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UHY LLP News Stories - March 2012a 
In This Issue
IRS name and Individual Taxpayer Identification Number matching
Watch your Michigan unemployment tax rate
Home office deduction
Joint FASB/IASB meeting to discuss financial instruments
Take this quiz about income taxes

Events Calendar 

 

CORE Webinar Series  

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IRS name and Individual Taxpayer Identification Number matching

By Patricia Baker, CPA 

 

When your tax returns are filed, the IRS matches the names and Social Security numbers of the filer, spouse and dependents to their records. If the names and numbers do not match, the return will be rejected which could cause a delay in receiving your refund and require paper filing instead of electronic.

 

One of the most common reasons for mismatching is a name change that has not been filed with the Social Security Administration (SSA). For example, if a woman marries and changes her name to her spouse, but does not notify the SSA, the return will be rejected. Similarly, if you have divorced and changed your name back to a previous name, the SSA needs to be notified. Another situation occurs when you adopt a spouse's child and the child's name is changed.

 

Any time a taxpayer or dependent changes his or her name you need to file form SS-5. The form is available on the SSA website. Or, you can call 1-800-772-1213 or your local SSA office to obtain the form. You will receive a new card with the name change, but the number stays the same.

 

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.  


Watch your Michigan
unemployment tax rate

By Jared Schroeder, CPA 

 

At the end of 2011, the State of Michigan issued bonds to repay federal loans for unemployment benefits and restore solvency to the Unemployment Trust Fund. In order to repay these bonds, Michigan has added a new component to their unemployment tax rate calculation, the Obligation Assessment (OA). All Michigan employers will receive their new unemployment tax rate determination letters soon and should note their OA factor applied. The OA is not a separate tax bill and will simply result in additional unemployment taxes being paid each calendar quarter.

 

The OA uses the employer's experience rate and a base assessment of $42 per employee (for 2012), so the rate charged to each employer will be different. The 2013 OA was recently estimated to use a base assessment of $63 per employee. The State of Michigan has estimated that the OA will be applied for approximately ten (10) years in order to repay the bonds issued. The trade-off of higher unemployment taxes is a reduction in Federal unemployment taxes (FUTA). Michigan was a "credit reduction" state for the years 2009-2011. Michigan employers paid $21, $42, and $63 per employee in additional FUTA for those years, respectively. Beginning in 2012, FUTA will be reset to its' original rate.

 

Employers using a payroll service should be looking for the 2012 rate determination notice from the State of Michigan and forwarding it to their service provider. Those employers preparing their payroll in-house should make sure to update their system to use the new rate. The other item to keep in mind is that the State of Michigan also increased the taxable wage base for unemployment taxes for 2012 from $9,000 to $9,500 for each employee.

 

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.  


Home office deduction 
By Amrit Dhillon, CPA 

 

Whether you are an employee or self-employed and you use a portion of your home for business, you may be able to take a home office deduction.  

 

In order to claim the deduction, your home office must be used regularly and exclusively in a trade or business activity. If the area is used for both business and personal purposes you will not meet the criteria of the exclusive test. The exclusive test does not have to be met if you use part of your home to store inventory or product samples or as a daycare facility.

 

Your home office must be your principal place of business or a place to meet with patients, client and customers in the normal course of business. Using your home for occasional meetings is not sufficient to meet this requirement. Your home office does not have to meet either of these conditions if is a separate structure not attached to your home.

 

If your employer provides an office or work space somewhere else and does not require you to work from home, you as an employee will not be able to take a home office deduction because it must be for the convenience of your employer.

 

Generally, the amount you can deduct depends on the percentage of your home used for business. Expenses attributable to business use that you could deduct even if the home were not used for business, such as home mortgage interest and real estate taxes are fully deductible.   Deduction for other certain expenses will be limited if your gross income from your business is less than your total business expenses.

 

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.  


Joint FASB/IASB meeting to discuss financial instruments
By Robert Scope, CPA 
 

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) met on January 25, 2012 to discuss the following topics regarding financial instruments: a) classification and measurement and b) impairment. On the classification and measurement issue, a decision was made to re-deliberate selected aspects to reduce key differences between the respective models.

