offices. You may also request a transcript that will show most lines from the original return, including accompanying forms and schedules.

Fees 
There is no charge to request a tax return transcript of the Form 1040 series filed during the current calendar year and the three preceding calendar years. For other requests, a fee of $23.00 per tax period requested must be paid in order to obtain copies of a return. Taxpayers seeking tax account information (such as adjusted gross income, amount of tax, or amount of refund) should contact their local IRS Taxpayer Service Office, which will provide the account information free of charge.

Timing of Requests 
A request for a copy of a return must be received by the IRS within 60 days following the date when it was signed and dated by the taxpayer. It may take up to 60 calendar days to get a copy of a tax form or Form W-2 information. If a return has been recently filed, the taxpayer must allow six weeks before requesting a copy of the return or other information. The IRS cautions that returns filed more than six years ago may not be available for making copies; tax account information, however, is generally available for these periods.

You may be able to save some time by going directly to your tax return preparer for the information. Although a return preparer may retain a copy of the taxpayer’s return, however, there is no absolute requirement to do so. Preparers must retain for three years either a copy of each completed return and claim for refund or a list of the names and taxpayer identification numbers of taxpayers for whom returns or claims have been prepared.