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Our news articles are posted on a regular basis to give our clients relevant and timely information about matters pertaining to our financial services. Browse through our current and archived articles to learn more.

Category: Business Accounting

IRS Releases Updated Form W-4 and Withholding Calculator

The IRS has released an updated version of Form W-4 (Employee’s Withholding Allowance Certificate) and its online withholding calculator. These tools allow taxpayers to check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act (TCJA).


The IRS is encouraging taxpayers to perform a quick “paycheck checkup” to make sure sufficient tax is being withheld from their paychecks. This is particularly important for (1) two-income families; (2) people with two or more jobs at the same time or who only work for part of the year; (3) people with children who claim credits (such as the child tax credit); (4) people who itemized deductions in 2017; and (5) people with high incomes and more complex tax returns.

 

The IRS anticipates making further withholding changes for 2019 and will work with businesses and the tax and payroll communities to implement these changes.

The revised withholding calculator can be accessed at www.irs.gov/individuals/irs-withholding-calculator

 

G.R. Reid Payroll Services can handle all of your business payroll needs. Contact us to learn more.

 

 

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Accounting & Tax :: Identity Theft Prevention & Recovery


ID fraud

 

Recent cyber-attacks involving companies such as Target, Neiman Marcus, and Kickstarter, remind us that identity theft and credit card fraud occurs every day.

Major companies have become victims of criminal security intrusion, which affects not only the success of their business, but their customers. Every day hackers steal credit and debit card data, personal information including names, addresses, e-mail addresses, phone numbers, and most importantly Social Security numbers and dates of birth. Cybercriminals steal this information, auctioning it to other cybercriminals who open new lines of credit using stolen identities. Once this occurs, it’s extremely difficult to completely remove stolen personal information from the internet.

 

“….Cybercriminals steal this information,
auctioning it to other cybercriminals who
open new lines of credit using stolen identities.
Once this occurs, it’s extremely difficult
to completely remove stolen personal
information from the internet.”

Not only do hackers steal credit card information to make personal purchases, they also file tax returns using stolen identification to receive fraudulent refunds. In almost every case, the legitimate taxpayer is unaware this has occurred until they file their return and are notified by the tax authorities a return has already been filed in their name.

As a result of these breaches, many have asked what precautions should be taken to improve security measures and what to do once one’s identification is stolen. Our suggested action plan is to combine prevention with aggressive reporting.

How can you prevent identity theft?

1.  Review monthly statements: Be diligent in checking your credit card bill every month. This will enable you to detect erroneous charges to your account.

2.  Order and review your credit reports: By ensuring the information in your credit reports is correct and up to date, you have a better chance of detecting any signs of identity theft. At AnnualCreditReport.com you can request your free credit reports annually from TransUnion, Equifax and Experian. These three credit agencies are required by law to provide you one free credit report a year. Order your reports annually and review them carefully. Make corrections as required.

3.  Shred documents with personal information: Shred account statements and destroy expired credit cards to prevent criminals from finding your information in your trash. You can find inexpensive shredders at office supply stores such as Staples and Office Max.

4. Secure your personal information: Keep important documents such as your Social Security card and credit cards you may not be using in a safe place. Secure your online passwords by changing them regularly, making them difficult for anyone but yourself to crack.

5. Be careful how you handle paying your bills: Use online payments when possible. If you must use regular mail, be smart about how you post it. Depositing mail in a secure mailbox or by hand to the Post Office is certainly better than leaving mail unattended in a private mailbox on your house or by the curb, especially when important confidential information is included.

6. Avoid doing business with unfamiliar entities: Don’t make online purchases if you are not familiar with the company or you cannot be sure their website is secure. If a “lock” icon appears on the status bar of your internet browser, your information is safe.

7. Protect personal data saved to your computer: Install firewalls and virus detection software so hackers can’t access personal information you have saved.

8. File your tax returns early: By filing early, chances of someone else using your information before you do is diminished. File electronically through a secure website. Request your refund through direct deposit so criminals don’t have the opportunity to steal your refund check.

9. Transfer personal information from your computer: Transfer personal files to other mediums, such as CDs or flash drives, and store them in a safe place. Deleting information from your hard drive prevents criminals from accessing it when you dispose of the computer.

