Obama Tweets for Tax Cut Extension

President Barack Obama urged middle-class families who are in danger of seeing their taxes go up next year to begin using Twitter and other forms of communication to urge lawmakers to extend tax cuts for the middle class.

Obama said Wednesday they should use a new Twitter hashtag, #My2K, to explain what they would do with the additional $2,200 that a family of four is estimated to pay next year if the current tax rates expire for taxpayers earning less than $250,000 a year.

“Today, I’m asking Congress to listen to the people who sent us here to serve,” he said.  “I’m asking Americans all across the country to make your voice heard.  Tell members of Congress what a $2,000 tax hike would mean to you. Call your members of Congress, write them an email, post it on their Facebook walls.  You can tweet it using the hashtag My2K. Not Y2K. My2K. We figured that would make it a little easier to remember.”

Obama met with a group of small business owners Tuesday to discuss the impending tax hikes and other aspects of the so-called fiscal cliff that threatens to plunge the economy into recession next year unless Democrats and Republicans in Congress can agree on a tax cut extension and budget cuts (see Obama Meets Small Biz Leaders to Discuss Fiscal Cliff).

On Wednesday, Obama plans to sit down with the leaders of major financial firms such as Deloitte LLP CEO Joe Echevarria and Goldman Sachs chairman and CEO Lloyd Blankfein, as well as the chief executives of major corporations such as Yahoo CEO Marissa Meyer, Home Depot chairman and CEO Frank Blake, and Coca-Cola CEO Muhtar Kent.

“I’m sitting down with CEOs; I’m sitting down with labor leaders; I’m talking to leaders in Congress,” said Obama. “I am ready and able and willing and excited to go ahead and get this issue resolved in a bipartisan fashion so that American families, American businesses have some certainty going into next year. And we can do it in a balanced and fair way, but our first job is to make sure that taxes on middle-class families don’t go up. And since we all theoretically agree on that, we should go ahead and get that done. If we get that done, a lot of the other stuff is going to be a lot easier.”

Obama plans to go on a campaign-style trip later this week to Pennsylvania and other parts of the country to promote his tax policy. “Even the wealthiest Americans would still get a tax cut on the first $250,000 of their income,” he pointed out. “So it’s not like folks who make more than $250,000 aren’t getting a tax break, too. They’re getting a tax break on the first $250,000 just like everybody else.”

Speaker of the House John Boehner, R-Ohio, and Republican leaders met Wednesday with former Clinton White House Chief of Staff Erskine Bowles, who co-chaired the Simpson-Bowles deficit reduction commission, and the “Fix the Debt” coalition of business leaders to discuss a balanced framework for averting the fiscal cliff and solving our debt crisis.

“Going over the ‘fiscal cliff’ would hurt our economy and cost jobs, and people in both parties agree we need a ‘balanced approach’ to deal with our debt,” said Boehner in a statement after the meeting. “One thing Republicans won’t be party to is a deal that protects big businesses and preserves special-interest tax breaks while raising tax rates on the small businesses we’re counting on to create jobs. To show we’re serious about reaching a bipartisan agreement, we have offered to accept some new revenues, provided the revenue comes from tax reform and is accompanied by significant spending cuts. Without spending cuts and entitlement reform, it is impossible to address our country’s debt crisis. We put revenue on the table. Now, it’s important for President Obama and congressional Democrats to tell the American people what spending cuts they’re willing to make, and I’m hopeful the ‘Fix the Debt’ coalition will call on them to do so. Republicans are eager to forge a bipartisan agreement that can pass both chambers of Congress. The framework we’ve outlined is the responsible path, and it is consistent with the ‘balanced’ approach the White House says it wants.”

-Michael Cohn, Accounting Today

New IRS Notices Related to Form 1099-K

If you receive a letter or notice from the IRS, it will explain the reasons for the correspondence and provide instructions. The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax or are due a larger refund, or if there is a question about your tax return.

What do I do with the Form 1099-K?

Form 1099-K is an information return that reports payment card and third party network transactions. You should retain it for your records and use it to assist you in completing your tax return. Refer to Publication 583, Starting a Business and Keeping Records, for more detailed information and assistance regarding proper record keeping.

