PGwire

Retirement Plan Forfeiture Suspense Accounts

2011-11-30T12:02:00.001-05:00

Doryanne Hamel, CPA, Manager

By Doryanne Hamel, CPA, Manager
Contact information: doryanneh@pgco.com
401-831-0200

Many defined contribution plans include a period of service requirement prior to a participant becoming fully vested in the employer contributions. Therefore, when an employee is terminated prior to meeting the full vesting requirement their non-vested account will be forfeited. Often, these forfeited account balances are transferred to a plan suspense account.

IRS Revenue ruling 80-155 states that a defined contribution plan will not be qualified unless all funds are allocated to participant accounts in accordance with a formula defined in the plan’s document. Therefore, plan administrators who allow the plan’s suspense account to accumulate forfeitures for a number of years may be risking the plan’s qualified tax-exempt status.

The plan document terms should include provisions for how and when forfeiture suspense accounts will be utilized. Plans may include a provision to reduce future employer contributions, pay plan expenses or allocate to participant accounts. A plan’s failure to use forfeitures timely denies plan participants additional benefits or reduced plan expenses.

To comply with IRS and ERISA requirements plan administrators should:

Review the provisions in the plan document for handling plan forfeitures to ensure the plan complies with IRS and ERISA regulations.

Monitor plan suspense accounts to ensure that forfeitures generated in any plan year are used in accordance to the provisions of the plan document.

If plan forfeitures have not been allocated properly, the plan administrator should apply the correction principles in Revenue procedure 2008-50, section 6 when making the correction. More information can be found on the IRS web site www.irs.gov/retirement.

ABOUT THE AUTHOR

Doryanne Hamel, CPA is a manager at the Firm and is responsible for audit, review, compilation and other accounting and tax engagements for a wide range of clients. She is qualified to perform employee benefit plan audits in accordance with the guidelines established by the AICPA Employee Benefit Plan Audit Quality Center. Contact Doryanne at doryannh@pgco.com or 401-831-0200.

Employee or Independent Contractor? IRS Offers Amnesty

2011-11-29T10:36:00.000-05:00

Partner John Mathias

One of the more difficult questions facing a business is whether a service provider is an employee or an independent contractor. Answering this question requires an interpretation of both individual facts and circumstances and common law. If the business decides that the service provider is an independent contractor, the obligation to remit income taxes and pay employment taxes falls squarely on the independent contractor. If the business, however, considers the service provider an employee, the business assumes all obligations to remit income, social security and Medicare taxes as well as the liability for matching payroll taxes.

Businesses that have been liberal in construing service providers as independent contractors could face large employment tax liabilities for past non employee treatment. Those businesses currently treating some of their service providers as independent contractors now have the opportunity under the Voluntary Classification Settlement Program (VCSP) to voluntarily treat these workers prospectively as employees. In exchange for this “amnesty” the business will pay ten percent of the employment tax liability that may have been due on the compensation paid to these workers. The employment tax liability will be calculated under the reduced rates of section 3509 of the Internal Revenue Code. In addition, the taxpayer will neither be liable for any interest and penalties on the liability nor subject to an employment tax audit with respect to the classification of workers for prior years. Any taxpayer participating in the VCSP must agree to the extension of the period of limitations on the assessment of employment taxes.

To be eligible for the VCSP, a taxpayer must have consistently treated the workers as nonemployees, filed all required Forms 1099 and not be under audit by the IRS, Department of Labor or any state government agency. Eligible taxpayers who wish to participate in the VCSP must submit an application for participation in the program. Information about the VCSP and the application is available on www.irs.gov.

Is your Business Separating Credit Card Sales? New Requirements Effective with 2011 Tax Year

2011-10-14T09:53:00.000-04:00

Beginning in 2011, businesses will need to start paying much closer attention to their credit card sales! Credit card companies will be issuing Form 1099-K to merchants detailing these transactions starting in January 2012. Businesses must report sales included in the 1099-K, sales not included in the 1099-K and returns, allowances and "cash back" on three separate lines on their business tax returns beginning with the 2011 tax year. Be sure to keep a close eye out for these important tax documents! More information will be available as the IRS finalizes the rules regarding these requirements.

Fox Network "The Rhode Show" Spotlights P&G

2011-09-19T11:57:00.000-04:00

Partner Rich Sullivan has raced

in every Downtown 5k

since its start.

Piccerelli, Gilstein & Company, LLP has a long association with the CVS Caremark Downtown 5k. The Firm is featured on Fox Providence's "The Rhode Show". Click here to view the story.

Partner Rich Sullivan has raced in every Downtown 5k
since its start.

RI Sales Tax Changes Begin October 1st

2011-09-13T16:43:00.000-04:00

You can expect more than just fall color changes in RI over the next few weeks. New provisions to Rhode Island's sales tax take effect October 1, 2011. The changes are a result of the legislation approved by the General Assembly and signed into law on June 30, 2011 by Governor Lincoln Chafee. Click here to read the Division of Taxation's Advisory. Do not hesitate to contact your P&G professional if you have any questions.