10. Identify scams and alert the appropriate government agencies: Criminals send mailings or create e-mails pretending to be from government agencies. If you come across a scam claiming to be from the IRS, the U.S. Postal Service, or the FBI you should report it.

What do you do if your identity is stolen?

1. Notify your bank: Cancel your checking and savings accounts. Obtain new account numbers and ATM passwords. Stop payment on any outstanding checks you are unsure of.

2. Contact all your credit card issuers: Get replacement cards with new account numbers to make sure your card can no longer be used by someone else.

3. Put a fraud alert on your accounts: Call the fraud units of the three credit reporting companies, Experian, Equifax and Trans Union. Request your accounts be flagged with a fraud alert so new credit can’t be granted without your approval. Advise each agency of the specifics of your identity or credit card theft.

4. Call your telephone, electrical, gas and water utilities: Alert these companies that someone may attempt to open new service under your name.

5. Seek legal assistance: If required, engage counsel to determine whether your rights have been violated under various credit, banking, and SSN laws.

6.  Report the identity theft: After you take proactive steps to minimize potential damage, file the appropriate reports. The earlier youfile these reports, the faster the problem can be solved.

How to file a report

• Filing Identity Theft Affidavits: Download the Identity Theft Affidavit, Form 14039, or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). Use this form to report the theft to three credit bureaus, Experian, Equifax and Trans Union, as well as to credit card companies and other sources of credit.
 Report stolen checks to Telecheck: This check guarantee company will flag your file so fraudulent checks wil1 be turned down. For more information visit http://www.firstdata.com/telecheck/index.htm or call the Telecheck fraud, identity theft, and forgery line at 1-800-710-9898.
• Report the fraud to the IRS: Submit a copy of your valid government-issued identification, along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 1-855-807-5720. You can also contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
• In appropriate circumstances, report the fraud to the local Police Department, Post Office and FBI. It is important to keep a copy of the police report and save originals. This will make it easier to prove your case to credit agencies and financial institutions.
• Report fraudulent use of your Social Security number to the Social Security Administration’s Office of the Inspector. Go to http://oig.ssa.gov/contact-oig to submit a reporting form. This report should only be filed in the most extreme situations.

7.  Keep a log: Keep track of all conversations, including dates and names when discussing your identity theft with credit agencies, authorities, or credit issuers. Keep all notes and documents so they can be submitted as needed to defend any claims against you or to clear your credit history.

8.  Apply for an IRS Identity Protection PIN number: This IRS pilot program is available to taxpayers in Florida, Georgia and the District of Columbia – the three U.S. jurisdictions with the highest per-capita percentage of identity theft. The PIN number is used to avoid delays in filing returns and refunds.

Identity theft creates financial hardship, credit destruction, and generally frustrates each affected party’s financial future. Repairing your credit history can be a long and arduous effort. You should do everything you can to protect your identification. If it is compromised, stop the damage from compounding and take immediate steps to begin the repair process.

 

Resources

Are you a victim of identity theft?
 If you receive a notice from the IRS, please call the number on that notice. If not, contact the IRS at 800-908-4490 or fill out the IRS Identity Theft Affidavit, Form 14039.

Social Security Administration’s Office of the Inspector General

Reporting Fraud
If you suspect someone of committing fraud, submit a report form at: https://www.socialsecurity.gov/fraudreport/oig/public_fraud_reporting/form.htm

By U.S. Mail:

Social Security Fraud Hotline
P.O. Box 17785
Baltimore, Maryland 21235
Fax: 410-597-0118
Telephone: 1-800-269-0271

Credit Bureaus

Equifax

www.equifax.com

1-800-525-6285

Experian

www.experian.com

1-888-397-3742

TransUnion

www.transunion.com

1-800-680-7289

Report Suspicious IRS Related Emails


Report suspicious online or emailed phishing scams to:
phishing@irs.gov.

For phishing scams by phone, fax or mail, call:
1-800-366-4484

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Accounting & Tax :: Get Tax Transcripts FAST

TaxReturn

In mid-January 2014, the IRS introduced the ability for taxpayers to instantly view and print tax transcripts. Prior to the introduction of this new online service, taxpayers were able to request either returns or transcripts, which would take approximately 5-10 days to be delivered.

 

Tax return and tax account transcripts are available
for the current year plus the previous 3 processed years.
Wage and income transcripts are available for
the past 10 processing years.

