McKonomics

Pennsylvania Unclaimed Property Holder Amnesty Program

The Pennsylvania Department of Treasury has initiated an Unclaimed Property Holder Amnesty Program that will run through October 31, 2010 for businesses that have either missed the annual April 15th reporting deadline or have never filed or have gaps in their reporting history. As an incentive to enter the Amnesty Program, no penalties or interest will be assessed.

 

Simply stated, abandoned and unclaimed property is any asset that has become dormant for a given period of time (usually between 2-5 years depending on the asset type). An asset is dormant if there has been no contact with the owner over that given period of time.

 

Some examples of unclaimed property include bank accounts, uncashed payroll checks, accounts payable or receivable checks, credit balances, stocks and bonds, escrow accounts, gift cards or certificates that have expired, and insurance proceeds. In addition to intangible property, the Treasury also accepts a wide array of tangible personal property such as jewelry, musical instruments, and video games.

To Forgive Is Not Always Divine – At least as it Relates to the IRS

For tax purposes, don't think that you're off the hook if another party forgives or cancels a debt. Under the "cancellation of debt" (COD) provision in the tax law, this seemingly generous act could result in an unexpected tax bill. 

 

Basic rules: If an amount you owe is forgiven or cancelled, you must generally report it as taxable income on your personal tax return. A forgiven business debt is reported as income on the appropriate form for the business entity or sole proprietorship.

For this purpose, a "debt" includes any financial obligation for which you are legally liable or which attaches to property you own.

 

Similarly, you are required to report any interest attributable to the debt that is forgiven or cancelled.

 

However, there are several notable exceptions to the taxation of cancelled debt income, including the following seven:

Get the Latest on IRS Audit Activity

There are several ways the IRS collects money after taxpayers have payroll deductions taken, make estimated payments, and file balance due amounts with their returns.

 

Of course, the IRS can assess additional taxes after auditing the tax returns of those who arouse suspicion based on what is claimed. These examinations can take place in person or through correspondence audits, where the IRS asks taxpayers to mail in proof for particular tax return entries.

 

The IRS also randomly audits returns in order to learn more about taxpayer trends. In addition, the tax agency can file liens and levies against those who become delinquent.

Buff Up Your Business Before Putting it on the Market - Positioning Your Business For a Future Sale

 
As the economy rebounds, the Merger & Acquisition markets will continue to heat up. Although some buyers remain cautious, others are scooping up businesses -- in some cases, at a premium. If the thought of selling your company has crossed your mind, now is the time to begin positioning your business for a future sale.

 

In a best-case scenario, preparations should begin months, even years, in advance. Even if you must sell quickly, it's important to avoid the appearance of a distress sale. You should begin as soon as possible to get your business in shape so you can maximize the price.

 

Here are a dozen questions to consider:

The 2010-2011 Pennsylvania State Budget

Less than a week after the due date, Governor Ed Rendell signed his final Pennsylvania state budget at Elmwood Elementary School in Mechanicsburg, Pennsylvania, emphasizing the Commonwealth's continued commitment to education. His budget displayed this fact in that it brought about a $250 million increase in basic education spending. However, overall spending for many programs was significantly decreased due to lower revenue expectations.

 

The 2010-2011 enacted state budget is built on a few assumptions. Pennsylvania anticipates an additional $850 million from the federal government for Pennsylvania's Medicaid program. Currently, the U.S. Congress has not yet allocated these funds. The General Assembly and the Rendell administration agreed to meet this October to pass a severance tax on the extraction of natural gas from the Marcellus Shale which would be effective January 1, 2011. 

Does Your Organization Qualify for the New Health Tax Credit?

The recently enacted healthcare legislation includes a new tax credit for qualifying small employers. The credit can cover up to 35 percent of employee health insurance costs. It is available for tax years beginning in 2010, and can be claimed for eligible costs incurred before the healthcare legislation became law.

 

Does your company qualify for the credit? As with most tax topics, there's no simple answer. Here are the qualification rules.

 

Basics About the Credit

Hiring Summer Help? Tax Breaks and Rules to Keep in Mind

With the summer now here, you may be expanding your workforce to accommodate increased seasonal demand. Fortunately, there's usually a good source of available labor, including high school and college students, workers recently laid off, and retirees looking to pick up some extra cash. You might even keep summer interns on board longer if they work out to your satisfaction.

 

Be aware that certain legal requirements apply when you add summer help to the staff. In particular, your business must comply with federal and state laws regarding minimum pay standards, workers' compensation and discriminatory practices (see right-hand article). However, if you stay within the legal boundaries, you can realize extra tax benefits for hiring certain workers this summer.

 

The three main tax breaks for employers are the Work Opportunity Tax Credit (WOTC), the payroll tax exemption for previously-unemployed workers and the new tax credit for retaining those workers:

Think You Know What Your Business is Worth?

Many business owners believe they know what their business is worth. Some may have a solid foundation for that belief. However, this belief is often derived from third party information on what they "heard another business sold for." They apply some multiple of revenue or earnings before interest, taxes, depreciation, and amortization (commonly referred to as EBITDA) or other benchmark derived from a transaction to their business and...VIOLA...they know what their business is worth!  In most instances this could not be further from the truth.

 

Without specific knowledge of the facts and circumstances and timing of the transaction, as well as the motivation of BOTH the buyer and seller, you will have a cloudy picture of value at best. We firmly believe that the value of any business cannot even begin to be determined until you can answer a few simple questions we all learned in our elementary school English classes: Who, What, Where, When, and Why.

Let's look at these questions briefly and see how they can potentially impact the value of a business.

Two Valuable Hiring Incentives

Keeping money in the family is always a worthy goal. If you're a business owner, one way to accomplish this is to hire relatives. As an added bonus, if you act quickly, you might qualify for two temporary payroll tax breaks. Here is what you need to know.

 

Social Security Tax Break for New Hires

 

The Hiring Incentives to Restore Employment (HIRE) Act grants a temporary employer Social Security exemption for wages paid by a qualified employer to an eligible new employee between March 19 and December 31, 2010. Specifically, such wages are exempt from the 6.2 percent employer portion of Social Security tax that your business pays as part of the FICA tax.

SEP IRA - The Basics

Over the past few years, many taxpayers have made the switch from employee to self-employed. Although much can be gained from that change, there are also a few things that can be lost, including being covered by an employer's retirement plan.

 

The SEP IRA is a retirement plan designed to benefit self-employed individuals and small business owners. Sole proprietorships, S and C corporations, partnerships and LLCs qualify.

 

SEP IRA contribution limits

 

In 2010 a SEP IRA has a contribution limit of $49,000. Contributions to a SEP IRA are generally 100% tax deductible and investment earnings in a SEP IRA grow taxed deferred. Withdrawals after age 59 1/2 are taxed as ordinary income. Withdrawals prior to age 59 1/2 may incur a 10% IRS penalty as well as income taxes.