Tax Partner Pat Thompson Provides Testimony on the IRS Paid Tax Return Preparer Program

2011-08-09T15:15:00.000-04:00

On July 28, 2011, Tax Partner Pat Thompson, Chair of the AICPA Tax Executive Committee, testified to the U.S. House of Representatives Committee on Ways and Means Subcommittee on Oversight regarding the implementation of the IRS paid tax return preparer program.

The AICPA has been a steadfast supporter of the IRS' overall goals of enhancing compliance and elevating ethical conduct in the tax preparer community. To read Pat's testimony, click here.

Governor Chafee's 2012 Budget Addresses State's Structural Deficits

2011-07-01T17:07:00.000-04:00

Governor Lincoln Chafee signed the fiscal year 2012 budget on June 30, 2011. The $7.7 billion plan begins to address the state’s structural deficits and includes expense reductions, revenue increases (rather than tax increases) and repays the rainy day fund. Click here to read highlights of the budget.

Foreign Bank Account Holders - Report by June 30

2011-06-13T14:20:00.000-04:00

Do you have a foreign bank account that you are required to report?

If you are a United States person, who maintains one or more foreign accounts, and the aggregate value of those accounts exceeded $10,000 at any time during the year, you may be required to report those accounts to the IRS. The due date for reporting foreign accounts is June 30th. The penalties for failing to report a foreign account include steep fines and possible criminal prosecution.

To learn more, click here.

Minimizing the Stress of Divorce

2011-05-10T14:47:00.000-04:00

Laura DaFonseca, Principal
CPA, MST, CFE, CFF, CDFA,

Divorce, one of the more traumatic events in life, is becoming a statistical certainty for more than 50% of married couples. Stress is an inherent element in this extremely emotional and personal experience, but some of the stress can easily be prevented when the proper specialists have been consulted. Read my recent article in "Sumnews", the Massachusetts Society of Certified Public Accountants' quarterly newsletter. Click here to read more.

Employee or Independent Contractor - Which Is It?

2011-05-02T11:44:00.000-04:00

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers' compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

Continue reading

Don't Have the Funds to Pay your Tax Liability?

2011-04-13T16:10:00.000-04:00

Many individuals appreciate the six month extension of time to file their individual income tax return. However, filing form 4868 only extends the filing date and not the payment of any tax due with the return. Your options? If the reason you seek an extension is due to not having the funds to pay, it is far better to file the return timely without payment and ask for an installment payment plan with the IRS. In addition, you will eliminate additional penalties being imposed. To view the Installment Agreement Request, click here.
http://www.irs.gov/pub/irs-pdf/f9465.pdf

Government Shutdown Will Not Impact IRS Operations

2011-04-08T10:23:00.000-04:00

With the growing possibility of the government closing, the IRS wants you to know that taxpayers are still expected to send in their tax returns by the April 18 filing deadline.

According to the Commisioner of Internal Revenue Doug Shulman, if the government closes, Internal Revenue Service operations will be affected, but the agency will be able to normally process and issue refunds for electronically filed returns. Processing of paper returns will be delayed, he said.

The Commissioner stressed the administration's goal is to avoid a shutdown. Asked how a shutdown might impact the work of the IRS chief counsel and tax regulations, Shulman gave a more general answer.

IRS has 100,000 employees; if the government closes, “not all of us will be coming to work,” he said, without implying whether that would affect the chief counsel's office. Shulman said he could not provide “nuances of who's going to be doing what.”

The IRS commissioner said his agency is a “huge operation” involved in the running of government. “Funding the government every two weeks is not a great way to operate,” the official said, noting that “not knowing what to expect” makes IRS's tasks difficult.

IRS Filing Deadline Moves to April 18, 2011

2011-04-04T12:06:00.000-04:00

Emancipation Day, a legal holiday in the District of Columbia, will be observed on Friday, April 15, 2011. As a result, the deadline to file your personal income tax return has been moved to Monday, April 18, 2011. Often, taxpayers find they cannot file their personal tax returns by the deadline. The cause could be due to missing information, late arriving investment data or the more common reason, "I just didn't get around to it".

The government allows for an automatic six month extension of time to file, bringing the new filing date to October 15th. To obtain this extension of time to file, you must file Form 4868 by April 18.

Tune in as Pat Thompson Discusses Governor Chafee's Proposed 2012 Budget

2011-03-25T14:32:00.000-04:00

On Sunday, March 27th at 11:30am on Channel 10, Tax Partner Pat Thompson will be a member of 3-person panel to discuss Governor Chafee's proposed 2012 budget on the program "Ten News Conference". Tune in to learn how the proposed budget will impact the Rhode Island business community.

Divorce - Avoid These Financial Mistakes

2011-03-22T16:46:00.000-04:00

Donna Slater, CPA, CDFA
Principal

It’s a sad fact that over 50% of marriages will end in divorce and though divorce is very prevalent, most people don’t understand the financial distress it can cause. With emotions running high, it is important to keep a level head and with proper planning, you can avoid some of the more common pitfalls.

