Monday, January 30, 2012

Sec 105/HRA Money May Now Be Used to Pay Health Insurance Premiums in DE

A basic HRA is an employer funded plan wherein an employer sets aside an amount of money to reimburse eligible employees for qualified expenses. For example, you might say that you will reimburse up to $2000 per year of medical expenses for 35+ hr/week employees who have been with the company for at least 2 years. The employer may deduct this as a fringe benefit and the employee does not have to pay tax on this money. Unused amounts carry forward for 1 year. Employees turn in expenses on a form using vague descriptions (prescription, Dr, Dentist, etc) so their privacy is not impeded and a service with handle all the tax forms for a very minimal fee. The employer does not have to have a separate bank account for housing unused HRA funds and they are forfeited upon employment termination.

In the past, in Delaware and most states, HRA money could not be used for purchasing major medical insurance (only Dental and Vision). Effective with 2012, DE participants may use the HRA for medical insurance premiums. This provides a great vehicle for small business owners to offer some vs. no medical benefits without opening themselves up to unknown future liabilities as they would when offering to pay medical insurance premiums as a part of a compensation package.

Contact BASE for more info:

Friday, January 27, 2012

New Jersey—Ponzi Scheme Victims Entitled to Refunds

Taxpayers, who were victims of the Madoff Ponzi scheme, were entitled to file amended New Jersey gross (personal) income tax returns for 2005 through 2007 to claim refunds for interest, dividends, and capital gains reported and taxed in those years from which they received no economic gain. The income never existed and, therefore, was not taxable.

Wednesday, January 25, 2012

Virginia—Sales and Use Tax Exemption: Investment and Job Creation Clarifications/Scenarios

Prior to claiming the exemption, any qualifying entity must enter into a memorandum of understanding with the Virginia Economic Development Partnership Authority ("VEDP").

A qualifying data center is a data center (1) that is located in a Virginia locality; (2) that on or after January 1, 2009, results in a new capital investment of at least $150 million; and (3) that on or after July 1, 2009, results in the creation of at least 50 new jobs associated with the operation or maintenance of the data center, provided that such jobs pay at least one and one-half times the prevailing average wage in that locality. (The jobs requirement is reduced to 25 new jobs if the data center is located in a locality that has an unemployment rate for the preceding year of at least 150% of the average statewide unemployment rate for such year or is located in an enterprise zone.)

A single entity makes a data center investment of $150 million, creates 50 jobs and enters into a memorandum of understanding with the Virginia Economic Development Partnership.

A single entity makes a data center investment of $150 million, signs agreements with tenants who contractually commit to create 50 jobs and submit verification of job creation through the single entity and the single entity enters into a memorandum of understanding with VEDP.

A number of tenants create a single entity, like a limited liability company (LLC), for the construction and operation of a data center, make a data center investment totaling $150 million, sign agreements with tenants who contractually commit to create 50 jobs and submit verification of job creation through the LLC, and the LLC enters into a memorandum of understanding with the VEDP as a single entity.

Monday, January 23, 2012

Maryland—Working in MD for Part Year Prior to Relocation Does Not Equal Residency

MD courts ruled that a taxpayer was not a resident of Maryland. The taxpayer worked in Maryland for part of the year prior to moving to Maryland the subsequent year. The court noted that facts such as the taxpayer’s driver’s license, automobile registration, voter registration, homeowners’ fees, real estate taxes, mortgage payments, and testimony indicated that the taxpayer intended to reside in Michigan during the subject year. (Taxpayers contributed to the confusion by filing a part-year MI return despite being full year MI residents.)

Friday, January 20, 2012

DE 2011 Searchable Unclaimed Property List

See FAQs at same link for more info about how property winds up on this list and how to claim it.

