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Lewitz, Balosie, Wollack, Rayner & Giroux, LLC
Certified Public Accountants
Newsletter
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IRS Makes Installment Agreements Easier
Do you, or someone you know, still owe the IRS taxes for 2012? The IRS now allows taxpayers to complete an application for an installment agreement online. You must be up to date with filing your tax returns and owe less than $50,000 to be eligible. |
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Deadline For The New Form I-9
A new version of Form I-9 (Employment Eligibility Verification) must be used beginning May 7, 2013. Federal law requires every employer to complete a Form I-9 for every new employee hired. The new version of the form is in a different format intended to make it easier to complete and has new instructions, but otherwise it is much the same as the expired version. The new form has a revision date of 3/8/13 and expiration date of March 31, 2016.
Employers must retain each employee's completed Form I-9 for as long as the individual works for the employer. Once the individual's employment ends, the employer must retain the form for the later of 3 years after the date of hire or 1 year after employment has ended.
Penalties for failure to comply with these requirements range from $110 to $1,100 for each violation. More details are contained in the newly revised M-274 Handbook for Employers. |
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Facts About The Surtax On Net Investment Income
- Surtax starts in 2013
- Applies to single taxpayers with modified adjusted gross income over $200,000 and joint filers over $250,000
- Trusts and estates with income over $11,950 in 2013 will also be subject to the surtax
- The surtax rate is 3.8 percent of net investment income (NII)
- Investment income subject to the surtax includes:
- Interest
- Dividends
- Annuities
- Rents
- Royalties
- Capital gains
- Passive Income
- Investment income does not include:
- Wages
- Operating income from nonpassive businesses
- Unemployment benefits
- Social security benefits
- Alimony
- Tax-exempt interest
- Distributions from retirement plans
- Gain from the sale of principal residence to the extent it is excluded from gross income for regular tax purposes
- Gain on the sale of business assets
- Investment expenses may be deducted against investment income to determine NII. Examples of investment expenses include:
- Investment interest expense
- Investment advisory fees
- Brokerage fees
- Rental and royalty expenses
- State and local income taxes properly allocable to items included in NII
- The surtax is in addition to both regular income tax and alternative minimum tax
The new surtax makes tax exempt income more appealing and makes planning discretionary income, such as capital gains and IRA distributions, more important for taxpayers whose income is close to the threshold levels.
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Free Payroll Service Not So Free
Nonprofit organizations who received an offer for free payroll services thought it was an opportunity to save, but it was actually the latest swindle by Richard Zakarian. The offer was for a two-year grant from Zakarian Charities, which required organizations to complete a grant application and provide financial information, to be applied to the cost of the services. Once selected for the grant, the organizations were required to authorize Zakarian to draft the payroll taxes directly from their bank accounts. In documents issued on April 23, 2013, by the U.S. District Court of Cleveland, Ohio, Zakarian is alleged to have collected payroll taxes from various nonprofit organizations, but never remitted the funds to government authorities and did not file the required payroll tax returns.
Zakarian hit upon the scam to target nonprofits after offering discounted payroll services to businesses through which he diverted their employment taxes to his own benefit. He offered one year free service, then began offering payroll services for $1 per employee subject to a minimum charge of $10 per payroll. He used the funds, in part, to make high risk investments in which he had a history of sustaining large losses.
Zakarian, a Certified Financial Planner, is alleged to have started his criminal career by targeting clients of his tax preparation business whom he had identified as being unsophisticated in investing. He convinced these individuals to invest their retirement savings into "safe, guaranteed-return investments" using self-directed IRAs through companies that provided custodial services. Instead of delivering a secure retirement fund, he used worthless promissory notes to divert the funds to himself.
In all, the court has charged that Zakarian swindled 23 clients out of over $1,000,000 of retirement funds and 43 businesses and 29 nonprofits out of over $3,000,000 of payroll taxes.
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A word of caution: this is a brief summary and does not include all of the details that may impact your individual situation. Please contact us if you would like more information.
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About Lewitz, Balosie, Wollack,
Rayner & Giroux, LLC
Our five partners have over 150 years of combined professional experience. We provide accounting, tax, and financial services to individuals, businesses, nonprofit organizations, estates, and trusts. Our services include tax return preparation, software consulting, and compilations, reviews, and audits of financial statements. We have been located in the shoreline community of Old Saybrook, Connecticut for over 50 years. Feel free to contact us if we can be of service. We can be reached at 860-388-4451.
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IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
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