Since income will likely drop after a divorce, it is important to develop a budget based on your current and projected income and expenses. Understand what your financial needs are and negotiate enough liquid assets to meet those needs.

Identify what assets you have and the value of each asset. Be sure to include everything. Some assets are easy to forget such as stock options, the cash value of life insurance policies and timeshare properties. Use this list as a starting point in negotiations.

Be aware of the value of all pensions. A pension is often more valuable than the marital home, since pensions produce income and home maintenance costs deplete income.

Since no two pension plans are identical, involving a pension expert early in the divorce process will minimize costly mistakes. A Qualified Domestic Relations Order (QDRO) is the legal document from the court that directs a pension plan administrator to give a certain amount of an employee’s pension to his or her ex-spouse after the divorce is final. It should be prepared pre-judgment and presented to the judge for signature concurrent with the final divorce decree. An order cannot be accepted after the death of a participant and any benefits that have been awarded to the alternate payee will not be paid by the plan.

If you would like to retain the marital home, first determine if you can afford it and then be sure to pre-qualify for a mortgage before the divorce is final. Have a home inspection prior to signing the divorce papers to determine if expensive repairs are necessary and be sure to subtract the closing costs and projected expenses needed to get the house ready to put on market from the value you assign to the house.

Keep in mind the after-tax values of all assets, since that will determine how much you will ultimately end up with. For example, you could end up paying capital gains taxes on the sale of your home or investment assets.

Cancel all joint credit cards in writing and open new ones in your name only. Remember that third party creditors can still hold you liable for joint debt regardless of what your divorce decree states.

Contact Donna by emailing donnas@pgco.com, or by calling 401-831-0200.

Does your Employee Benefit Plan Need a New Auditor?

2011-03-15T14:05:00.000-04:00

Auditing employee benefit plans is an industry-specific task that requires specialized experience and knowledge. According to the U.S. Department of Labor, approximately one-third of all benefit plan audits fail to comply with Employee Retirement Income Security Act (ERISA) requirements. One of the most important duties of the plan's administrator is to hire an independent qualified CPA. Click here for helpful tips in choosing an auditor. To learn more about our Employee Benefit Plan Audit services, contact Sharon Kennedy at 401-831-0200, or sharonk@pgco.com.

Your Missing Money Awaits You

2011-03-08T13:27:00.000-05:00

If you own a business, I’m sure you’ve noticed that sometimes an employee or a vendor doesn’t cash a check. Or maybe you’ve noticed that a bank account hasn’t been used in years. Who owns that property? Those funds are still the property of the employee, the vendor or the account holder. Most states have laws designed to gather and return lost or forgotten property to its rightful owners.

In Rhode Island, unclaimed property is turned over to the RI General Treasury if there has been no activity for three years. For wages and utility deposits the time period is only one year.

--------------------------------------------------------------------------------

Any business with two or more employees should file a report with the General Treasurer’s Unclaimed Property Division listing the abandoned property.

What will the State do? The State will publish a list of the unclaimed property and try to reunite the property with its rightful owner.

An individual should visit the General Treasurer’s web site which has a cumulative list of unclaimed property dating back to the 40”s. RI General Treasury - Unclaimed Property

Pat Thompson Addresses Congressional Ways and Means Sub-Committee

2011-03-03T11:19:00.000-05:00

Tax Partner Pat Thompson is in Washington, D.C. this morning to testify to a Congressional Ways and Means Sub-Committee. Pat will testify at a hearing on the special burdens that the tax code imposes on small businesses and pass-through entities and the need for comprehensive tax reform to address these problems. Pat is the Chair of the American Institute for Certified Public Accountants Tax Executive Committee.

Employee Benefit Plans and ERISA's Fiduciary Advisor

2011-03-02T15:45:00.000-05:00

Visit P&G's Employee Benefit Plan Audits page to learn more about our audit services and to access helpful resources and links, such as the new IRS web tool for retirement plans. The ERISA Fiduciary Advisor is a helpful tool for retirement plans to determine your company's fiduciary responsibilities under the Employee Retirement Income Security Act. Check back for news and the latest regulatory developments impacting qualified plans and their related audits. For additional information on how we can assist you with your Employee Benefit Plan Audit, contact Irene Fasano: email: irenef@pgco.com Ph: 401-831-0200.

Read how Tax Partner Pat Thompson is Advocating for Small Business

2011-02-25T15:27:00.002-05:00

Tax Partner Pat Thompson, Chair of the American Institute of CPAs Tax Executive Committee, was featured in a recent Journal of Accountancy article, "House Committee Sends 1099 Repeal to the Floor". Pat urged the repeal of certain compliance provisions impacting businesses and rental property owners that were included in the Patient Protection and Affordable Care Act and the Small Business Jobs Act. Click here to read the article.

Did you file your 2011 Rhode Island Annual Report?

2011-02-17T13:09:00.000-05:00

March 1st is the deadline to file your 2011 Rhode Island Annual Report with the Secretary of State's Office to avoid revocation of your business certificate of incorporation or authority.