Remember, the information reported on the 1099-K should already be reflected in your income tax return as part of your total gross receipts, which are a combination of both payment card receipts and other forms of payment like cash and checks.

What do I do if I receive a notice related to Form 1099-K?

You received one or more of these letters and notices because you may have underreported your gross receipts. This is based on your tax return and Form(s) 1099-K, Payment/Merchant Cards and Third Party Network Transactions that show an unusually high portion of receipts from card payments and other Form 1099-K reportable transactions. It is very important that you respond to the IRS.

Here are some tips to help you in addressing the inquiry.

  • Read the notice thoroughly and complete any worksheets.
  • Gather your tax records including the 1099-Ks that you have received and determine if you agree with the notice about the underreporting of gross receipts.
  • If you have questions, use the contact information provided on the notice.
  • If appropriate, consult your tax professional for assistance.

How is the IRS going to use this information?

IRS uses the information reported from third parties to ensure individuals and businesses meet their tax obligations. The IRS is integrating the new information supplied on the Form 1099-K into a variety of areas, including its compliance efforts, to ensure fairness and address non-compliance.

All 1099-K activities respect taxpayer rights and provide opportunities for taxpayers and tax practitioners to offer explanations or corrections if they receive a notice or audit related to this effort.

Want to know more about the Form 1099-K? Go to the Third Party Reporting Information Center which provides information on who should file these forms; when they need to be filed; and how to get help.

2013 Standard Mileage Rates Up 1 Cent per Mile for Business, Medical and Moving

WASHINGTON — The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven
  • 24 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate.  The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

-IRS Notice 2012-95

Happy Thanksgiving from NFS

Today, we all move pretty fast and sometimes we rush right by the simple things in life, like thanking our colleagues, customers and friends for all that they do.

We’d like to “slow down” for a minute, during a very challenging year, as we approach one of America’s great traditions of “taking stock and giving thanks.” For almost 400 years, our country has celebrated Thanksgiving Day to give thanks for what we have and express gratitude to each other.

Your friends at Northeast Financial Strategies want you to know how much your loyalty and friendship are appreciated this year and in all years past.

To you and your family, from all of us here at NFS, a very Happy Thanksgiving!

What is a FUTA Tax Surcharge?

FUTA Tax Surcharges – Form 940 Schedule A for 2012

Some states have borrowed from the Federal government to pay unemployment benefits and have not yet repaid the money. As a result employers with payroll in those states have a “credit reduction” that applies to effectively reduce the maximum .054 credit. The reduction in the credit means a net increase in the FUTA taxes due for the year.

When a state borrows from the Federal government and does not repay the funds by the end of the year AFTER the year of the borrowing, the credit drops by .003 (.3%).  If the funds are not paid by the end of the following year, the credit decreases by an additional .003.  Each year that the funds are not repaid results in an additional .003 (.3%) credit decrease.

As of November 10, 2012, the following states have not repaid their borrowed monies and therefore the credit reduction indicated applies.  If any of these states repays its entire borrowed monies by December 31, 2012, the reduction does not apply, but such a repayment is not expected to happen.

Indiana – 0.9% reduction in the credit due to four years of non-repayment, effectively resulting in a FUTA rate of 1.5%.

Arkansas, California, Connecticut, Florida, Georgia, Kentucky, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Rhode Island, and Wisconsin – 0.6% reduction in the credit due to three years of non-repayment  effectively resulting in a FUTA rate of 1.5%.

Arizona, Delaware, and Vermont – 0.3% reduction in the credit due to two years of non-repayment  effectively resulting in a FUTA rate of 0.9%.

Michigan – not on the list this year which means it must have repaid its borrowed funds.

The credit reduction is shown on Schedule A (Form 940) and then carried to the Form 940. Affected employers (those required to make deposits of FUTA taxes) should take this reduction in the credit into account when calculating the fourth quarter deposit.

This adjustment is above and beyond any invoices the employers have received from their states for the interest on the borrowed funds.