2012 IRS Forms Waiting for Approval

Although filing season has technically started with the IRS and state governments, there are still many forms that are not ready for filing yet due to the tax changes included in the American Taxpayer Relief Act (ATRA) enacted on January 2, 2013.

For instance, education credit Form 8863 will not be e-fileable until February 14th. Once this form is final, that will enable the majority of taxpayers that have been on hold to be able to file their tax returns. Some other forms like Form 8903 Domestic Production Activities Deduction and Form 8582 Passive Activity Loss Limitations are among a list of forms that may not be accepted by the IRS until the first week of March.

For a complete list of forms waiting on final approval from the IRS please visit http://www.irs.gov/uac/Newsroom/List-of-IRS-forms-that-1040-filers-can-begin-filing-in-late-February-or-into-March-2013.

We will continually check with the IRS to determine when these forms have been updated.

Auditor to IRS: Speed it up

The IRS could quicken the pace of its responses to taxpayers, a new government audit has found. The Treasury Department’s inspector general for tax administration, in a recent report, says that the IRS almost always responds accurately to taxpayer inquiries. But, the audit adds, the agency is not nearly as successful in getting back to taxpayers within its self-imposed 30-day deadline. “Inadequate and untimely responses to taxpayer correspondence adversely affect taxpayers and tax administration,” Russell George, the tax administration inspector general, said in a statement. The audit looked at three separate sets of responses from the IRS, finding them to be accurate at least 80 percent of the time in all three. But the replies were timely only between 10 and 56 percent of the time. The inspector general also found that interim letters, required if a reply cannot be made within 30 days, were not always issued. In all, the audit recommended that the IRS study the interim letter process and clarify instructions for employees, among other things. In its response, the IRS, which received 20 million pieces of correspondence in 2010, quibbled with the how audit compiled its statistics. The agency also noted that it had staffing constraints and defended its use of interim letters.

IRS Releases 2011 Standard Mileage Rates

The IRS released in early December the standard mileage rates for use in 2011. The optional standard mileage rates can be used by taxpayers to calculate the deductible costs of operating an automobile. For business use of an automobile after Dec. 31, 2010 is 51 cents a mile; for medical or moving expenses, 19 cents a mile; and for services to charitable organizations, 14 cents a mile. For tax year 2010, the rates were 50 cents, 16.5 cents and 14 cents, respectively. Rather than using the standard mileage rates, taxpayers may instead use their actual costs, if they maintain adequate records and can substantiate their expenses. IRS Revenue Procedure 2010-51 prohibits a taxpayer from using the business standard mileage rate to compute the deductible expenses of five or more automobiles a taxpayer owns or leases and uses simultaneously.

Final Schedule on Disclosures of Uncertain Tax Positions

The IRS has looked at the comments submitted in response to its proposed schedule of uncertain tax positions, and it's ready to produce a final version. Some of the concerns that businesses raised have been incorporated into the finished product.

Internal Revenue Service Commissioner Douglas Shulman said the agency plans to move forward with an unpopular plan to require businesses with more than $10 million in assets and have taken a reserve on the financial statements to file the new Schedule UTP, Uncertain Tax Position Statement. The schedule will require annual disclosure of uncertain tax positions with a concise description of the positions. The proposal does not require companies to disclose their risk assessment or tax reserve amounts, even though the IRS can issue a summons to compel submission of the information.

Many businesses are required by FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, (FASB ASC 740-10), to identify and quantify a tax position relating to a specific federal tax return for which a taxpayer is required to reserve an amount. The IRS said that the information developed in the course of complying with FIN No. 48 or other accounting standards is highly relevant to understanding the tax positions and assessing how those affect the taxpayer’s tax liability, Shulman said in a speech at Financial Executives International's Washington Policy Conference on September 21, 2010.

