For 2011, Pennsylvania employers' FUTA tax rate will be 0.8% on an employee's first $7,000 of wages paid from January 1 through June 30. From July 1 through December 31, the rate decreases to 0.6% on the first $7,000 of wages. In addition, Pennsylvania is a "credit reduction state", meaning that for 2011, there is an addional 0.3% tax increase on the first $7,000 wages per employee. A credit reduction state is a state that has not repaid money it borrowed from the federal government to pay unemployment benefits.

What is a reasonable salary?

This question is one that any entity may be faced with, but for S corporations, it is becoming a hot topic. In 2009, a U.S. Government Accountability Office report noted that the combined 2003 and 2004 underreported shareholder compensation was $24.6 billion for corporations with fewer than three shareholders being responsible for nearly all of that. How is that relevant to the IRS?

The IRS has recently issued internal memos that appear to be focusing on increasing audits of rental real estate activities. The Treasury Inspector General for Tax Administration examined tax returns from 2001 and has found that many rental real estate owners are underreporting the taxable income from those activities. They are recommending an increase in the auditing of rental activities in the future.

The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 eliminated new information reporting requirements that were created by previous legislation.

Individuals or Businesses who hire subcontractors should issue a 1099 tax form by January 31 to their recipients. The 1099 requires a SSN for an individual or EIN for a business. It is suggested that when you contract the recipients, you have them fill out a W-9 form. You can pick these forms up at our office, or print from the following IRS website: http://www.irs.gov/pub/irs-pdf/fw9.pdf

The IRS has announced certain tax returns cannot be filed until mid- to late February, due to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. If you fall into the following three categories, your tax return cannot be filed until a future date determined by IRS:

* Taxpayers claiming itemized deductions on Schedule A

* Taxpayers claiming the Higher Education Tuition and Fees Deduction

* Taxpayers claiming the Educator Expense Deduction

The IRS will announce at a later date the first filing day for these specific returns.

The IRS has released the mileage rates for tax year 2011 (IRS Notice 2010-88).

Sometimes individuals want to start a non-profit organization, but are afraid it takes too much work, or will cost too much money. Starting a non-profit doesn’t have to take a lot of time or cost a lot of money. The first step is hiring an attorney who can file the organization’s articles of incorporation with the state they are looking to create the non-profit in. After this step is accomplished, an EIN is obtained, a bank account is established, and a Form 1023 exemption application is filled out.

Sounds strange, but it’s just a way of saying you have created a connection with a State. Those business connections can create taxable issues and those connections are easier to create than you may think. In a recent study, 95% of companies underestimated their nexus footprint.

Under a change in the IRS regulations, the IRS is allowing individuals to rollover Regular IRA's into Roth IRA's up until December 31, 2010. The conversions will cause the taxpayer to show the rollover amount as income and to be taxed on that income in 2010, or prorated 50% to 2011, and 50% to 2012. The change applies to all individuals regardless of their level of income. Previously, individuals were only allowed to convert their IRA's to Roth IRA's if their adjusted gross income was under $ 100,000.00.