The Exuberant Accountant - Scott Heintzelman

With all the hoopla over the debt ceiling debate and the stock market drop, few people noticed last week that the IRS just added more work for payroll departments. 

The IRS said last week that it would require employers to manually enter the Taxpayer Identification Number (TIN) shown on W-2 forms for all taxpayers with Individual Taxpayer Identification Numbers (ITIN) who are reporting wages for tax year 2011. 

They also stated that no software package should use an auto-population feature, regardless of the presence of an override feature, to populate the TIN on Forms W-2 for ITIN filers. Failure to comply with the new rules could result in a written reprimand, suspension, or even expulsion from the e-filing program. 

An ITIN is a 9-digit number that always begins with 9 and has a range of 70-88 in the fourth and fifth digits. The IRS issues ITINs to individuals who are required to have a TIN, but who do not have, and are not eligible to obtain, a Social Security number (SSN). 

Who needs an ITIN? 

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). 

The form must be submitted by U.S. persons with signature authority over or a financial interest in a financial account outside of the U.S. 

The FBAR form for 2010 must be received by the Treasury Dept by June 30, 2011. There are no extensions. 

It may be complicated to determine whether you are required to file this form. The form instructions do not address many questions that have arisen in particular situations. 

The good folks over at Gainer, Donnelly & Desroches, LLP (friends of our firm) have provided a flowchart indicating the major decision points you need to review to determine if there is a need to report your accounts. 

Please click here to view flowchart 

The penalties for not complying are very severe and you can read more about them on the IRS website. 

Late last week the IRS provided a short extension for anyone required to file for year 2009 and earlier, but the 2010 year is still required to be filed by June 30^th. 

If you believe that you may need to file, please contact us for further assistance. 

Last week Pennsylvania’s governor put forth his 2011-2012 budget. As most governors are doing across the country, our governor proposed some difficult spending cuts. Much has been written about his proposed plan, his lack of tax increases, and his deep educational cuts. I thought I would dig a little deeper into the plan.

Governor Corbett is the first governor in over two decades to submit a budget that was lower than the prior year. I personally find this to be refreshing. This recession has impacted everyone from large business, small business, nonprofits…government is just now feeling the effect and the need to cut back as everyone else has.

What I particularly like about this budget are the areas that our governor selected to reduce and the tone he used when communicating this message. Unlike some other states (New Jersey and Wisconsin) and their governors, ours seemed to not be looking for a fight with unions and state employees. While he did propose eliminating 1,500 state jobs, 1,000 of them are currently vacant. He did speak about a pay freeze for state employees (and additional contributions for health insurance and retirement), but in the business and nonprofit world this has already been done. 

Pennsylvania recently made a significant change to the treatment of bonus depreciation, which should create a great benefit for businesses. Here is an excellent summary, which was posted on our firm’s McKonomics blog.

The federal government has provided for the acceleration of depreciation expense on qualified assets for various periods of time since 2001. The main purpose for providing the acceleration of depreciation was to encourage businesses to make investments in their company in an effort to stimulate the economy.

The initial bonus depreciation deduction provided for a 30% deduction to income of eligible assets purchased between September 10, 2001 and September 10, 2004. The bonus depreciation amount was increased from 30% to 50% for assets purchased between May 5, 2003 and January 1, 2005. The second provision of bonus depreciation provided for a 50% deduction to taxable income for assets placed in service after December 31, 2007 and before January 1, 2011. In both instances, the depreciation deduction can be taken on the remaining 50% of the assets value over the useful life of the asset.

 Our firm just posted a great article on estate planning under the new tax rules. Here is a reposting of the content.

The new tax cut extension package, which was signed into law on December 17, 2010, establishes a new (but temporary) estate and gift tax regime for 2011 and 2012. It also clarifies the situation for the estates of individuals who died in 2010. 

Here is a brief summary of the relevant estate and gift tax provisions in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. 

Exemption and Tax Rate