February 8, 2010 Client Update

Another update.  We have finished virtually all W-2 forms and have turned our attention to 1099 forms for your non-employees.  Remember that all forms have to be mailed no later than February 16, 2010 to avoid any IRS inquiry. We will mail any necessary copies to the IRS and the Social Security Administration on your behalf. We do strive for perfection but occasionally we miss.  Please let us know if there is a problem or any questions about your employees W-2 forms.

Interestingly the IRS changed the deadline last year for mailing 1099 brokerage and retirement accounts to February 15th or later if the 15th falls on a weekend.  Congress in 2008 changed the law, requiring brokers to include cost basis statements for securities sold when they send their annual 1099 forms to their customers. This later due date has frustrated some clients expecting refunds when it came time to file their taxes, no 1099, no filing, delayed refund.

Speaking of delays, the Illinois Department of Revenue has yet to release, as of today, the final version of its 1040 and schedules to mail/file your 2009 income tax return.  Although you can efile the Illinois return, you cannot mail it in. Unbelievable.     

If the IRS Commissioner has his way, Congress may legislatively fix the Internal Revenue Code to match the modern-day use of employer-provided cell phones. Currently, when an employee engages in personal use of an employer-provided cell phone, the employer is required to report that personal usage as income to the employee. For many employers, such as you and me, distinguishing between business and personal use is so burdensome that they simply have neglected to comply with the law; risking the consequences if audited by the IRS.

However, IRS Commissioner Doug Shulman recently issued an announcement declaring that the current law is so obsolete, the IRS has asked Congress to enact legislation so that the personal use of employer-provided cell phones will no longer be taxable. Importantly, the Commissioner’s announcement does not suggest that the IRS will not enforce the current law.  Indeed, last June, the IRS issued Notice 2009-46 seeking comments on three suggested approaches for determining the amount of personal cell phone usage to be included in employee income:  minimal personal use requiring an employee to keep track, safe harbor percentage method, perhaps 75 %, or statistical sampling of the employee's usage.    It should be mentioned that the aforementioned Notice and its three methodologies was not well-received by the general public, let alone employers and their tax advisers.

Remember the due date for your corporate return is March 15, 2010.  If you do not want us to apply for an automatic six month extension for filing your income tax return, please let us know.