Contracting and Tax Accountability Act Heads To Senate

113TH CONGRESS 1ST SESSION H. R. 882

"To prohibit the awarding of a contract or grant in excess of the simplified acquisition threshold unless the prospective contractor or grantee certifies in writing to the agency awarding the contract or grant that the contractor or grantee has no seriously delinquent tax debts, and for other purposes".

The U.S. House of Representatives unanimously passed House Resolution 882, Titled the Contracting and Tax Accountability Act of 2013.” The bill would ban the government from awarding contracts and grants unless the bidder certifies in writing that the individual or company does not have “seriously delinquent tax debts.” Rather than focusing on any tax debt of the company, the certification also focuses on the tax debt(s) of the individuals running the company.

The Legislation would ban the award of a contract to a “person with a seriously delinquent tax debt.” A corporation violates this standard if an officer or shareholder with a controlling interest in the company has an outstanding tax debt for which a notice of lien has been filed. A tax debt will not be considered “seriously delinquent” if it is being paid in through a payment agreement with the IRS or if there is a hearing request pending. 

The full text of the Legislation can be found here.

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IRS, The New Health Care Police!

Under The Patient Protection and Affordable Care Act (PPACA),  Americans will be required to have health insurance, and that brings with it a whole new level of administrative duties. Someone will have to serve as the health care police. It appears those tasks will fall to the IRS.

Some of the new tasks that will be required once the health law is fully implemented. According to Kaiser Health News this will involve:

• Monitoring compliance. Taxpayers will have to provide proof of coverage with their annual federal tax returns. Failure to comply will result in a penalty, payable to the IRS.
• Distributing new government subsidies to low-income individuals through newly created state exchanges.
• Overseeing small business tax credits to help qualifying businesses provide insurance to employees.
• Assessing a tax on insurers that provide insurance benefits that are high-cost, or “Cadillac” plans.
• Enforcing penalties for improper distributions from Health Savings Accounts, which are likely to increase under the new plan.
• Overseeing the demand that not-for-profit hospitals live up to their “charitable missions” by doing a “charitable needs assessment” once every three years.
• Regulating contributions to Flexible Spending Accounts, which under the new law are now limited.

In addition the Congressional Budget Office (CBO) says that the tax agency will also collect new fees levied on employers, drug makers, device manufacturers and health insurance providers. The CBO reports that this could amount to hundreds of billions of dollars.

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W-2 Reporting Requirement in Health Care Law

The Internal Revenue Service (IRS) March 29 issued interim guidance on a provision in the Patient Protection and Affordable Care Act that will require employers to report the cost of coverage under an employer-sponsored group health plan on each employee’s W-2 form. The reporting becomes mandatory in 2012 and will have to be included on 2012 W-2 forms. 

The Guidance covers how to report the information, what coverage to include and how to determine the cost of the coverage. The IRS stressed that the reporting to employees is to inform them of the cost of their health coverage and the amounts reportable are not taxable.

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Government To Crackdown On Businesses That Misclassify Workers As Independent Contractors

Worker misclassification costs the federal government $1.6 billion annually. In late 2010 the IRS and the U.S. Department of Labor (DOL) announced an interagency misclassified worker initiative designed to target and pursue employers who misclassify workers. The DOL is dedicating $25 million and at least 100 employees to this initiative.

    

While not good news for employers who misclassify workers, the initiatives are good news for employers who properly classify their employees, because employers who misclassify workers do not pay into the unemployment or workers' compensation pools, employers who comply with the law must pay more than they otherwise would have to pay if more employers.

Many businesses mistakenly believe they have discretion to designate a worker as an employee or an independent contractor, or that however the business and the worker prefer to characterize the relationship controls.

As State & Federal taxing authorities rely more heavily on IRS Form 1099 data to determine which businesses to target for a worker misclassification audit, the names on 1099s could become one of a business' biggest points of vulnerability.

Employers who misclassify workers run risks that include, but are not limited to: having to pay back taxes, interest and penalties; owing back wages and penalties for violating federal and state wage and hour laws; penalties for failing to obtain and properly maintain Form I-9s; jeopardizing the ERISA qualified status of their 401(k) or pension plans; and owing more for workers' compensation premiums. 

On the state level the costs are also dramatic. More States will be utilizing IRS Form 1099 data to target businesses for audit and a growing number of States Including New Jersey are moving to enact legislation designed to increase revenues when misclassified workers are discovered.