The new online feature will give taxpayers instant access to:

Tax Return Transcripts — Reflecting most items from the tax return as it was originally filed. (It does not reflect any changes made after it was originally filed.)
Tax Account Transcripts — Showing any adjustments made after the return was filed, including basic data, such as marital status, type of return, gross and taxable income.
Record of Account Transcripts — Combines the information from a tax return transcript and a tax account transcript.
Wage and Income Transcripts — Provides data from W-2s, 1099s, 1098s, etc.
Verification of Non-filing Letter — Proof from the IRS that the taxpayer did not file a return this year.

To access this feature, follow this link:
http://www.irs.gov/Individuals/Get-Transcript.

After creating an account and signing in, the taxpayer will answer security questions and have immediate access to a page listing the years available for each transcript. Tax return and tax account transcripts are available for the current year plus the previous 3 processed years. Wage and income transcripts are available for the past 10 processing years.
This is a quick and easy way for taxpayers to get immediate access to their past tax return information.

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Accounting & Tax :: NYS Tax Refund: E-mail Notification Sign- Up

New York taxpayers can sign up to receive an email when their income tax refunds are issued instead of calling the department or checking your refund status online. 


Sign up for email today by logging into your Online Services account and selecting “Manage email” from “Account Preferences” at the top of the page.

If you have already signed up for email, but only for Bills and Related Notices, you will need to sign up for Other Notifications to get email telling you when to expect your refund.

If you have questions, please visit: http://www.tax.ny.gov

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Accounting & Tax :: New York’s Metropolitan Commuter Transportation Mobility Tax Upheld

On January 14, 2014, the New York Court of Appeals, the state’s highest court, declined to hear a challenge to the Metropolitan Commuter Mobility Tax, the payroll tax levied in counties served by the Metropolitan Transit Authority. The decision permits the continuance of the tax, which was enacted in 2009, and helps fund the region’s mass transportation.

 

The tax is imposed on certain employers, self-employed individuals and partners in a partnership conducting business within the Metropolitan Commuter Transportation District, including the counties of Duchess, Orange, Putnam, Rockland, Westchester, Nassau, Suffolk and the boroughs of New York City.

 

Local county executives have fought hard to reverse this tax declaring it an undue burden on local businesses, especially those whose employees never use MTA services such as railroads, subways and buses. The MTA states that the fees are necessary to reduce costs. The tax imposes an up to 34-cent tax for every $100 of payroll for large companies with an annual payroll more than $1.25 million and on self-employed individuals and partners.

 

This tax was first challenged in August 2012 when the New York State Supreme Court found the tax unconstitutional. New York State immediately appealed this decision and in June 2013 the New York Appellate Court reversed the Supreme Court finding the tax to be constitutional. The final appeal to the Court of Appeals and their decision to not hear the case, essentially leaves the tax as a valid tax and good law. All taxpayers and employers must continue to comply with this law as it is in full force and effect.

 

The State had previously implemented a streamlined appeal process to handle protective refund claims that were anticipated as uncertainty about this tax continued during the appeals process. All of these claims are now null and void.

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Accounting & Tax :: 2013 Schedule D Forms and Form 8949 Contain Sales/Exchange Reporting Changes

Final versions of the 2013 Forms 1040 Schedule D, 1120 Schedule D and 8949 have been released by the IRS. There have been a few changes to the aforementioned forms regarding how sales and exchanges of capital assets are reported. Form 8949 is used to report sales and other dispositions of capital assets. Unlike schedule D, Form 8949 lists every sale/disposition and separates the totals based on how they were reported to the taxpayer. The totals on Form 8949 are then brought forward to Schedule D. In 2013 both individuals and businesses can look for the following changes to these forms:

 

• Certain Transactions can be omitted from Form 8949
In previous years, Form 8949 has required that every sale/disposition be reported separately, notwithstanding the following exceptions:

 

1. Taxpayers can attach a separate statement with the transaction detail in a format prescribed by form 8949.

2. Corporations, exempt organizations and partnerships with a large number of transactions were allowed to omit the detail and indicate “Available upon request.”

3. The third exception has been added for the 2013 tax year. Taxpayers may aggregate and report qualifying transactions directly on line 1a (Short-Term Transactions) or line 8a (Long-Term Transactions) of Schedule D. In order to be deemed a qualifying transaction, the following criteria must be met:

a. The taxpayer must receive a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and does not show a nondeductible wash sale loss in box 5.

b. There may also be no adjustments made to the basis or type of gain or loss (short-term or long-term) reported on Form 1099-B (or substitute statement).

