March 2010: What A Long Strange Trip

March 2, 2014

March 2010: What A Long Strange Trip

I know its been a while since my last post, but the month of March has given those of us in the employment and business services realm a great deal to think and be concerned about.

What a Long Strange TripAt a March 12, 2010 an address to the American Payroll Association’s 2010 Capital Summit in Washington DC, John Tuzynski, head of the Employment Tax Operations, Small Business/Self Employed Division of the IRS indicated that “For the first time in IRS history,” the agency will begin to make assessments of an employer’s share of employmenet taxes (Social Security, Medicare and Federal Unemployment Tax) for unreported tip income exceeding $20 and reported on IRS Form 4137 (Social Security and Medicare Tax on unreported Tip Income, usually attached to Form 1040). This signaled the IRS’ intent to comb their databases of filers of form 4137 and cross-reference those numbers with those reported by the employer to see if the employer had filed their share of the of the Social Security, Medicare and Federal Unemployment Tax on that unreported tip income. This was not an IRS practice until 2010, which should result in significant demands for payment by the employer by the IRS, although they indicated they would not assess penalties and interest to cooperating employers. This is building storm of liability for the hospitality industry and since it will represent unpaid income from many year’s past, and will be a significant problem for these employers who did not pay tax on that income.

Interestingly enough, I ask if the tip income was unreported in the first place, how is the employer to know about it? Go figure.

Next, on March 18, 2010, the signing of the HIRE Act of 2010 into Law by President Obama took small business into Alice’s “rabbit hole”, announcing incentives intended to reinvigorate hiring by then forgiving some of the above mentioned employer taxes. Nothing like a good old fashioned rewrite of the employment tax code regarding employer responsibilities to boost the economy. The good news is that the HIRE Act of 2010 basically lowers the cost of bringing on new employees by 6.2% by forgiving the employer-side social security for each eligible new employee hired. And also provides a nice end-of-year tax credit for retaining those employees for 52 weeks.

Eligible new hires mean an individual who was unemployed for no less than 60 days leading up to their time of employment with the forgiveness-seeking employer. Considering that in a well-managed organization new employees mean either an increase in efficiency (so a resulting decrease in cost) or an increase in sales (creating an increase to the top and hopefully bottom lines), this should represent good things for companies emerging out of the darkness of the “Great Recession”.

Then by Monday, March 22, we learn that the health care bill has been passed. Since detail on that and its impact on businesses is a blog post in and of itself, I will save that for another time.

Finally, on 3/25/2010 the Massachusetts Department of Revenue announces a two-monmth tax amnesty program between April 1, 2010 and ending June 30, 2010 for taxpayers with existing business tax liabilities, including unpaid sales/use tax, meals tax, tax on telecommunications services, meals tax local option, witholding income and other taxes. For all taxpayers who make full payment of taxes due will be granted amnesty for unpaid penalties for tax years or periods that ended on or before December 31, 2009.

The landscape is changing. I am just not sure into what.

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