Click here to visit the Rhode Island Secretary of State website for additional information.

The Dollars and Sense of Divorce

2011-02-10T15:36:00.000-05:00

Because of the financial complexity of many divorces, more and more financial professionals are being asked to play an active role helping individuals and lawyers sort through the financial issues related to divorce. We are pleased to announce that P&G Principals, Donna Slater, CPA, CDFA and Laura DaFonseca, CPA, MST, CFE, CFF, CDFA recently completed a specialized education program in professional divorce analysis and are now Certified Divorce Financial Analysts (CDFA). Laura and Donna, the only certified public accountants in Rhode Island to have the CDFA designation, are trained to evaluate the tax implications of dividing property and the financial impact of various settlement options for dividing marital property (including pensions) and child and spousal support payments. Contact Donna at donnas@pgco.com and Laura at laurad@pgco.com or call our office, 401-831-0200.

Eager to File Your 1040? Not so Fast says the IRS

2011-02-03T14:21:00.000-05:00

The IRS has announced that some "early birds" who traditionally file individual income taxes early, will have to wait until mid-to-late February to file 2010 returns. Why? The IRS needs more time to reprogram its processing systems to reflect new legislation included in the late-breaking Tax Relief Act signed on December 17th. Who has to wait?

Taxpayers claiming itemized deductions on Schedule A.
Taxpayers claiming the higher-education tuition and fees deduction.
Taxpayers claiming the educator expense deduction.

Depreciating Equipment and Sport Utility Vehicles

2011-01-25T18:25:00.005-05:00

Good news from Congress? Read on.

The Federal Income Tax Code ordinarily requires equipment, furniture and fixture investments by businesses to be depreciated over pre-defined time periods such as 5 or 7 years. In December 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law.

There are two significant provisions in this new legislation for 2010 and 2011 with respect to writing off fixed asset purchases. These two provisions have been put into place to encourage businesses to expand, improve and upgrade. One provision allows a 100% write off for unlimited fixed asset acquisitions if the assets acquired are NEW and purchased after September 8, 2010 and before December 31, 2011. That’s right! UNLIMITED 100% write off! The second provision has more restrictions including a phase out provision that limits the deduction at $500,000, but it can be utilized for USED fixed asset acquisitions, whereas the 100% deduction cannot. Determining which provision is applicable to your specific circumstances is the first step in planning your 2011 business investment plan. Just let us know your 2011 asset acquisition plans.
One particular interesting aspect to the new bonus depreciation law, is the ability to write off the cost of trucks using the 100% bonus depreciation provision. Sport Utility Vehicles with Gross Vehicle Weights greater than 6000 pounds are considered trucks for this provision. Prior to the passage of this law, first year depreciation on these SUV’s was limited to $25,000. While it was probably an unintentional result of the new law, at the time of this writing these greater than 6000 pound SUVs appear to be 100% deductible in 2011 if acquired after September 8, 2010 or in 2011. Please contact us if you are considering the purchase of such a vehicle so that we can review the latest information about the tax law.

Window of Opportunity Closes on January 31, 2011

2011-01-12T19:59:00.000-05:00

Don't miss the IRA tax opportunity included in the legislation signed by President Obama on December 17, 2010. This one has a very short window of opportunity; it ends January 31, 2011.

Taxpayers over age 70 1/2 have the option to transfer up to $100,000 from an IRA to a qualified charity and have the transfer count as the required minimum distribution.

• You can still make your 2010 transfer by the end of January 2011. The advantage is that a taxpayer can contribute a maximum of $200,000 to charity. If they miss the January 31, 2011 deadline, the most they could transfer would be $100,000.

• This provision expires at the end of this year.

To learn why an individual would transfer the funds to charity rather than take the distribution and then write the check directly to the charity, contact Irene Fasano, irenef@pgco.com.

The Tax Relief Act of 2010 - What it Means to You

2010-12-20T16:08:00.000-05:00

The Tax Relief Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) was signed into law on December 17, 2010 and contains a number of income, estate and gift tax provisions. Click here to learn more about the Act.

Principal Donna Slater Discusses Collaborative Family Law

2010-12-13T11:35:00.013-05:00

Collaborative divorce is a new and highly effective divorce method that uses a team approach to divorce.

The Collaborative divorce process begins with each spouse retaining an attorney who is specially trained in Collaborative Law. They meet with their attorneys in a series of four-way settlement conferences to resolve their issues and settle their case. Often, other divorce professionals such as financial consultants, mental health professionals, or child experts are included in the team. Each team member assists the family in their area of expertise and their recommendations are used to help the family reach an acceptable resolution.

The divorcing couple and their attorneys are required to sign a contract in which they agree not to take the case to court. They must commit to provide full and fair disclosure of all financial information and must exhibit mutual respect and honesty.

Divorce is never easy but there is a way to get through it with minimal damage so that you can move on to a brighter future.

Contact Donna Slater at donnas@pgco.com or 401-831-0200.

