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February 3, 2010 - Who depends on you? When the people counting on you for support are qualifying children or relatives, you may be eligible for a dependency exemption of $3,650 on your 2009 federal income tax return.

Not sure who meets the definition? Consider these tips.

•  Dependents cannot have dependents. The "dependent taxpayer" test prevents you from
   claiming a dependent when someone else claims you on their return. Put another way,
   you can only claim a dependent if you yourself are not one.

•  The definition of a qualifying child has been updated for 2009 returns. Generally, a
    qualifying child must not have filed a joint return. In addition, the child must be younger
    than you are.

•  Divorced or separated parents need a signed release to claim an exemption. If you're a
    noncustodial parent who wants to claim a dependency deduction for your child in 2009,
    you must attach Form 8332 to your federal income tax return. As a general rule, copies
    of divorce decrees or separation agreements are no longer acceptable.

•  Qualifying relatives can include family members who do not live with you. Do you
    support a parent in a nursing home or another state? You may be able to claim a
    dependency exemption as long as your loved one's gross income is less than $3,650 and
    you provide more than half the total support.

If other family members pitch in to help but no one individually furnishes more than half of your loved one's total support, you can still benefit. A "Multiple Support Declaration" (Form 2120) lets you decide who claims the exemption.
 
Need more information? Give us a call. You can depend on us for answers.

January 27, 2010 - While gathering information to complete your income tax return, you may give little thought to your filing status. But there's a reason "filing status" choices appear at the beginning of tax forms: They're important.

Why? Because filing status can impact exemptions, reportable income, deductions, credits, tax rates, liability, the type of form you file, and whether you need to file at all. In addition, some states require that you use the status reported on your federal return, which can affect the amount of state tax you pay.

Here are facts to consider when determining filing status.

1. Your status generally depends on whether you're married or single on the last day of your taxable year (typically December 31). In cases of divorce or separate maintenance decrees, the laws of your state determine whether you're considered married or single. Same-sex marriages are not recognized for federal income tax purposes.

2. As a married couple, you can choose joint or separate returns. When you file separately, you can change your mind later and amend your return to file jointly. However, you can't switch from joint status to married filing separately after the due date of the original return.

3. If you were widowed during the year and have not remarried, you have the option of
filing jointly with your late spouse. When you're widowed and have dependent children, you can continue to use joint tax rates for two additional years following the year your spouse died.

4. Head of household status is intended for single taxpayers with dependent children. It may also be available when you're single and maintaining a separate household for a
parent — including one living in a nursing home.

Questions about your filing status? Please call for information.

January 20, 2010 - When it comes to employment tax, 2010 is a year when many things change — and much remains the same.

Here's an overview of what's new and what's not.

• Social security wage base. The 2010 wage base is $106,800, the same as 2009. Once an employee's gross wages reach that amount, you no longer have to deduct FICA tax. As in prior years, there is no limit on wages subject to Medicare tax.

• FICA and Medicare tax rates. The rates for these taxes remain the same: 6.2% for the FICA portion and 1.45% for Medicare, resulting in a combined total of 7.65%.

• Unemployment tax. The federal unemployment tax rate of 6.2% (less a credit for state unemployment payments) has not changed.

However, your state unemployment tax rate is likely to increase, and you may have to pay the higher tax on more wages.

• "Making Work Pay" credit. This refundable credit of up to $400 for single workers ($800 for married filing jointly) is still in effect during 2010. The credit is incorporated into federal income tax withholding tables, so be sure your employees give you an accurate W-4.

• Form 944 opt-out rules. Would you prefer to prepare quarterly payroll returns instead of this annual report? In 2010 you can opt out of filing Form 944.

• Business vehicle mileage. You can reimburse yourself and your employees 50¢ for each mile driven for business during 2010, a decrease from 2009's rate of 55¢.

• Identity theft safeguards. Under a new initiative, you can elect to use asterisks instead of identification numbers on certain information returns you send to vendors, such as Form 1099.

• Tip program extension. The Attributed Tip Income Program, originally set to expire December 31, 2009, is now extended to December 31, 2011.

Please call for more information on the latest employment tax rules and their application to your business.

January 13, 2010 - Would you be ready if your business was one of the 6,000 companies expected to be randomly chosen for employment tax audits beginning this February?

As you wrap up 2009 payroll reporting, taking time to review your policies and procedures can save headaches down the road.

Here are tips.

• Reconcile quarterly and annual figures. Tie the wages you reported during the year on quarterly state and federal payroll tax returns to the total reported on "Form W-3, Transmittal of Wage and Tax Statements."

In addition, whether you file electronically or on paper, the total of individual Forms W-2 must agree with Form W-3.

• File all necessary returns. Remember those returns that are due only once a year, such as Form 940, used to report federal unemployment tax, or Forms 1099, for independent
contractors and other vendors.

Do you file Form 944, the annual employment tax return? You're required to complete the form even if you paid no wages during the year.

• File on time. Forms W-2 are due to your employees by February 1, 2010, and to the Social Security administration by March 1 (March 31 if you file electronically). Quarterly and annual federal payroll returns are generally due by February 1.

For any filing assistance you need, please contact our office.