On Tuesday, July 12th, the U.S. Attorney’s Office announced that Kathleen Baker, a former office manager at Bathgate, Wegener & Wolf (a real-estate partnership in Lakewood) has admitted to embezzling $1.14 million over six years. Prosecutors say that Baker created a fictitious company (also known as a “straw man” company) called “Corporate Solutions,” and directed funds to a bank account under its name. The money was subsequently used to pay off her credit card bills and personal debts. Baker faces up to 20 years in prison. [Read more…] about NJ Fraud Case Highlights Importance of Internal Control
BUSINESS FORUM
NJ New Budget Decreases S-Corp Minimum Tax
On June 30th, 2011, New Jersey Governor Chris Christie signed into law portions of the legislature’s New Jersey budget that included a 25% decrease for the minimum corporate business tax on S-corporations. The new rates are as follows:
Gross Receipts Minimum Tax
$1 million or more $1,500
$500,000-$999,999 $1,125
$250,000-$499,999 $750
$100,000-249,999 $562.50
Less than $100,000 $375
The only exception to the decrease will be S-corporations which are members of affiliated or controlled groups with payrolls of $5,000,000 or more. Their minimum tax remains at $2,000.
This last exclusion from the new minimum corporate tax law seems to unfairly discriminate against staffing agencies and service corporations, as their primary expense is payroll. In fact, payroll IS the product being sold. Typically staffing agencies have controlled groups and reach the $5,000,000 threshold. Yet, solely due to their line of business, they will not benefit from the new reduction.
FUTA surtax expires- a savings of $14 per employee!
Every private employer in the US, will now pay $42 an employee for Federal Unemployment Tax, FUTA, on the first $7,000 of wages, instead of the prior FUTA tax of $56 per employee. This is a savings of $14 an employee. A FUTA surtax of 0.2 percentage points on the first $7,000 of wages was introduced in 1976. It expired on June 30, 2011. Employers will now pay 0.6 percent on the first $7,000 of wages for the federal unemployment tax.
Tax Tips for Business Travelers
Traveling for business this summer? Let Uncle Sam chip in
Mixing business with pleasure can have several benefits if done the right way. As long as the trip was undertaken primarily for business reasons, the entire airfare is tax deductible in addition to the cost of lodging and 50% of meals while on business status. So if Penny Pincher, a self employed information technology specialist, flies from New York to Los Angeles on a 5 day business trip and wishes to go sightseeing for 3 days afterward, she can deduct the entire airfare and now her mini-vacation is, in effect, subsidized by the tax break.
Is It “Primarily For Business”?
There is no hard-and-fast rule for when a trip is considered to be primarily for business reasons. Each case has to be judged based on its own circumstances. One important factor is the way travelers split time between their business and personal pursuits. The concept here is to piggyback a personal vacation onto a business trip, not the other way around.
Get a Free Vacation
Although an employee’s out-of-town business chores conclude on Friday, he may extend his business trip to take advantage of a low-priced fare requiring a Saturday night stay over, where the savings in airfare are higher than the costs of the weekend meals and lodging. The employee doesn’t pay tax on the reimbursement for his Saturday meal and lodging expenses. In this case, the IRS said that under a “common sense test,” payments to the employee for the Saturday stay were deductible if a “hardheaded business person would have incurred such expenses under such circumstances”.
Stop On the Way
Not interested in your business destination? No problem – you can make a stop wherever youdesire, whether en route to or from your business destination, and still deduct the amount the travel would have cost without the stopover. To illustrate, suppose Sam Surfer, a business owner who always wanted to visit Hawaii must travel to Hong Kong for 6 days for business purposes. The airfare would have been $1,400, but with a 3 day stopover in Hawaii would amount to $1,700. The $1,400 would still be deductible despite the fact that he would be stopping over. It is important to keep a record of what the round-trip travel costs would have been without the personal stop.
Should I Bring My Spouse?
Although the expenses of a spouse or other companion accompanying a traveler are not deductible (unless (1) the spouse/companion is an employee of the taxpayer and is also traveling for business, and (2) his/her expenses would otherwise be deductible), a tax benefit may still be salvaged from traveling together. The rule is that any travel expense that would have been incurred had the traveler been alone is deductible no matter what. So if, for example, Lora Lonely would have paid $200 a night for a room at the hotel but instead brought her spouse and paid $150 per person, she would still be allowed to deduct $200 a night. Similarly, if she rented a car to get to the hotel and brought along her spouse she would be able to fully deduct the car rental expense.
Plan Your Getaway
So as you plan your summer business travel, don’t forget to consult with your tax advisor at Urbach & Avraham to see how much Uncle Sam can help you out with your summer vacation.
Increase in IRS Mileage Rates- July 2011
The IRS has increased the optional standard mileage rates for the final six months of 2011. Although the mileage rates are normally updated once a year, in recognition of recent gasoline price increases the IRS has decided to increase the medical, moving, and business mileage rates by 4.5 cents. From July 1st 2011 through December 31st 2011 the standard mileage rates will be:
Business Mileage Rate
The standard mileage rate for business mileage will be 55.5 cent per mile
Medical or Moving Mileage Rate
The standard mileage rate for miles driven for medical or moving purposes will be 23.5 cents per mile
Charitable Mileage Rate
The standard mileage rate for miles driven in service of charitable organizations will be the same as the first half of 2011, at 14 cents per mile
US Immigration Audits on Forms I-9
As part of the Dept. of Homeland Security, US Immigration announced that it will increase the number of employer I-9 audits. The US Immigration and Customs Enforcement will typically allow three business days to present the Forms I-9.
An employer may receive a monetary fine for all substantive and uncorrected technical violations. Monetary penalties for knowingly hire and continuing to employ violations range from $375 to $16,000 per violation. For an overview of the US Immigration Form I-9 Inspection see ICE_Form_I-9_Inspection_Overview
Employers, especially large employers, should consider conducting a self-audit of their Forms I-9 to ensure that they are in compliance. Certain industries such as agriculture, construction, food processing and staffing firms can expect to be targeted for these inspections, although no company will be immune.