Wednesday, January 18, 2012

PA Governor Orders Implementation of Licensee Tax Responsibility Program

The state Department of Revenue (DOR) has been instructed to develop and operate a licensee tax responsibility program. The Secretary of Revenue will issue a notice to licensing agencies indicating those licensees and applicants who have unresolved tax obligations on not less than an annual basis and administrators of state agencies will provide the Secretary of Revenue with information regarding business licensees and applicants for licenses, including various tax identification numbers and a statement signed by each licensee and applicant, under penalty of perjury, indicating that all state tax reports have been filed and paid, or alternatively, that a deferred payment plan currently is in effect.

Monday, January 16, 2012

Guidance on New Jersey Alternative Business Loss Deduction Provided

For tax years beginning after 2011, the legislation provides a deduction that uses a calculation that consolidates business income and/or loss and allows taxpayers to carry forward unutilized losses. A net loss in one category of personal income still cannot be used to offset income in another category of personal income.

The four categories of business income included in the alternative business calculation deduction are:

(1) net profits from business

(2) net gains or net income derived from or in the form of rents, royalties, patents, and copyrights (3) distributive share of partnership income

(4) net pro rata share of S corporation income

To calculate the alternative business calculation deduction ah…use tax prep software. Or see examples in the below link.

Friday, January 13, 2012

Delaware - Georgetown DE Business Owner Charged with Felony

George W. Donald, 46, was charged with two felony counts of failing to pay over state withholding taxes that were withheld from his employees’ wages during the years 2006 and 2007. Donald was also charged with five felony counts of failing to pay over rental use taxes collected from customers of his construction equipment rental business, Delaware Rental, during the years 2006 through 2010. Taxes total more than $30,000. Investigators say that Donald operated Delaware Rental and, as part of his duties, he was responsible for remitting withholding taxes and rental use taxes owed by the business to the Division of Revenue.

Payroll taxes are part of an employee’s wages which are retained by the employer for the sole purpose of remitting them to the state for application against the employees’ personal state tax liabilities as calculated on their tax returns. During the period in which the money has been withheld from employees but not yet remitted to the government the funds are considered held in trust. They never belong to the employer. Similarly rental use taxes are collected from customers as an agent for the State but never belong to the collecting entity. (The rental of tangible personal property within Delaware is subject to a rental use tax at the rate of 2.07%.)

Instead of paying over these taxes to the state, Donald transferred a significant amount of corporate funds into a separate business he controlled. It is illegal to use withholding and trust-fund taxes for any purpose other than payment to the government. The seven felony counts each carry a maximum penalty of five years in prison, and such fines and penalties as the court deems appropriate. Donald awaits arraignment and trial date in Superior Court in Wilmington.

Wednesday, January 11, 2012

Virginia—No Filing Requirement but Still Get NOL

A Virginia corporation commercially domiciled and operated in a foreign country, and a corporation commercially domiciled out of state, were appropriately excluded from the consolidated return because they did no business in Virginia and lacked sufficient activities to generate income from Virginia sources or to create a positive apportionment factor. However, the parent co did not have to back out a deduction for the full amount of a net operating loss incurred by the out of state corp between the date it was acquired and the date it was liquidated.

Monday, January 9, 2012

New Jersey—Jobs Tax Credit

The New Jersey Legislature has passed a bill that would provide a credit against the corporation business tax. Partnerships, S corporations, and limited liability companies would be able to pass through the credit to their members. The business must utilize a facility of a minimum $20 million value, employ at least 100 full-time persons (retained or created), provide health care benefits, and be a desirable industry as identified by the New Jersey Economic Development Authority (Authority). The business would have to demonstrate that 1) it would yield a net positive benefit to the state and 2) the existence of a credit was instrumental in the decision to create or retain that many jobs. (What? No room for a 'hand over your first born' clause?)

The credit is $5,000 per year for a period of 10 years for each new or retained full-time job. The Authority would be authorized to grant a bonus award of up to an additional $3,000 per job, depending on the type of industry, the location of the business, and whether the annual salaries for the jobs exceed the average full-time salary in the state. The amount of tax credits available to be applied by a business annually would be limited. Apply by July 1, 2014. A carryover of unused credits would be available for up to 20 tax periods. Credits would be transferable. Credits would be forfeited if conditions of certification were not met.