Debra Watkins – Page 34 – Debra Newby Watkins CPA

The Rainy Day Fund Will Be Used

The Texas Society of CPA’s reports:

There are enough leaks in the Republican dike against using the funds to burst the dam. While Gov. Perry has not changed is opposition to using the fund, this week added to the number of Republican leaders who say the funds must be used. Last week we reported that Appropriations Chair Pitts (R-Waxahachie) said he had the votes to use the fund on his committee and this week Sen. Finance Chair Ogden (R-Bryan) said “We’re going to have to use a substantial amount of the rainy-day fund if we’re going to pass a budget.” While neither of these chairmen have the final say (it takes a three-fifths vote of the legislature to use the Rainy Day fund), there is growing Republican support as budget hearings continue to spell out the results of proposed budget cuts.

I wrote the above paragraph Thursday afternoon. This morning the Tea Party Caucus Advisory committee came out with strong language opposing the use of the Rainy Day fund in a letter to legislators saying, in part, “We strongly support a budget that is balanced without the use of any portion of the State’s Rainy Day Fund and without the imposition of new taxes, new fees that are effectively increased taxes (such as increased vehicle registration fees) or other new sources of revenue (such as gambling).” According to Jason Embry writing in his First Reading blog, “This is a very significant development. The Tea Party Caucus Advisory Committee consists of 13 tea-party organizers from around the state. They serve as a liaison back to the tea parties for the Tea Party Caucus, which consists of about a third of the membership of the House and two senators. “

Sales Tax Deduction on Large Purchases-Easily Overlooked

Taxpayers that elect to deduct sales tax instead of income tax paid typically use the sales tax deduction calculator to calculate their deduction instead of saving receipts and totaling the sales tax paid. An easily overlooked deduction is the sales tax paid on large purchases that may be added to the amount computed with the calculator.

Large purchases include:

A motor vehicle (car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle) whether purchased or leased.
An aircraft or boat.
A home (including a mobile home or prefab home or a substantial addition to or major renovation of a home) with certain restrictions.

Small Employer Health Insurance Credit

Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, 2010, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.

Here are answers to frequently asked questions about the credit.

Closing in on the Repeal of the 1099 Requirement

The Senate approved an amendment Wednesday to repeal the expanded 1099 information reporting requirements in the health care reform law. The repeal of the 1099 reporting requirements enjoys broad bipartisan support. The requirements, which were included in the Patient Protection and Affordable Care Act (commonly know as the “Health Care Reform Bill,” would have required businesses to report to the Internal Revenue Service any purchases of goods and services over $600 a year from another business or individual.

In the past, the battle has ensued over how to pay for the measure and cover about $19 billion in estimated lost revenue. To avoid adding to the budget deficit, the amendment authorizes the director of the Office of Management and Budget to cut unnecessary unobligated spending, but exempts the Social Security Administration’s administrative expenses from being cut.

IRS Goes Social

I think this is hilarious: The IRS Goes Mobile With IRS2Go. You can check your refund status, get tax updates, and, the hilarious part, follow the IRS Twitter news feed, @IRSnews. IRSnews provides the latest federal tax news, including information about tax law changes and important IRS programs.

Although this is all very convenient, and I probably sign up, will IRS want me to “like” them on Facebook?

Information Reporting for Rental Income

As of January 1, 2011, persons receiving rental income from real property have to file information returns (Form 1099-MISC) to the Internal Revenue Service and to persons that provide services for which they receive payments of $600 or more during the year for rental property expenses such as repairs and maintenance.

Form W-9 is available to give to service providers. I recommend obtaining the W-9 before paying the provider unless it is clearly obvious that payments will not exceed $600 for the year. Hear’s a comprehensive article in the Journal of Accountancy.

Federal Tax Deposits

On December 27, IRS sent Notice CP-247 to inform employers that required federal deposits may not be made with Forms 8109/8109-B as of January 1, 2011. Taxpayers are advised to check with their financial institution to find out its cut-off date for accepting Federal Tax Deposit coupons.

