September 17, 2007

IRS Works to Narrow the Tax Gap

         Look for the IRS to strike hard at schemes for avoiding Social Security and Medicare taxes.  More audits of firms, more document matching.
        The number one employment tax issue is misclassified workers. The IRS suspects that a large number of businesses circumvent their payroll tax responsibilities by calling workers independent contractors when they are really employees.
         Starting next year, workers who think they have been misclassified can use a special form to file, giving the IRS information about their employers when they pay their share of employment tax.
         Payroll tax fraud is another big issue in taking profits from an S firm via dividends instead of salary to avoid payroll taxes.  Ditto, excess employee expense reimbursements.  The IRS will get tough with firms that fail to either recoup excess per diems or tax employees on amounts over the IRS permitted per diem rates.
        The IRS also plans to expand a new tip reporting program now used in the restaurant industry to taxis, parking lots, car washes and other cash based businesses
        The IRS will use new authority to slap fines on preparers who understate clients’ payroll tax liability.
        And partnering with states’ labor departments to share audit leads to spot tax hanky panky. 

NYC Sales and Use Tax Changes

          Effective September 1, 2007 all sales of clothing, footwear and items used to make or repair clothing are exempt from the 4% New York City local sales and use taxes regardless of the cost.  However, sales in New York City of clothing and footwear costing $110 or more per item or pair remain subject to the 4% New York State sales and use taxes and the 3/8% sales and use tax imposed in the Metropolitan Commuter Transportation District.  TSB-M-07(5)S 8/14/07

America’s Bird

          In July, Audrey and I went on a two week, 4,700 mile trip through the South, with the primary objective of attending the annual Securities Service Network Conference in Miami, Florida and seeing our son in Houston, Texas.  The secondary objective was to stop along the way to meet with family, friends and clients along Routes 10, 75, 85 and 95, which took us through the states of New Jersey, Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana and Texas.
          There was a common sight that we saw, whether in Houston, Mobile, Tallahassee, South Beach, or Miami and that was the construction crane.  It seems as if they were everywhere, so much so that we thought the crane was the official bird of America, not the eagle.  One can read that our economy is good, that we are rebuilding infrastructure, but until one gets out and sees all that building and rebuilding, the words are relatively meaningless.
          The bumper to bumper truck traffic on I-81 from North Carolina to the Maryland border was quite frustrating. The media might say we have a McDonald’s economy, but none of those trucks had a McDonald’s logo on it.  They were hauling what somebody had produced.  The economy again was the culprit in causing the traffic jam.
          On the trip I also had the opportunity to meet with some fund managers at AIM Investments, execute wills, and engage in financial planning meetings.
          Needless to say, we were glad to get home!
          Next year, in Chicago!

          If you have questions about the foregoing or any other financial matters, please call us.  
          We are always available to see if we can help your family or friends.
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