March 2014 - In This Issue:

 

  

 

 

   

 

 

 
FUTA Rates for 2014
Businesses Facing Higher Rates
Employers in 15 states, including Ohio, will likely face higher Federal Unemployment Tax rates for 2014. That's because those states have outstanding federal unemployment insurance loans for at least two years. Generally, employers pay FUTA tax at a net rate of 0.6% (base rate of 6.0% minus a "normal' credit of 5.4%) on the first $7,000 of wages. The federal government provides loans to states with financial difficulties in order to pay unemployment insurance benefits. However, if a state defaults on its repayment of the loan(s), the "normal" credit allowed in the above formula is reduced. As it stands now, Ohio employers will face a 1.2% reduction in the credit making the effective tax rate 1.8% instead of 0.6%. The rate could go higher if the Benefit Cost Ratio (BCR) add-on goes into effect. The BCR is another mechanism for increasing the FUTA rate if states become more than 5 years behind in repaying their federal loans. Other states in the same boat as Ohio include AR, CA, CT, GA, IN, KY, MO, NJ, NY, NC, RI, SC, WI and the Virgin Islands.
Bitcoins
A New Currency or Just Other Property
money_grass.jpg There is a lot of press on the subject of "bitcoins" and whether they are a legitimate form of currency. From an economist's point of view, the jury is still out. The IRS, however, has weighed in from a tax perspective and says bitcoins act as a substitute for real currency. As such, when they are used for payment of goods and services, the taxpayer receiving them must include the value in U.S. dollars in income. Those who sell or exchange bitcoins realize gain or loss on the transaction. Whether the profit or loss is treated as ordinary income or as a capital transaction will depend on whether the bitcoins are being traded in the ordinary course of a trade or business, or being held as an investment similar to stocks and bonds.  
Tax Refunds
Sharing or Not Sharing
home_finance.jpgFor a couple who filed a joint return, tax refunds are for sharing. Soon after the initial filing, the two separated, but the husband kept the entire refund. The wife got some revenge when she filed a separate return using a "married filing separate" status and filed it by April 15th of the year the joint return was filed. The IRS audited the former husband and made adjustments denying him dependency exemptions and child tax credits. When "his" refund disappeared as a result of the audit, he took his case to Tax Court. The court sided with the IRS and said the Service's changes to his return were correct because the wife timely filed a separate return by the April 15 due date (Kososki, TC Summ. Op. 2014-28).
Severance Payments
IRS Gets Major Victory from the Supreme Court
dice-stock-listing.jpg In a key payroll tax case that many businesses and tax professional have been watching for several years, the IRS prevailed in its position that payments made to laid-off employees were wages subject to FICA tax. The case involved a bankrupt retail company called Quality Stores that laid-off most of its staff as part of a workforce reduction plan. The taxpayer took the position that the severance payments to those workers were not "wages" for purposes of the FICA tax. The U.S. Supreme Court settled the conflict arising between two Appeals Courts and ultimately sided with the IRS. Many business filed refund claims based on the taxpayer favorable decision by the Appeals Court that decided the Quality Stores case. Those claims, being held in suspense by IRS, will be dismissed by the Service.

We appreciate your feedback on our efforts to raise awareness of tax issues that affect you and your business operations.

 

If you have any questions, please contact your Meaden & Moore representative or Pete DeMarco at (216) 241-3272 or pdemarco@meadenmoore.com.

 

Thank you, 

Meaden & Moore

ABOUT MEADEN & MOORE

 

Since 1919, Meaden & Moore has been providing accounting, tax, forensic and business consulting services to a wide array of clients in a variety of industries. Through careful examination of the issues affecting business success, our staff of CPAs, CFEs, advisors, and auditors develop strategies and solutions to help our clients thrive in today's global economy.

 

STAY CONNECTED

Like us on Facebook   Follow us on Twitter   View our profile on LinkedIn