The agency said the information would allow it to focus its examination resources on returns that contain specific uncertain tax positions that are of “particular interest or of sufficient magnitude to warrant inquiry, as well as allowing examination teams to identify all of the issues underlying the tax returns more quickly and efficiently.” The proposed schedule and instructions seek information related to three categories of tax data:

• Positions for which a reserve is reflected in the taxpayer’s financial statements;
• Positions for which no reserve is reflected because the taxpayer expects to litigate and win the position; and
• Positions for which no reserve is reflected because the IRS has a general administrative practice of not examining the position.

The IRS released Announcement 2010-09 in January 2010 and extended the comment deadline in March. It was followed with a proposed Schedule UTP and draft instructions in Announcement 2010-30 in April. The comment period ended June 1.

Many accountants voiced concerns during the comment period. One complaint centered on the burden on taxpayers who are already stretched to meet current disclosure requirements. Some accountants argued that the proposal could undercut the integrity of the financial statement process by creating tension between taxpayers and tax advisers. They also feared that a disproportionately large share of the costs would fall on small businesses.

Source: WG&L Accounting & Compliance Alert Checkpoint 9/22/2010

COBRA Subsidy Eligibility Period Extended to May 31

From the IRS:

Workers who lose their jobs during April and May may qualify for a 65-percent subsidy on their COBRA health insurance premiums, according to the Internal Revenue Service. The American Recovery and Reinvestment Act established this subsidy to help workers who lost their jobs as a result of the recession maintain their employer sponsored health insurance.
The Continuing Extension Act of 2010, enacted April 15, reinstated the COBRA subsidy, which had expired on March 31. As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008 and May 31, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy.
Employers must provide COBRA coverage to eligible individuals who pay 35 percent of the COBRA premium. Employers are reimbursed for the other 65 percent by claiming a credit for the subsidy on their payroll tax returns: Form 941, Employers QUARTERLY Federal Tax Return, Form 944, Employer’s ANNUAL Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees. Employers must maintain supporting documentation for the claimed credit.
There is much more information about the COBRA subsidy, including questions and answers for employers, and for employees or former employees, on the COBRA pages of IRS.gov.
Some people who are eligible for the COBRA subsidy also qualify for the health coverage tax credit (HCTC) and may want to choose the more generous HCTC benefit, instead. The HCTC pays 80 percent of health insurance premiums for those who qualify. See more at HCTC: Eligibility Requirements and How to Receive the HCTC.

Health Care Tax Credit

Millions of small businesses have begun receiving postcards from the IRS alerting them to the new Small Business Health Care Tax Credit and encourage them to check their eligibility. The IRS provides a fact sheet to determine whether a business qualifies. The IRS also provides answers to Frequently Asked Questions. Key provisions of the credit are as follows: Eligibility Rules

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

IRS Open House May 15

From the IRS website: The Internal Revenue Service will host a special nationwide Open House on Saturday May 15 to help small businesses and individuals solve tax problems.

Approximately 200 IRS offices, at least one in every state, will be open May 15 from 9 a.m. to 2 p.m. local time. IRS staff will be available on site or by telephone to help taxpayers work through their problems and walk out with solutions.

“Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them,” IRS Commissioner Doug Shulman said. “If you have a problem filing or paying your taxes or resolving a tough tax issue, we encourage you to come in and work with us.”

IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues. At a previous IRS Open House on March 27, approximately two-thirds of taxpayers requested and received assistance with payments and notices.

So, for example, a taxpayer who cannot pay a tax balance due can discuss with an IRS professional whether an installment agreement is appropriate and, if so, fill out the paperwork then and there. Assistance with offers-in-compromise will also be available. Likewise, a taxpayer struggling to complete a certain IRS form or schedule can work directly with IRS staff to get the job done.

At the March 27 Open House, 88 percent of the taxpayers who came in for help had their issues resolved the same day.

Locations for the May 15 Open House are listed here.

The Open House on May 15 is the first of three events scheduled through the end of June. The next two are planned for Saturday June 5 and Saturday June 26. Details regarding those events will be available soon.

