By Jerry Lopatka, Managing Principal
Jerry Lopatka is Dugan & Lopatka’s managing principal. He specializes in business tax planning for privately-held companies and has extensive experience in the areas of corporate tax, LLCs, real estate transactions, and succession planning. This article appeared in the November 9, 2015, edition of the Daily Herald Business Ledger.
This is a busy time of year for everyone. And it’s not just the holidays.
Business owners and CFOs have a lot of year end projects on their plate. They can include budgets and forecasts, taxes, banking matters, insurance renewals, year-end bonuses, retirement and benefit plan updates – the list goes on.
No matter what type of business you operate, January is busy. You're trying to get your business off to a good start in the new year, you're closing the books on last year, and you have to complete payroll and 1099 forms by month-end. Why not make time this month to get a head start on at least one of those chores?
You can lay the groundwork now for a common information return known as "Form 1099-MISC, Miscellaneous Income." You use Form 1099-MISC to report payments to non-employees. The list of payments includes fees to independent contractors for services, such as consulting, web designing, accounting, and legal. Generally, you don't need to report amounts you pay to corporations, but there are exceptions. For example, you must report payments to all law firms, whether the firm is incorporated or not.
Here's the information you need to start assembling to complete Form 1099-MISC: the name and address of vendors you paid in the course of your business, the taxpayer identification number of each vendor, and verification of corporate status. The best way to collect this information is to use "Form W-9, Request for Taxpayer Identification Number (TIN) and Certification." Send a copy to all vendors and ask them to complete and return the form to you. When you get the form back, keep it with your records. The IRS doesn't need a copy.
In order to save time in the future, establish a policy to request Form W-9 from a new vendor whenever you sign a contract. If you have questions on establishing such a policy or other issues related to 1099 forms, please contact your Dugan & Lopatka CPA at (630) 665-4440.
Are you preparing your business for the "Cadillac" tax? This Affordable Care Act provision is actually named the "Excise Tax On High Cost Employer-Sponsored Health Coverage," and is scheduled to take effect in 2018. Starting that year, this 40% tax will be assessed on the cost of health benefits above a certain threshold. The initial threshold is an annual cost of more than $10,200 for individual plans ($27,500 for a family).
The tax will be due annually and is nondeductible. Who will pay - the insurance company, a third-party provider, or you as the employer – depends on the type of coverage. For example, if you offer employees a group health plan through an insurance company, the insurance company will make the payment. However, under current rules, you're responsible for calculating the amount due.
The IRS is just beginning to release guidance for calculating and reporting the Cadillac tax. Because the tax applies to a wide range of health coverage, you'll need to determine how your business will be affected.
Contact your Dugan & Lopatka CPA at (630) 665-4440 for more information.
The CPA Compass
Take a look at this new infographic we created showing the tax environment in Illinois....
If you own a building you may be overlooking a very important tax deduction that can, if applicable, can provide...
After years of work, the IRS has finally issued regulations clarifying for the business community when costs related...