Looking Ahead for Tax in 2013

i. Will Bush Tax Cuts remain in Effect? 

Remember those Bush tax cuts enacted in 2001 and 2003?    These cuts will expire December 31, 2012.   Without Congressional action, there will be significant tax increases and tax rate changes beginning in 2013, including, but not limited to:

a.  Tax Rate increases for income taxes, long-term capital gains rates, dividend income rates;
b.  Medical Contribution tax on certain unearned income of individuals, trusts, and estates;
c.  Reduction in Itemized Deductions for higher-income taxpayers; and more.

ii. 1099 K Matching

The IRS will start Form 1099-K matching in late 2013. Previously, the IRS delayed merchant card reporting on business returns for 2011 Schedule C and Forms 1065, 1120S and 1120; however, the IRS plans to change its approach after 2012 returns are filed. The IRS has indicated that it plans to pilot a business-matching program that can address a large amount of small business noncompliance.

This topic will also be addressed in the November 27, 2012 seminar on IRS Form 1099. 

iii. Unpaid payroll tax – the IRS’s stepped up plan

In 2012, the IRS updated its Collection Process manual to provide for more streamlined approaches to obtain Court injunctions for business that are trust fund (payroll tax) violators.    See a recent example below:  

Failure to Withhold Federal Taxes and Failure to Timely Pay:
  –  The Government takes action to prevent business owner from operating her business
On March 20, 2012, the U.S. Attorney’s office filed a civil complaint against Jea-il, Inc, doing business as, NiteCap, owned by Lynn Kim.   The complaint alleges that Ms. Kim failed to withhold and pay employment taxes in the amount of $165,332.   The Internal Revenue Service has added over $65,000 to this amount in monetary penalties and now, through the U.S. Attorney’s office, seeks to stop Ms. Kim from operating her business.     We are not the attorneys in this case but will continue to monitor it and provide you with any relevant updates.

Contact Moskowitz, LLP for more information.