 

With regards to impairment, the boards discussed how the three-category impairment model should be applied to purchase financial assets with an explicit expectation of credit losses at acquisition. In addition, the boards discussed other aspects of the accounting for such purchased financial assets.

 

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.

 

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Take this quiz about income taxes
 

Most people take more than a passing interest in income taxes which, after all, may require you to send a third or more of your income to the government. You know when taxes are due, and you're probably aware of some of the things that normally qualify for a tax deduction or credit. You may even know the tax rate you pay on "ordinary income," which can be as high as 35% for the 2011 tax year.

 

Yet, you may be a little less certain about less obvious aspects of the tax code. Do you know the rules on investment gains and losses? Do you understand how to calculate deductions for medical expenses or casualty losses? This quiz can help you gauge just how tax-savvy you are.

 

1. You can deduct non-reimbursed medical and dental expenses for 2011 to the extent your total expenditures exceed:

a. 7.5% of your adjusted gross income, or AGI 

b. 10% of your AGI

c. The amount of the standard deduction 

d. The amount of your itemized deductions

 

2.  Non-reimbursed casualty and theft losses are deductible for 2011 to the extent the annual total (minus $100 per event) exceeds:

 

a. 7.5% of your adjusted gross income, or AGI   

b. 10% of your AGI 

c. The amount of the standard deduction 

d. The amount of your itemized deductions   

 

3. If you give a charity stock you have owned for more than a year, your charitable deduction:

 

a. Is limited to your "basis" in the stock

b. Is limited to 50% of the stock's value

c. Equals the fair market value of the stock

d. Equals the amount by which the donation exceeds 30% of your AGI

 

4. Which of the following statements is true for 2011?

 

a. Mortgage interest on a principal residence is always deductible

b. Mortgage interest on a refinanced loan is never deductible

c. Mortgage interest may be deductible even for those who don't itemize deductions

d. Mortgage interest on a vacation home may be deductible by itemizers

 

5. Which of the following statements is NOT true for 2011?

  

a. Capital losses can offset capital gains

b. Capital losses exceeding capital gains can offset up to $3,000 of ordinary income

c. The maximum tax rate on long term capital gains is 15%

d. The maximum tax rate on short-term capital gains is 25%

 

6. The tax rule prohibiting you from claiming a loss on a stock sale if you buy back the same stock within 30 days is called:

  

a. The "wash sale" rule

b. The "prohibited sale" doctrine

c. The 'Cohan rule"

d. The rule on perpetuities

 

7.  If you show a loss from a "passive" activity, such as rental real estate, the loss is:

 

a. Completely deductible

b. Completely nondeductible

c. Deductible up to the amount of your income from other passive activities

d. Deductible up to 30% of your AGI

 

Answers:1-a; 2-b; 3-c; 4-d; 5-d; 6-a; 7-c

 

Events Calendar 

CORECORE Business Management Webinar      

 

Start your week out right with an executive-level, 55-minute webinar. The CORE Business Management complimentary webinar series is packaged to provide busy executives with the understanding, business direction and recommended strategies to help address, achieve and maintain business profitability and viability. Each session will run from 8:05 AM-9:00 AM EST. The series targets strategy, tools and methodologies to achieve and sustain a viable business based on strengthening a company's processes leading to increase profitability, market share and operational control. 

 

03/05 Strategic Marketing: Transition & Position for Market Growth

03/19 Strategic Supply Chain Management

04/02 Grants, Credits & Other Revenue Enhancing Strategies

04/16 Reshoring/Backshoring: A Manufacturing Opportunity?

04/30 Developing & Implementing a Strategic Marketing Plan

05/14 Web, Mobile and Emerging Technologies

05/28 Retooling Your Economic Engine

06/11 Social Media as a Marketing Tool

 

CPE credit is offered. The CORE webinar series will be presented by Alan Lund, Consulting Principal. Alan has over 30 years of experience providing business process analysis and profit improvement services. To register please contact Alan Lund via email [email protected] or phone 248-204-9447.

 

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Published by UHY LLP News.
 
Copyright � 2011 UHY LLP. All rights reserved.

 

Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.   

UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors."  UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms.  UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY Advisors and/or UHY LLP (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.