Accelerated Deduction for Haiti Relief

On Friday, the President signed into law a special provision allowing taxpayers to deduct on their 2009 tax returns charitable contributions made to provide relief in Haiti. Today's IRS announcement provides guidance on the deduction, including the following requirements for a 2009 deduction:

• Only cash contributions qualify. This includes contributions made by text message, check, credit card or debit card.
• The contribution must be made after Jan. 11, 2010, and before March 1, 2010.
• The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
• Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.
• To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

We do not have word yet as to whether California will conform to this legislation. We'll keep you posted.

Tax Credit Helps Pay for Higher Education Expenses

The IRS provides the following information about the new credit for higher education... The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit – which expanded the existing Hope credit – helps parents and students pay for college and college-related expenses. Here are the top nine things the Internal Revenue Service wants you to know about this valuable credit and how you can benefit from it when you file your 2009 taxes. 1. The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010. 2. The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education. 3. The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit. 4. The term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study. 5. Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year. 6. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back. 7. To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers. 8. The credit begins to decrease for individuals with incomes above $80,000 or $160,000 for joint filers and is not available for individuals who make more than $90,000 or $180,000 for joint filers. 9. The credit is claimed using Form 8863, Education Credits, (American Opportunity, Hope, and Lifetime Learning Credits), and is attached to Form 1040 or 1040A. For more information about the American Opportunity Tax Credit visit the IRS Web site at IRS.gov/recovery.

Worker classification audits on the way

As we've posted before, the IRS is increasing enforcement efforts related to worker classification -- meaning the issue of treating a worker as an employee or an independent contractor. AccountingWeb provides an update on these efforts:

Beginning in February, 2010, the IRS is launching an examination of 6,000 randomly selected companies to focus on employment tax issues ranging from executive compensation to fringe benefits. The IRS will perform an examination of 2,000 random companies per year over the next three years. Companies targeted will be of varying sizes and include both for profit and non-profit employers. While these audits can target any reporting aspect of the tax return the IRS's primary focus will be on worker classification, executive compensation, fringe benefits, nonfilers and reimbursed expenses.

More information on this issue, including examples of worker classification for the construction industry, is available on the FAQ section of our website.

IRS Offers Tax Tips

With tax time approaching, the IRS offers a series of Tax Tips for 2010 on topics such as dependents, filing status, and tips for recently married or divorced taxpayers. The following are what the IRS called the Top Ten Tax Time Tips:

• Start gathering your records. Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support an item of income or a deduction you’re taking on your return.
• Be on the lookout. W-2s and 1099s will be coming soon from your employer; you’ll need these to file your tax return.
• Try e-file. When you file electronically, the software will handle the math calculations for you. If you use direct deposit, you will get your refund in about half the time it takes when you file a paper return. E-file is now the way the majority of returns are filed. In fact, last year, 2 out of 3 taxpayers used e-file.
• Check out Free File. If your income is $57,000 or less you may be eligible for free tax preparation software and free electronic filing. The IRS partners with 20 tax software companies to create this free service. Free File is for the cost conscious taxpayer who wants reliable question-and-answer software to help them prepare a return. Visit IRS.gov to learn more.
• Consider other filing options. There are many different options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at an IRS office or volunteer site. Give yourself time to weigh all the different options and find the one that best suits your needs.
• Consider Direct Deposit. If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.
• Visit IRS.gov again and again. The official IRS Web site is a great place to find everything you’ll need to file your tax return: forms, tips, answers to frequently asked questions and updates on tax law changes.
• Remember this number: 17. Check out Publication 17, Your Federal Income Tax on IRS.gov. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.
• Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return. Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors made by taxpayers.
• Don’t panic! If you run into a problem, remember the IRS is here to help. Try IRS.gov or call our customer service number at 800-829-1040.

Another source for answers to FAQs is the FAQ section of our website.

Small Business Tax Calendar

The IRS recently released its annual Tax Calendar for Small Businesses and Self-Employed Taxpayers. The calendar includes information on general business taxes, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Welcome to 2010!

That time of year!