Employers that are using a payroll service have already been depositing electronically through that service. Others must navigate to https://www.eftps.gov/eftps/ to enroll in the Electronic Federal Tax Payment System.

This system is available to both business and individual taxpayers. Be sure to set up a business account for payroll taxes and a personal account if you would like to use this method for 1040-ES (estimated tax) payments.

If you’re stuck and need to make a payment and your financial institution turns you away, you can take the payment to the IRS. In Austin: 825 E. Rundberg Ln. (IH35 and Rundberg)

Moolala: Ooo La La?

Moolala is the most recent opportunity that I have been offered that operates like Grupon or LivingSocial Deals. Businesses offer reduced rates on services or goods; I am offered the opportunity to purchase them. Grupon offers me $10 if I refer friends. From Grupon’s website:

We’re giving $10 in Groupon Bucks for every friend you refer when they make their first purchase. It’s our way of saying “thanks” for spreading the word and increasing our collective buying power! Groupon Bucks can be used toward any Groupon purchase, and they never expire.

LivingSocial offers my deal for free if I share my purchase and at least three people buy it:

Share for a Free Deal
After you buy the deal, you’ll get a unique link to share. If three people buy the deal using your link, then your deal is free.

Here’s Moolala’s pitch:

There’s more – we want to help you make money, too!

We will give you 2% back on each deal you buy. And for each friend you refer to Moolala, you will earn 2% of every deal they buy. And that’s not all: we’ll pay you 2% for each friend they refer, and again for your friends’ friends’ friends and your friends’ friends’ friends’ friends. It’s a 2% five-level reward system. That adds up to lots of rewards for you and your friends.

Use your rewards to buy the Moolala deals you love or even redeem them for cash. It’s up to you.

So start inviting friends and earning rewards now.

There’s more – we want to help you make money, too! We will give you 2% back on each deal you buy. And for each friend you refer to Moolala, you will earn 2% of every deal they buy. And that’s not all: we’ll pay you 2% for each friend they refer, and again for your friends’ friends’ friends and your friends’ friends’ friends’ friends. It’s a 2% five-level reward system. That adds up to lots of rewards for you and your friends.

Use your rewards to buy the Moolala deals you love or even redeem them for cash. It’s up to you.
So start inviting friends and earning rewards now.

Whenever I see “we’ll pay you based on your friends’ friends” , I immediately think, “pyramid selling and chain letters.” It appears Moolala is an Austin based business that was formed in 2010. Here’s the LinkedIn reference. I joined Moolala to help my missionary, traveler friend receive his 2% should I make a purchase.

My least favorite is the LivingSocial offer. I’m not sure I know three people that would make the same purchases as I would make. My choice is between the immediate $10 of Grupon or a potentional stream of 2% commissions of Moolala. The Grupon offer seems more bird in the hand to me, so I would choose Grupon. Except, what if all of my friends have already signed up? Then I think that there’s “no soup for me.”

It will be interesting to see which company is most rewarded by the market place.

Those darn outstanding checks

On June 30 of each year, business owners in Texas need to determine whether they are holding abandoned property: property for which they have had no contact with the owner for the applicable abandonment period and their whereabouts are unknown.

For most business owners the most common financial assets will be outstanding payroll, accounts payable, or refund checks. For payroll checks, the abandonment period is one year. For other checks the period is three years.

The reports are due November 1 and no extension of time to file is available. Effective for the 2010 reporting cycle, which just ended, holders reporting to Texas are required to mail a notice in July to all owners of property over $250 that are due to be included in their November report. Here is a sample letter: Due Diligence Letter.

The Texas Comptroller is able to go back ten years to look for unreported unclaimed property. Although the Comptroller is holding the property for the rightful owner, the state wants to be the one holding the property rather than the business owner. Although there is no legal limit to make a claim, the state can invest this money much as lenders use escrow funds to make money on your money.

Investigate outstanding checks and contact vendors or employees on a regular basis so that you will limit your exposure to the unclaimed property regulations.