Read the Latest Issue of our Quarterly Newsletter Disclosure

2010-11-09T14:42:00.000-05:00

The Fall 2010 issue of our quarterly newsletter, Disclosure, has been posted to our website, pgco.com. Featured articles include:

... "A Conversation with Bill Piccerelli"

... "Securing Customer Credit Cards: Are you in Compliance?" by Cheryl Houston

... "Tax Incentives for Commercial Buildings" by Kevin Papa

Click here to view the latest issue.

Small Business Jobs Act Bringing Changes

2010-10-07T10:47:00.000-04:00

On September 27, 2010, President Obama signed into law the "Small Business Jobs Act of 2010" which includes a number of important tax provisions for business. Click here to read a summary of the law.

New Information Reporting Provisions Getting Lots of Press

2010-09-13T15:46:00.000-04:00

The Health Care Legislation included many revenue raising provisions. Even though this provision doesn't take effect until 2013, the expansion of information reporting is getting a lot of press. Tax Partner Patricia Thompson recently appeared on the NBC 10 News Sunrise program with Frank Coletta to discuss the impact on small business, what happens if you don't comply as well as potential problems with the legislation.

Can you explain the provision?

• The provision of information reporting is expanded to require information reporting for goods as well as services and for payments to corporations made starting 2012. For example, your small business purchases its cleaning supplies from Walmart and the total payments are over $600 in a year. Under this provision, your small business will be required to send a Form 1099 to Walmart indicating the total amount spent in Walmart during the particular year.
• This is on top of the current requirement for a business to issue Forms 1099, the information reporting form, to any unincorporated business you paid for providing a service to your business.

Why was this provision included in the legislation?
• Provision intended to reduce the "tax gap". Studies show that taxpayers are more likely to report income that has been reported to the IRS. The provision was included as a revenue raiser.
What is the impact on small business?
• The small business will need to track the payments to each vendor.

• They may need to modify their bookkeeping systems to be able to accumulate the information necessary for reporting.

• They will need to contact the vendor to obtain the vendor's identificaiton number. The small business may use a Form W-9 to request the information. If the vendor doesn't provide the information, the small business must withhold 28% from all subsequent payments due to the vendor. The small business person who is the payee is subject to a $50 penalty for not providing the information to the small business.

• The number of information returns that is 1099 forms prepared by the small business will increase

• All of these will require more time by the small business on administrative matters.

• Many businesses may reduce the number of vendors to minimize the administrative burden.

• Taxpayers renting real estate are not considered in a trade or business. As a result, they are exempt from the information reporting requirements.

What if you don't comply with the legislation?
• There is a failure to file an information return of $50 for each return not submitted. The penatly is doubled if the failure is intentional.

• There is another $50 penalty if the information return is for the wrong amount.

What is wrong with the provision?
• The IRS will be receiving millions of information reports. They will need to address computer capacity.

• IRS will not be able to match the information returns to the taxpayer if the taxpayer is on the accrual method of accounting or if it has a fiscal year. The returns are prepared on the basis of cash payments and on the basis of a calendar year covering January 1 to December 31.

• The requirement for the annual filing limit of $600 paid to a vendor is too low. The $600 level has been the same since 1954. The dependency exemption was also $600 in 1954 but has increased to $3,650 in 2010. It is easy to spend over $600 on small items.

Any solutions?
• Use your debit or credit card for as many purchases as possible. Recently, the IRS Commissioner indicated that an information return would not be required if the payment was made by either a debit or credit card. The payments by debit and credit card are already being reporting by the financial institutions and if these payments were not excluded it would result in duplicate reporting.

• It is not likely the provision for filing 1099’s will be repealed but maybe it can be modified to make some exceptions from reporting certain types of payments or to payments to certain types of entities.

Providence Business News Asks Pat Thompson Five Questions on Rhode Island's Income Tax System

2010-08-19T14:36:00.000-04:00

Looking for more information on Rhode Island's new tax law? Tax Partner Pat Thompson was recently asked for more information on this overhaul to the state's personal income tax system by Providence Business News. Click here to read the article.

Read the Latest Issue of our Quarterly Newsletter, Disclosure

2010-08-02T14:58:00.000-04:00

The Summer 2010 issue of our quarterly newsletter, Disclosure, has been posted to our website, pgco.com.

Featured articles include:

... "Rhode Island's New Tax Law: What it Means to You" by Pat Thompson

... "Is your Industry Susceptible to Fraud?" by Frank DeLuca

... "Employee Benefit Plan Regulatory Update" by Doryanne Hamel

Click here to view the latest issue.

Spotlight on Form 1099

2010-07-19T13:59:00.000-04:00

Tucked away in the health care bill is a little known change that has brought a whole lot of attention to little ole' federal form 1099.

Beginning in 2012, all companies must report to the IRS any payments to vendors, suppliers and service providers that exceed $600 in a year. Right now, 1099 forms are filed by businesses that have hired outside contractors who are not employees. The requirement, created to help pay for the new health care law, would expand 1099 reporting in two ways: it would include payments to incorporated businesses (not just independent contractors) and payments for goods and services. For example......

