Articles and Tax Tips

By Steven D. Mercatante Esq.
 
Are you are a federal, state or local governmental entity? If so, set aside some time to review proposed regulations, REG-158747-06, released on December 5, 2008. REG-158747-06 addresses a new requirement for government entities to withhold 3% when making payments for services or property. The new requirement falls under §3402(t) of the code, previously added by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). Payments made on or after January 1, 2011 would fall under the purview of the new regulations.
 
The proposed regulations contain several withholding requirements, as well as a few exceptions. Overall, the new withholding requirement has an expansive scope. Please note that all Government entities are subject regardless of whether they are at the federal, state or local level. In addition, because withholding is required on payments for services and goods, the new regulations encompass almost all payments. The new regulations propose required withholding whenever a payment is made by a Governmental entity, regardless of if service performance was made or if goods were supplied to that entity. The requirement is irrespective of the payment method or dollar amount.
 
Take care when examining the proposed regulations; exceptions do exist in regards to the 3% withholding rule.  

By Steven D. Mercatante Esq.
 
Do you know when to report a payment made to your payee? We hope so. Since 2005 the law has been clear on this point. However, since that time our tax experts have received dozens of questions about what to do, in terms of reporting, if they issue a check and it is not cashed, sometimes not even until the next tax year or calendar year. In addition, with the addition of the 409A reporting rules and the additional reporting boxes on the 1099-MISC you had better step it up; knowing what to report and when has become more important than ever.
 
The key to answering your questions comes from a little known but widely applicable legal doctrine known as “constructive receipt of income.” The following article will first examine the general rule for constructive receipt of income. See if you cannot answer your own questions after reviewing the rule. If you can’t then don’t worry you are not alone, only after the tax courts stepped in to provide further guidance has this issue become one more easily addressed. Second, we will briefly explore what the United States Tax Court decided nearly four years ago; in Millard v. Commissioner, T.C. No. 3717-04, T.C. Memo 2005-192, August 8, 2005. Finally, we will offer a few tips on how better to approach such a critical issue. 

By Steven D. Mercatante Esq.

 
Gift cards can represent a significant reporting and compliance risk. Read on to find out more about gift cards and handling the risk they may represent to your organization.
 
If you filed electronically, and requested your extensions, then your filing season probably closed out early this summer. With warm weather at hand, it probably seems odd to consider what your organization did last winter, but you had better, because the IRS is. It is common for many organizations to provide their employees with some form of appreciation for the work they have done throughout the year. In many cases, this may have come in the form of a gift card or gift coupon. The question you should have asked as you frantically prepared payee statements and tax filings was: are gift cards or gift coupons excludable from gross income as a fringe benefit? Regrettably, many of you may have forgotten to address this issue.
 

With Proposed Penalty Notice season coming as sure as the dog days of summer there is no better time to review your organization’s procedures for issuing gift cards to employees. This article will help you stay in compliance with IRS goals for handling payments made to employees by gift card. First, we will look at the basics of the issue. Second, this article will provide a brief overview of fringe benefit requirements. Finally, we will conclude with some advice that can help make your job a lot easier moving ahead.  

By Steven D. Mercatante Esq.

 
We often receive questions regarding record retention and the Form W-9. Mostly these questions focus on the length of time needed to retain payee Forms W-9 on file. In particular confusion arises because the IRS has different record retention rules for different forms. For instance, you often hear about needing to hold onto Form 1099 documentation for “three years; or four years if backup withholding occurred, or if filing Form 1099-C.”
 
Nevertheless, if you take this too much on face value, you may be making a mistake... 

By Steven D. Mercatante Esq.
 
Filing deadlines often arrive well before you are ready. That said the speed of the filing season does not need to overtake you. In particular there are several tools provided by the IRS which can help slow filing season down and significantly cut down on potential mistakes made by your organization. For instance... 

By Steven D. Mercatante Esq.
 
Some tax information reporting forms are far more important than others are. For instance, most filers are very familiar with the Form W-2, the tax information reporting form which reports wages and other forms of compensation paid to employees. However, the IRS is probably least concerned with the W-2 and far more interested in other information reporting forms. Why? The following article will answer that question and introduce you to the information reporting forms the IRS focuses upon the most heavily. 

By Steven D. Mercatante Esq.
 
Although payments for rent may seem like a simple issue there are some pitfalls you need to be aware of when dealing with rent payments reportable on the Form 1099. The following article will briefly examine these common traps and show how you can avoid them. 

By Steven D. Mercatante Esq.
 
Publication 1220 should be the starting point for anyone looking to learn about the basics of Form 1099 filing. The following article will examine why and highlight what it is that makes Publication 1220 so effective in making your filing season easier and reducing corrections.

By Steven D. Mercatante Esq.
 
Among your other job duties as an information reporter there is one that typically ranks at the top; avoiding risk. Risk is inherent in doing business therefore, the need to minimize risk is essential to maximizing organizational goals. If you fail to meet regulatory standards you are setting up your organization for unnecessary exposure to risks.
 
When it comes to regulatory compliance and setting internal controls these are goals mandated by the federal government for almost all organizations. Such goals are not optional and if you make a mistake because you were lax in your compliance efforts you will eventually get zapped. Among the risk that can cause the greatest pain there is one that ranks higher than just about any other does. The following article will identify what this risk and offer you some practical advice on how to mitigate just such a risk.
 
Incorrectly classifying your workers - a move ranking among the riskiest you can take. Among other things, you can face substantial fines as a repercussion for misclassifying workers as contractors when they are in fact employees. But why?