There are important changes to your year-end reporting requirements associated with Form 940’s and Form 1099’s.

Annual 940 FUTA Form

 Many states borrowed money from the Federal Unemployment system to pay their State Unemployment benefits. Those loans were to be repaid by November 2011 or a portion of YOUR credit reduction would be reduced. However, many states did not get those loans repaid, with Nevada and California being among them. This reduced credit reduction is .003 of all taxable wages and will add a maximum of $21.00 per employee who earned $7,000 in 2011.

You are required to complete and include Schedule A with your Form 940.   Please read through your Federal Form 940 report to insure you accurately complete all of the sections.

1099 Information Returns

 You no longer need to prepare 1099 forms for vendors/subcontractors where your payments were made by credit card/debit card. Those payments are now being reported on Form 1099-K by the credit card merchants. Please remember to file all 1099’s to their recipients by January 31, 2012

Should you need additional assistance or have questions please feel free to call our office at 775-885-8847 or visit the IRS website at www.irs.gov.

In general, if you use your vehicle in pursuit of a trade or business, you are allowed to deduct the ordinary and necessary expenses incurred while operating the vehicle.  However, any expenses associated with the personal use of the vehicle are not deductible.  In lieu of proving the actual costs of operating an automobile, individuals may compute the deductible costs for their business use using a standard mileage rate of 51 cents per mile for the first 6 months of 2011 and 55.5 cents per mile for the second half of 2011.  Whether you use the standard mileage rate or claim actual expenses including gas, maintenance, insurance and depreciation, you should keep a daily log showing the miles traveled, destination and business purpose.  Without a business mileage log, the Internal Revenue Code allows an auditor to disallow all automobile expenses even though it may be clear that you as the taxpayer use your vehicle for business purposes.  This is an audit adjustment that the Service is now pursuing regularly when mileage logs are not produced.

50% of meal and entertainment expenses that are bona-fide business deductions can be deductible for income taxes as well.  To follow the substantiation requirements for these deductions, you must keep a receipt or written record showing the time, place and cost of the event, who was entertained, and the business purpose of the meal or entertainment.

There may be other reasons for a married couple to have a division of their assets into two separate trusts upon the death of the first spouse.  If it is a second marriage, there may be children from each spouse’s first marriage to whom the first to die wants to leave specific assets or the bulk of their wealth while still providing for the surviving spouse an income stream from those assets for their remaining lifetime.  If that type of circumstance exists, then the A/B trust format is still appropriate.  However, if a married couple wants the surviving spouse to have complete discretion over all trust assets after the first death, provided that couple has a net worth of less than $5,000,000, amending your trust to a single trust format may be something you should consider.  In addition, the single trust format has far lower administration costs during the surviving spouse’s lifetime, since in the A/B trust environment, the trust created for the first spouse to die must file its own separate tax returns and, perhaps, prepare annual accountings for the remainder beneficiaries.

Please let us know if you would like to meet and review your estate planning documents to determine if you should visit with your estate planning attorney regarding any amendments that might be necessary or desirable for your trust.  Meeting with the professionals at KBCA is often a good first step, since we work with our clients to implement the terms of the trust, including funding of the A/B trust upon the first death, and we can show you what would occur under your existing trust document from an administrative cost and expense perspective plus explain the restrictions placed on the surviving spouse as the document is currently written.  If you would like to schedule such an appointment, please contact us at (775) 885-8847.

The topic of short sale and foreclosure has become so commonplace within the general population today that there are many myths that circulate amongst our clients regarding the tax implications of a short sale or foreclosure. We have met with several clients who are of the impression that a cancellation of debt associated with their primary residence on a short sale or foreclosure was tax free due to special legislation passed a few years back by Congress that is in effect through 2012 relative to cancellation of debt on primary residence property. We have found in a few instances that the provisions of that legislation do not apply to certain clients, only to deliver the difficult news that a tax liability had been incurred without the prior knowledge of the taxpayer. We have also found, especially with regard to income property, that many of our clients are eligible for tax refunds associated with the tax implications of a short sale or foreclosure, especially if they acquired the income property as the real estate prices were rising in the mid 2000′s. This has been a pleasant surprise for many of our clients.