Taxpayers who qualify to use this new exception and who also qualify for Exception 1 or Exception 2 can use both (i.e., Exception 3 plus either Exception 1 or Exception 2).

 
• Change in Reporting by Electing Large Partnerships
Prior years required both corporations and electing large partnerships to report their share of gains and losses from pass-through entities on Form 8949. In 2013, electing large partnerships will report their share of gain or loss on Schedule D.

 
• Estates and Trusts Must Use Form 8949
Filing Form 8949 for estates and trusts has not been a requirement until 2013. Estates and trusts will now be required to report capital gain transactions on Form 8949. In previous years, all capital transactions at the estate and trust level were reported on Form 1041 Schedule D.

 
The 2013 changes to Forms 1040 Schedule D, 1120 Schedule D and 8949 allows taxpayers a simplified method for reconciling capital gain transactions.

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Commercial Insurance :: Understanding How Experience Rating Works

Many people wonder why it is necessary to use experience rating to predict future losses if workers’ compensation rates are designed for this purpose. Experience rating can benefit employers. The prospects of both bad credits and debits are implicit in the majority of risk-specific programs dealing with experience rating. Since it gives an employer some influence in how much the final premium will be, this gives an incentive for them to develop their loss prevention strategies. It is also good for them to form incentives that encourage injured employees to return to work as soon as they are able. When this happens, experience rating can be beneficial to employers by increasing occupational safety and health.

 Experience rating shows a refinement in processes of premium determination. It creates a net premium cost for employers, which means their costs will be appropriate for the provided coverage. Experience rating shares or spreads the cost of a loss with all group members who are likely to go through similar losses. Although the probability and cost of injuries for an entire group as a whole may not be accurately predictable, it is not possible to decide which member of the group will ultimately be responsible for costs.

This is why there is insurance. If it were possible or easy to predict, group members who do not experience loss would not have any incentive to purchase coverage. Meanwhile, the premium charge for members experiencing losses would need to include the loss costs. Serious injuries to individuals are usually rare, but the totals can be minor amounts or reach well into the millions. For workers’ compensation, the easiest rating method is manual rating. With this system, employers are categorized according to business classifications or operations. Group losses are estimated and then added as an average.

 Employers are assigned to specific classifications to make sure the rates they receive are reflective of the costs all similar employers have. While each classification comes with similar risks, individual ones are different in some ways. However, experience rating is designed to reflect individual differences. Insurance providers would be able to look for employers with lower costs and avoid ones with higher costs if the rating system were only manual. The system needs to be refined to avoid such a scenario, and experience rating falls under that category.

With workers’ compensation experience rating, individual employers’ loss and payroll data are analyzed over time. The most recent three years of data is reviewed against similar groups’ risks to determine the experience modification. An employer that has better experience ratings will be given credits, but those with less will be given debit ratings.

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Accounting & Tax :: START-UP NY Program Updates

The START-UP NY Program will create statewide tax-free zones in order to provide major incentives for businesses to relocate, start up or expand in New York State.

 

This past Summer, the NYS Governor, Andrew Cuomo, unveiled, START-UP, a new job creation program. Businesses will have the opportunity to operate state and local tax-free for ten years on or near academic campuses, and their employees will pay no state or local personal income taxes.
Employees pay no state income taxes on their wages for the first five years on income up to $200,000 of wages for individuals, $250,000 for a head of household, and $300,000 for taxpayers filing a joint return. In addition, businesses may qualify for additional incentives.

 

 

What businesses are eligible for START-UP NY?

Many different types of businesses are eligible to apply to the program. In order to participate, businesses need to support the academic mission of the college or university. Every business must create new jobs in order to participate by:

1. Being a new start-up company;
2. Being a company from out-of-state relocating to New York State; or
3. Expanding as an existing New York State company.

In New York City, Long Island and Westchester County, businesses must be start-ups or high-tech companies. Certain types of businesses are excluded from the program, including retail and wholesale businesses; restaurants and hospitality; professional practices like law firms and medical practices; and energy production and distribution companies.

How many jobs must a business create to be eligible for START-UP NY?