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Congress “De-Lists” Cell Phones

Congress “de-lists” cell phones: what does that mean for employer-provided cell phones?

On September 27, The President signed into law the Small Business Jobs Act (H.R. 5297) (SBJA). Hidden in this legislation is much-needed relief to all businesses (small or large) and their employees concerning the business and personal use of employer-provided cell phones, including personal digital assistants (PDAs) with mobile communication features1 and smartphones (collectively, cell phones).2 This provision removes cell phones from the Internal Revenue Code’s definition of “listed property” for taxable years retroactive to December 31, 2009.

What does this change mean to you?

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Justice Department Defends Health Insurance Mandate As A Tax

In a complete complete turn around from the Obama Adminstrations and the President himself claims that they will not raise taxes on middle class Americans, we now find out that the biggest program passed and signed by the President is indeed a tax.  

Lawyers for the Department of Justice are defending the health care reform provision that requires all Americans to purchase health insurance as a tax.

Justice Officials admitt in a brief that the mandate to purchase health insurance is part of the Government's "Power To Lay And Collect Taxes." 

This, critics say, is a departure from the arguments Democrats and the Obama administration made as they were working to pass the health care reforms.

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6 Months To Go Until The Largest Tax Increase In History

Unless Congress and The President Act, in just six months, the largest tax hikes in American History will take effect.

They will hit families and small businesses in three great waves on January 1, 2011:

In 2001 and 2003, the GOP Congress enacted a package of tax cuts for investors, small business owners, and families. these tax cuts resulted in the Federal Government bringing more tax revenue than ever in our country's history and an unemployment rate of less than 5%

Those tax cuts will all expire on January 1, 2011. Members of Your Government Affairs Committee have traveleled to Washington year after year and asked for the tax cuts to be made permanant to no avail.

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent.

All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%

- The 25% bracket rises to 28%

- The 28% bracket rises to 31%

- The 33% bracket rises to 36%

- The 35% bracket rises to 39.6%

For a full listing of the Taxes that will rise on January 1st 2011 Click Here

1099 Rule Buried In Health Care Reform Law Draws Criticism

Rep. Dan Lungren, R-Calif., has introduced a bill that would roll back the provision buried on page 737 of H.R. 3590 The Patient Protection and Affordable Care Act, that will require businesses to file 1099 forms to any vendor from which they purchase $600 or more of goods and services.

The provision is expected to be especially hard on small-business owners who could be faced with a drastic increase in paperwork.

Given the current Senate and House Majority that passed HR 3590, we do not have high hopes for this bill to ever see the light of day. The best advise we can give to our members is to start preparing to comply now so you do not get caught by surprise when the provision takes effect on January 1st, 2012.
Read More, Bloomberg Business Week

New Business Mandate Requires Millions of New 1099 Tax Forms

Stealth IRS Campaign Mandates Businesses to File Millions of New 1099 Tax Forms

The massive expansion of 1099 Tax Forms required to be filed by businesses was hidden in the 2409-page Health Care Reform Bill took many by surprise when it came to light after review of the new Health Care Law. But it's just one piece of a years-long legislative stealth campaign to create ways for the federal government to track down unreported income.

The result: A blizzard of new tax forms that the Internal Revenue Service will begin rolling out next year.

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Businesses May Utilize Net Operating Losses For Tax Refund

As a result of the economic downturn, many businesses generated net operating losses (“NOLs”) for federal income tax purposes for their 2008 and 2009 taxable years.

The Worker, Homeownership, and Business Assistance Act (“WHBAA”), enacted in November 2009, expanded the ability of taxpayers to carry back these NOLs to offset income from prior tax years.

Many taxpayers will be able to take advantage of this legislation to obtain tax refunds.

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Misclassifying Employees as Independent Contractors Can Be Costly

Over the years, companies have developed alternative working arrangements with their workers. One such arrangement is Independent Contractor. Independent Contractors are not covered by company benefit plans, and payroll withholdings and deductions do not apply. They are not entitled to statutory benefits and protections afforded to traditional employees, such as unemployment compensation and workers’ compensation.

Misclassifying individuals as Independent Contractors can result in many forms of liability. Stepped-up enforcement actions by the IRS and the federal government will likely increase the risks of misclassification.

Now the Obama Administration is weighing in on the misclassification of employees. Obama’s 2011 budget includes funds to start a joint initiative between the Department of Labor and the Department of the Treasury to eliminate legal incentives for employers to misclassify their employees.

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