Payroll Tax Cut Extension
Although not signed into legislation just yet, the Senate and the House have both voted to extend the 2% payroll tax cut. The legislation (H.R. 36360) would extend the 4.2% employee payroll tax rate through the end of 2012. President Obama has promised to sign the bill as soon as it reaches his desk. The previous legislation extended the “payroll tax holiday” through February 29, 2012. Also extended are unemployment benefits and Medicare fees for doctors through the end of 2012.
For an employee making $50,000, this results in a “pay raise” of about $1,000 per year.
IRS Reverses 1099-K Reporting Rule
The IRS is reversing a requirement that companies reconcile their gross receipts with the merchant card transactions reported on the new 1099-K. For 2011, credit card companies were required to issue 1099-K’s to businesses that accept credit cards and report the credit card transactions by month. Starting in 2012, businesses were going to be required to reconcile their credit card and cash transactions, causing a potential administrative nightmare that most small businesses were not equipped to handle.
IRS Deputy Commissioner for Services and Enforcement, Steven Miller wrote, “…the reporting of gross receipts and sales on the 2012 tax forms will be modeled on the 2010 income tax forms”, which did not include lines reporting or reconciling credit card transactions.
It’s important to note that although businesses will not be required to reconcile their gross receipts, the credit card companies will still be issuing 1099-K’s to businesses and to the IRS.
For more information on these recent changes, contact Jenna Staton in Tax Planning and Preparation Department at 440-449-6800.