For example, if your business purchases a new computer at your local office supply store for $800, you will have to fill out a form 1099 for that vendor. You will have to keep a running tally of purchases made in smaller amounts but add up to $600 by the end of the year. The increased paperwork is expected to be quite burdensome. According to the National Small Business Association, an estimated 100 million 1099 forms will be filed under this provision.

Non-Profits - Don't Lose your Tax-Exempt Status

2010-06-29T10:53:00.001-04:00

If you serve as a board member or are otherwise involved in a non-profit organization, you want to be aware of IRS changes for 2010.

While 501©(3) non-profit organizations are exempt from federal income tax, most of them must file an annual information return, or risk losing their non-profit status. The Pension Protection Act of 2006 mandates that beginning in 2010, any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status. If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and the renewed exemption may be taxable.

The type of Federal Form 990 a charity must file is determined by the organization’s gross receipts. Organizations with less than $25,000 in annual receipts can file an electronic notice Form 990-N. Tax-exempt organizations with annual receipts above $25,000 must file a Form 990 or 990-EZ.

Governor Carcieri Signs Historic Tax Reform Legislation

2010-06-14T14:41:00.002-04:00

On June 9, 2010, Governor Carcieri signed historic personal income tax reform legislation into law. The legislation is effective for tax years beginning January 1, 2011.

The new personal income tax provisions significantly reduces the complexity of the current system and makes us more competitive with other personal income tax systems across the country as well as with our neighboring states. Many Rhode Islanders will see a decrease in their Rhode Island personal income tax.

The changes were necessary to make Rhode Island a more attractive state to conduct business. Taxes are a significant factor evaluated by business leaders when deciding where to start or expand their business. Over the years, we have seen Rhode Island businesses expand their operations in Massachusetts to take advantage of the lower income taxes. The current top tax rate of 9.99% was cited as a barrier for business owners. The top tax rate of 5.99% under the new legislation will remove that barrier.

Planning Opportunities Exist

Planning Opportunities Exist as a Result of This New Legislation

The legislation replaces an individual’s itemized deductions with a high standard deduction. You might consider moving some of your real estate taxes and state income tax deductions into 2010 to take advantage of the tax savings this year. However, f you are in the alternative minimum tax, moving these items into 2010 will not save you any taxes. Prepaying your January mortgage interest payment and charitable deductions will save you taxes in 2010 even if you are in the alternative minimum tax.

Certain business credits will no longer be available under the new personal income tax system. Examples of credits no longer available include the research and development, jobs tax, enterprise zone and investment tax credits. Any of these credits not used in 2010 will be lost. Consider generating sufficient income in 2010 to take full advantage of the credits.

These credits are still available for C corporations.

The historic tax and film credit are two of the credits that will be available under the reformed personal income tax. Consider purchasing these credits late this year or early next year. The supply of these credits is limited so acting early may ensure your ability to obtain them.

Spring 2010 Newsletter

2010-05-26T16:12:00.000-04:00

The Spring 2010 issue of our quarterly newsletter, Disclosure, has been posted to our website, pgco.com.

Featured articles include:

...   "Deducting Summer Travel Expenses" by Pat Thompson

...   "Lost, Forgotten or Abandoned Property" by John Mathias

...   "Collaborative Family Law" by Donna Slater

Click here to view the latest issue.

Claiming Personal Casualty Losses 2009 vs. 2010

2010-05-19T10:04:00.000-04:00

As New England flood victims continue their cleanup and renovation efforts, there is an important tax issue to consider. In federally declared distaster areas, taxpayers can elect to take the casualty loss deduction on the tax return in the year prior to the year of the disaster. If you were impacted by the flood, you should evaluate the tax consequences of including the 2010 flood losses on your 2009 return (you can amend if you've already filed) or 2010 return to determine the more beneficial treatment in your individual tax situation. There are benefits in taking the casualty losses in 2009.

Advantages of Taking the Loss on Your 2009 Tax Return

• No 10% of adjusted gross income limitation
• Floor of $100 rather than $500
• Lower tax liability resulting in a quicker potential refund and
• Lower 2010 estimated tax payment

Higher Medicare Taxes Included in Health Reform Plan

2010-05-04T16:28:00.000-04:00

High income taxpayers should brace themselves for expanded taxes. Starting in 2013, the high income taxpayers will be hit with an increase in Medicare taxes on wages and a new levy on investments.
Single people earning more than $200,000 and married couples earning more than $250,000 will be taxed at an additional .9% rate on earnings over these base amounts. The total Medicare tax paid by the employee would be 2.35%. The employer does not have to match this rate. Self employed persons will pay 3.8% on earnings over these same thresholds.

The Medicare tax is being expanded to include investment income. A new 3.8% tax will be imposed on net investment income of single taxpayers with adjusted gross income over $200,000 and joint filers with adjusted gross income over $250,000. Net investment income is interest, dividends, net rents, passive activity income and certain capital gain property.
These thresholds are not indexed for inflation.