With tax time upon us, the IRS has again reminded taxpayers to use caution in choosing a tax preparer in its January 3 article titled How to Choose a Tax Return Preparer and Avoid Preparer Fraud. The IRS explains:

While most preparers provide honest service to their clients, the IRS urges taxpayers to be careful when choosing a preparer –– as careful as they would be choosing a doctor or lawyer. Even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the return. For that reason, taxpayers should never sign a blank tax form. And they should review the return before signing it and ask questions on entries they don't understand.

The article goes on to provide the following specific suggestions when choosing a preparer:

• Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
• Avoid preparers who base their fee on a percentage of the refund.Use a reputable tax professional who signs the tax return and provides a copy.
• Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
• Check the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
• Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.

The California Franchise Tax Board often issues similar advice. As we've said before, regardless of whether you choose ThomasYork as your preparer, we encourage you to follow this counsel!

IRS Announces 2010 Standard Mileage Rates

The Internal Revenue Service today issued the 2010 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, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

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

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago. 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 any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

Newly Extended & Expanded Homebuyer Credit

On November 6, the President signed into law H.R. 3548, the ''Worker, Homeownership, and Business Assistance Act of 2009.'' The new law extends and generally liberalizes the tax credit for first-time homebuyers. The following is a summary of these tax provisions. Homebuyer credit basics. Before the new law was enacted, the homebuyer credit was only available for qualifying first-time home purchases after April 8, 2008, and before December 1, 2009. The top credit for homes bought in 2009 is $8,000 ($4,000 for a married individual filing separately) or 10% of the residence's purchase price, whichever is less. Only the purchase of a main home located in the U.S. qualifies. Vacation homes and rental properties are not eligible. The homebuyer credit reduces one's tax liability on a dollar-for-dollar basis, and if the credit is more than the tax you owe, the difference is paid to you as a tax refund. For homes bought after Dec. 31, 2008, the homebuyer credit is recaptured (i.e., paid back to the IRS) if a person disposes of the home (or stops using it as a principal residence) within 36 months from the date of purchase. Before the new law, the first-time homebuyer credit phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Revised homebuyer credit. The new law makes four important changes to the homebuyer credit: (1) Extension. The homebuyer credit is extended to apply to a principal residence bought before May 1, 2010. The homebuyer credit also applies to a principal residence bought before July 1, 2010 by a person who enters into a written binding contract before May 1, 2010, to close on the purchase of the principal residence before July 1, 2010. In general, a home is considered bought for credit purposes when the closing takes place. So the extra two-months (May and June of 2010) helps buyers who find a home they like but can't close on it before May 1, 2010. They can go to contract on the home before May 1, 2010, close on it before July 1, 2010, and get the homebuyer credit (if they otherwise qualify). Note that certain service members on qualified official extended duty service outside of the U.S. get an extra year to buy a qualifying home and get the credit; they also can avoid the recapture rules under certain circumstances. (2) Expansion of qualifying homes. The homebuyer credit may be claimed by existing homeowners who are “long-time residents.” For purchases after November 6, 2009, you can claim the homebuyer credit if you (and, if married, your spouse) maintained the same principal residence for any 5-consecutive year period during the 8-years ending on the date that you buy the subsequent principal residence. For example, if you and your spouse are empty nesters who have lived in your suburban home for the past ten years, you are potentially eligible for the credit if you “move down” and buy a smaller townhome. There's no requirement for your current home to be sold in order to qualify for a homebuyer credit on the replacement principal residence. Thus, the replacement residence can be bought to beat the new deadlines (explained above) before the old home is sold. For that matter, you can hold on to your prior principal residence in the hope of achieving a better selling price later on. The maximum allowable homebuyer credit for qualifying existing homeowners is $6,500 ($3,250 for a married individual filing separately), or 10% of the purchase price of the subsequent principal residence, whichever is less. (3) Expansion of eligible taxpayers. The homebuyer credit is available to higher income taxpayers. For purchases after November 6, 2009, the homebuyer credit phases out over much higher modified AGI levels, making the credit available to a much bigger pool of buyers. For individuals, the phaseout range is between $125,000 and $145,000, and for those filing a joint return, it's between $225,000 and $245,000. (4) Limit on home price. For purchases after Nov. 6, 2009, the homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000. It's important to note that there is no phaseout mechanism. A purchase price that exceeds the $800,000 threshold by even a single dollar will cause the loss of the entire credit. The new purchase price limitation applies whether you are buying a first-time principal residence or are a qualifying existing homeowner purchasing a replacement principal residence. Other homebuyer credit changes. The new law includes a number of new anti-abuse rules to prevent taxpayers from claiming the homebuyer credit even though they don't qualify for it. The most important of these are as follows:

• Beginning with the 2010 tax return, the homebuyer credit can't be claimed unless the taxpayer attaches to the return a properly executed copy of the settlement statement used to complete the purchase of the qualifying residence.
• For purchases after Nov. 6, 2009, the homebuyer credit can't be claimed unless the taxpayer has attained 18 years of age as of the date of purchase (a married person is treated as meeting the age requirement if he or his spouse meets the age requirement).
• For purchases after Nov. 6, 2009, the homebuyer credit can't be claimed by a taxpayer if he can be claimed as a dependent by another taxpayer for the tax year of purchase. It also can't be claimed for a home bought from a person related to the buyer or the spouse of the buyer, if married.
• Beginning with 2009 returns, the new law makes it easier for the IRS to go after questionable homebuyer credit claims without initiating a full-scale audit.

Please feel free to contact us if you think you may benefit from the homebuyer credit.

Tax Credits Help Homeowners Winterize their Homes

The IRS reminds taxpayers of tax credits available for energy-saving improvements. The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit. (1) Nonbusiness Energy Property Credit: This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count. By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2009 federal income tax return. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result. (2) Residential Energy Efficient Property Credit: Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property. Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification. The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits. Eligible homeowners can claim both of these credits when they file their 2009 federal income tax return.

Free Webinar on Employee vs. Contractor Issues

The issue of classifying workers as employees or contractors continues to be of top concern to the IRS and FTB. Intuit is offering a free webinar on Nov. 4 about deciding when to hire an employee vs. a contractor, including a discussion of the necessary forms to file for each (W-2s, 1099s, etc.). If interested, you can click here for more information.

New Publication for Unemployed

The IRS has released a new publication titled "Tax Impact of Job Loss," which discusses tax issues connected to severance pay, unemployment compensation, pension plans, job search expenses and moving costs. If you or someone you know is dealing with unemployment, you may find some useful information in the publication, available online here.

IRS releases Retirement Plan Navigator

WebCPA reports:

The Internal Revenue Service has created a new Web-based tool to help small-business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance. The IRS Retirement Plan Navigator aims to provide employers with an online guide for choosing, maintaining and correcting a plan. The navigator does not suggest which plan may be best for a specific employer, but instead lays out the options to allow small-business owners to choose a plan that best fits their situation. Options include 401(k) plans, plans with individual retirement accounts, defined-benefit plans and tax-exempt plans. The navigator includes a side-by-side comparison of the various types of pension plans and their requirements. The navigator also provides a checklist and suggested resources for maintaining compliance. It offers suggested options to employers seeking to correct errors and bring their plans back into compliance.

If you are interested in more information on retirement for you or your employees, you may want to give this new tool a try.

IRS reminder of worker classification issues

The issue of worker classification, meaning the issue of is whether you treat someone as an employee or as an independent contractor, remains a key focus of the IRS. As we've posted here and here, the government is looking to close the tax gap by going after businesses who treat workers as contractors that should really be treated as employees. Last week, the IRS again reminded taxpayers of the need to consider this issue carefully, publishing the following Ten Tips for Business Owners:

1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.

2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.

3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.

4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.

7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

8. Workers can avoid higher tax bills and lost benefits if they know their proper status.

9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.

10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.

For more information on the topic, please visit the FAQ section of our website.