There is no minimum requirement for the number of net new jobs that must be created, but all participating businesses must create jobs to receive the program’s benefits.

 

What tax benefits will participating companies receive?

START-UP NY will provide new and expanding businesses that create new jobs the opportunity to operate completely tax-free including no income tax for employees and no sales, property or business tax while partnering with higher education institutions. Business and employee tax benefits will be available for up to ten years. (After five years, certain NYS high-earners will be limited on the amount of employee earnings exempted from the Personal Income Tax).

 

 

G.R. Reid Associates is a full-service accounting firm with experience and knowledge in business formation. Obtaining financing can be crucial in getting your new venture started. Contact us today to discuss your needs.

 

 

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Additional Medicare Tax

As 2013 comes to an end, employers, employees and self-employed individuals should make sure they are complying with the new 0.9 percent additional Medicare tax.

 

This new rule was effective at the beginning of 2013, but the effects will not be fully felt until wages reach a threshold level which, for many employees, will not occur until the final months of the year. This additional tax will also need to be considered when processing year-end bonuses.
Beginning in 2013, employers were required to withhold an additional 0.9 percent Medicare tax on the wages paid to any employee whose wages exceed $200,000.
The tax applies only to employees and self-employed individuals, not employers, and is in addition to the 1.45 percent / 2.9 percent (regular) Medicare tax that all wage earners/self-employed individuals pay.
The required withholding of the additional Medicare tax may result in over- or under- withholding of the actual tax owed. This is because, employers are required to withhold on wages paid in excess of $200,000 regardless of the employee’s filing status. The actual threshold for the additional tax is $250,000 for joint filers.

 

Example:
Assume that an employee’s wages are $220,000 annually and his/her spouse earns $150,000, and they file a joint tax return. The employer will be required to withhold the additional Medicare tax on the $20,000 of wages that is in excess of the $200,000 withholding threshold. The spouse’s employer will not withhold additional Medicare tax because their earnings do not exceed $200,000. But, together, the employee and spouse will owe additional Medicare tax on $120,000 (the excess of the combined earnings over $250,000.)
In order to avoid under-withholding, such as in the above situation, taxpayers should consider filing a new form W-4 with their employers to request that additional income tax be withheld, or alternatively, make estimated tax payments to make up the difference.
The new withholding rules will require that employers withhold the additional Medicare tax even if employees have no additional Medicare tax liability. Since this is a payroll requirement, employees cannot request that the employer reduce the required withholding.

 

Example:
Assume an employee earns $220,000 annually, and the spouse does not work. The couple file a joint tax return. The employer is required to withhold additional Medicare tax on the $20,000 of the $220,000 compensation. However, the employee and spouse will not owe any additional Medicare tax because the joint annual salary is under $250,000, the threshold for joint filers. In this example the taxpayers will have to claim a refund for those amounts on their tax return.
Between now and the end of the year, employers should be checking their payroll systems to ensure they have properly begun to withhold from their high-earners. Employees should be making some calculations to see if they need to increase their withholding and self-employed individuals should be planning, with their tax return preparers, to be sure estimated tax payments are being made. Paying taxes now, can minimize penalties and interest that apply for failure to pay the additional Medicare tax.

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Debt Crisis Averted: But What’s Next?

Working to reach consensus before the October 17th debt ceiling deadline, the U.S. Congress reached an agreement to avoid a historic, and potentially catastrophic, lapse in the government’s ability to borrow money. The agreement averted an unprecedented debt default and will enable the government to re-open many of its services after a two-week shutdown. The agreement funds federal government agencies until January 15, 2014 and extends U.S. borrowing authority until February 7, 2014 although the Treasury Department may be able to temporarily extend its borrowing ability beyond that date should Congress fail to act early next year. While the agreement is good news, the deal reached by Congress is only a temporary solution to the nation’s debt ceiling challenges. The potential for another showdown in Congress, and shutdown of the government’s borrowing power, looms in a few short months when this temporary agreement expires. The agreement was only a stop-gap measure, Americans are faced with two real prospects for early next year: another government shutdown on January 15, 2014 and another debt ceiling crisis on February 7, 2014. Moreover, some Capitol Hill insiders believe that, unless Congress aligns on a final, “once and for all” solution to the debt-ceiling crisis, we could be facing many more Congressional showdowns and deadlines — perhaps on a monthly basis and through the next election.

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