Flood Disaster 2010

2010-04-01T14:38:00.001-04:00

In Rhode Island, as well as in portions of Massachusetts and eastern Connecticut, March 2010 will long be remembered for severe storms and unprecedented flooding. The serious impact on individuals and businesses has prompted President Obama to issue emergency disaster declarations for Rhode Island and Massachusetts. Click here for a comprehensive list of resources available for flood victims in R.I. and Massachusetts including income tax deadline extensions. We will continue to update this list as information becomes available.

Flood Damaged Businesses Get Relief From R.I. Dept. Labor and Training

2010-03-31T12:17:00.000-04:00

Rhode Island employers forced to lay off workers temporarily as a direct result of recent flooding may be able to help their employees connect to unemployment insurance benefits sooner if the employers apply for a waiver with the Department of Labor and Training.

Rhode Island Law § 28-44-14 waives the usual one-week waiting period for unemployment insurance if a worker's unemployment is caused by a natural disaster or state of emergency.

Employers whose storm-related property damage resulted in worker layoffs may be granted relief from related unemployment benefit charges if their businesses are deemed eligible under another weather related law,
§ 28-43-3. Under ordinary circumstances, employers are charged against their unemployment insurance account every time one of their employees draws on unemployment insurance.

To be deemed eligible for the benefit relief and the waiting period waiver, employers must first submit an application to the Department of Labor and Training. Applications are available for downloading at http://www.dlt.ri.gov/. To assist employers with this process, the Department of Labor and Training has set up a dedicated employer information line at (401) 462-8999 and an email address at uiemployerhelp@dlt.ri.gov. Please note that this contact information is for employers only and is not intended for individual claimants.

Employees of companies adversely affected by the recent flooding should follow standard procedures for filing for unemployment insurance benefits and will be credited for all benefits available to them once their employer is deemed eligible for the waiting period waiver. Any person wishing to file a Rhode Island unemployment insurance claim may do so online at http://www.dlt.ri.gov/ or by contacting the Unemployment Insurance Call Center at (401) 243-9100 during business hours.
Updates on the flood emergency response for Rhode Island are available through the Rhode Island Emergency Management Agency at http://www.riema.ri.gov/.

Who Owns This Pot of Gold?

2010-03-16T09:35:00.000-04:00

In Rhode Island, unclaimed property is turned over to the RI General Treasury if there has been no activity for three years. For wages and utility deposits the time period is only one year.
Any business with two or more employees should file a report with the General Treasurer’s Unclaimed Property Division listing the abandoned property.

What will the State do? The State will publish a list of the unclaimed property and try to reunite the property with its rightful owner.

An individual should visit the General Treasurer’s web site which has a cumulative list of unclaimed property dating back to the 40”s. RI General Treasury - Unclaimed Property

Are You Getting the Most From Your Auto Expenses?

2010-03-06T13:24:00.000-05:00

If you use a car for business, you have two choices for claiming deductions:

1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers' salaries, and depreciation.

2. Use the standard mileage deduction and simply multiply 55.0 cents for 2009 travel. (2008's rate was 50.5 cents for first six months and 58.5 cents for the last six months of 2008) by the number of business miles traveled during the year. Your actual parking fees and tolls are separately deductible under this method.
Which method is better?

For some taxpayers, the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to by-pass the limits and restrictions and is simpler, but often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100% for business, or close to that percentage.

Caution: Once you choose the standard mileage rate, you cannot later use accelerated depreciation if you opt for the actual cost method in a later year. You may then use only straight line.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

Immediate Tax Benefits for Haiti Contributions

2010-02-25T15:12:00.000-05:00

March 1, 2010 Deadline

Individuals who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.
The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004.

Increasing Cash Collections

2010-02-17T10:17:00.002-05:00

Even profitable businesses sometimes have trouble paying their bills. Running out of cash will get any organization into trouble. Every business needs to monitor how its customers are paying what they owe. Because even good customers sometimes fall behind in paying their bills, every business needs to regularly monitor its accounts receivable.

The sooner you spot a problem, the sooner you can contact the delinquent customer. Maybe there’s a clerical problem with the bill or maybe the customer is directing its limited resources to a vendor who’s more forceful. Whatever the reason, you need to decide as soon as possible how to proceed.
Maybe you’ll call the customer more often or refer the matter for legal action. You might consider retaining a collection agency to pursue customers with overdue accounts. In a difficult economy such as ours, it’s important to offer customers who have fallen on hard times the opportunity to work out a payment schedule. A spirit of cooperation may create customer loyalty in the future.

The Sky's the Limit with Skype

2010-02-09T15:40:00.004-05:00

I'm turned on with Skype and you should be too!

