Monthly Archives: March 2013

MARCH 2013 NEWS FROM SULLIVAN & ASSOCIATES, PC

The joys of tax season coupled with some snow in the Northeast has really kicked March off with a bang. In an interesting move, the IRS has jumped on the aggressive employee vs. independent contractor bandwagon by expanding its voluntary classification settlement program. The states have been on a tirade in this area for the last few years, and now the Feds are expanding this program to encourage worker re-classification. Seems like a bit of hard ball “collusion” between the Fiefdoms and the Federal government if you ask me. The times, they really are a changing. Have a great month, and enjoy March Madness.

IRS Expands Voluntary Classification Settlement Program

The IRS has expanded its Voluntary Classification Settlement Program (VCSP), which allows taxpayers to achieve legal certainty by reclassifying their workers as employees for future tax periods. Several eligibility requirements have been changed to allow more employers, particularly larger ones, to apply for the VCSP. The program, which provides partial relief from federal payroll taxes for eligible employers who are treating their workers, or a class or group of workers, as independent contractors and want to treat them as employees. Businesses, tax-exempt organizations, and government entities can apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Under the program as expanded, employers under IRS audit (other than an employment tax audit) can qualify for the VCSP. In addition, employers allowed into the program will no longer be subject to the “special” six-year statute of limitations. Further, until June 30, 2013, the IRS is waiving the eligibility requirement that an employer must file Forms 1099 with respect to workers they are seeking to reclassify for the past three years. To be eligible for the VCSP, an employer must currently be treating workers as nonemployees and consistently have treated them as such in the past, and not be under audit on a payroll tax issue. Further, the employer cannot currently be under audit by the Department of Labor or a state agency concerning worker classification, or be challenging worker classification in court. IR-2013-23.

Delaware – Income/Franchise – New Law Deletes Imputed Capital Addback Requirement Imposed on Bank Branches

A new law was recently passed that removes language in the Bank Franchise Tax law requiring imputed capital addbacks for out-of-state banks with Delaware branches. The law is effective immediately for tax years beginning after December 31, 2012. S.B.1.

New Jersey – Corporate & Personal Income Taxes – Angel Investor Credit Enacted

An angel investor credit is allowed against the New Jersey corporation business tax (CBT) or the gross (personal) income tax for privilege periods or taxable years beginning on or after January 1, 2012. A taxpayer must apply to, and be approved by, the Economic Development Authority (EDA) to be eligible for the credit. The credit is equal to 10% of the qualified investment made by the taxpayer in a New Jersey emerging technology business up to a maximum allowed credit of $500,000 for the taxable year for each qualified investment made by the taxpayer. The amount of the credits approved by the EDA and the Director of the Division of Taxation may not exceed a cumulative total of $25,000,000 in any calendar year.A “New Jersey emerging technology business” is a company:

  • with fewer than 225 employees, of whom at least 75% are filling a position in New Jersey,
  • that is doing business, employing or owning capital or property, or maintaining an office in the state, and
  • that has qualified research expenses paid or incurred for research conducted in the state, and
  • conducts pilot scale manufacturing in the state; or
  • conducts technology commercialization in the state in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, information technology, life sciences, medical device, technology, mobile communications technology, or renewable energy technology.

S.B. 581.

New York City—Personal Income Tax – Credit Enacted for General Corporation Tax Paid by S Corporations

Under recently enacted legislation, a New York City personal income tax credit is allowed to city residents for certain general corporation tax payments made by New York S corporations. The credit is available for taxable years beginning on or after January 1, 2014, and before July 1, 2015.If city taxable income is $35,000 or less, the credit is 100% of the applicable pro rata amount of tax paid. If city taxable income is more than $35,000 but less than $100,000, the credit percentage is calculated as follows: subtract from 100% a percentage determined by subtracting $35,000 from city taxable income, dividing the result by $65,000, and multiplying by 100%. If city taxable income is $100,000 or more, no credit is allowed. S.B. 2320.