Tax Highlights
Charitable Contribution Requirements
The IRS will not allow a charitable deduction for any contribution of $250 or more unless the taxpayer obtains a written acknowledgement from the organization by the time of filing the return claiming the deduction. The documentation MUST indicate either the amount of cash or description of the property contributed, as well as whether the charity provided any goods or services in consideration for the contribution.
Employee Payroll Tax Cut
The Employee Payroll Tax Cut enacted in 2011 has been extended for wages paid through February 29, 2012. Social Security tax withholding was reduced 2 percentage points from 6.2% to 4.2%.
1099 Rule
The additional scope requirements of 1099 reporting enacted to begin in January 2011 has since been repealed. A 1099 is still required to be distributed to any person or non-incorporated business that you paid $600 or more throughout the course of the year for services.
Merchant Card Gross Receipt Reporting
The IRS has issued Form 1099-K, Merchant Card and Third Party Network Payments. Credit card companies and other third party network payors must use this form to report payments to merchants. The form is required if amounts paid to a particular merchant exceed $20,000 in gross total reportable payments and if the total number of transactions exceeded 200 for the calendar year. If you are a small business that received this, please bring this form to your tax appointment.
Health Insurance W-2 Reporting
Employers are required to disclose the value of employer-sponsored health insurance coverage on each employee’s annual Form W-2. This change requires employers filing more than 250 W-2 Forms for the 2011 calendar year to disclose the health insurance amount in Box 12, Code DD. Employers filing fewer W-2 Forms are not required to disclose until 2014. The reported information has no impact on the employee’s taxable income. It is provided for information purposes only.
For questions on any of the items noted above, please contact your tax preparer.