What is Skype? A free service allowing users around the world to make calls, video or phone, over the internet. It's really neat. I've had video calls with friends in Italy on a few occasions. If you haven't heard of Skype, then you are really missing out! Skype requires a camera and microphone for your computer. Although many computers are already equipped with a camera and microphone, mine was not. I purchased a relatively inexpensive camera with built-in microphone for $79 and it works great.
The instructions to download Skype are very simple. When the download is complete, you can find friends, relatives and business associates already on Skype by the using the email addresses in your Contacts. You will be amazed by how many of your acquaintances are already using Skype. Another great feature is Skype alerts you when one of your contacts has logged on. Skype is a must for those who want face-to-face conversation with contacts in the U.S. as well as foreign countries. http://www.skype.com/

A Lottery You Don't Want to Win

2010-01-28T12:30:00.001-05:00

The Internal Revenue Service has announced the Employment Tax National Research Program will launch in early February. This study will involve the audits of 6,000 randomly selected companies and will be completed within three years. The audits will help the IRS guage revenue compliance with the employment tax laws and will assist with the selection of future audit targets. The good news for businesses is that only 6,000 of these audits are to be conducted. However, if you happen to be selected, you will find an audit such as this difficult and tedious.
These audits will be concentrated in the following areas:

Worker classification
Fringe benefits
Officer compensation
Non filers

Worker classification involves the on-going controversy regarding the classification of a worker as an employee or as an independent contractor. A set of tests and guidelines exist to assist employers in selecting the correct classification, but these guidelines can be confusing and ambiguous resulting in significant litigation with the IRS.

The non filer part of the program will focus on cash type businesses. The IRS estimates $110 billion dollars of lost tax revenue exists in the cash business environment.

Business Customs Across Borders

2010-01-22T11:10:00.047-05:00

When a business is considering expanding operations, choosing overseas might be a cost-effective option. However, when conducting business in person, it's important to understand the customs of each country. Some customs that are normal and respectful in the United States may actually be considered rude in other countries. For example, although the U.S. and Mexico are neighbors, they have very different views about eye contact. In the U.S., looking an individual directly in the eye is considered a sign of honesty. In Mexico, however, continued eye contact can be considered threatening and aggressive. Intermittant eye contact is best.

In Japan, a "poker face" is necessary during business negotiations. If you display shock or anger during your business meeting, your Japanese host may perceive this as a lack of self-control and might even question your character as a business partner. When visiting China, remember that age is respected. When sending more than one representative, the eldest in the group should enter and exit the conference room first, as a sign of respect.

Never take a business card and place it in your wallet in your back pocket! Although in the U.S., you might consider this to be a good place for safe-keeping, in Eastern countries this is a sure sign of disrespect. Wherever you go, determine the acceptable language for conducting business. While the country may have an official language, many times, the official "business" language is actually English. Bring business cards with a translation printed on the reverse side.

Take the time to understand the country, it's culture and values. This will help you make great strides in building strong business relationships.

Are You in the Zone? Your Business May Qualify for this R.I. Tax Incentive

2010-01-12T11:43:00.001-05:00

An Enterprise Zone is a specific geographic location in which the State and Town target programs to aid business expansion and job creation. The State of Rhode Island Enterprise Zone Program is designed to offer tax incentives to businesses that expand their workforce at facilities located in one of the state enterprise zones:

Cranston
Central Falls/Lincoln
East Providence
Pawtucket/Lincoln
Providence
Portsmouth/Tiverton
Warren/Bristol
West Warwick
Woonsocket/Cumberland

How does a business qualify?
A business must submit an application for admission to the Community Enterprise Zone Coordinator who will certify your location in the zone. This must be done prior to hiring the new employee.

Any business located in a state enterprise zone that grows its employment base by 5% with full time Rhode Island residents may be eligible for the tax credit. The employee must be hired during the application year and still be employed as of December 31st. The tax credit is equal to 50% of the annual wages paid new employees to a maximum of $2,500 per employee. If new employees reside in an enterprise zone, then the tax credit is euqal to 75% of the annual wages paid up to a maximum of $5,000 per employee. Credits that are earned and unused may be carried forward for a period of three years. To learn more, visit the R.I. Economic Development Corporation website R.I. Economic Development Corporation

How the Economy Impacts the Value of your Business

2009-12-30T10:09:00.000-05:00

If you own or co-own a privately held business, I’m sure you’ve wondered just what your business was worth. In other words, what would a willing and informed buyer pay you for your business? Maybe you’re thinking of selling, doing some estate planning or going through a divorce. Although your interest in the business isn’t actively traded on a stock exchange, your business probably still has a value. CPA’s with special training and experience in valuing businesses can work with you to determine a value for your business.

Businesses have value because they make profits or own valuable assets such as real estate or securities. Some businesses have developed special processes and expertise or products that are protected by patents. If it’s likely that your business and its assets have a bright future, then your business has value.

A business appraiser does a thorough analysis of your company’s profitability, assets and liabilities and computes its economic profit. The appraiser also considers the economic conditions as well as the prospects for the industry. Since profit is the typical driver of economic value for an operating business, the appraiser needs to make some judgments about the reported revenue and expenses to arrive at an economic profit that can be passed on to a willing buyer. Whenever there is a return, there must be something of value creating that return.

There’s another important question that the appraiser needs to answer. What rate of return does a buyer expect before assuming the risks associated with owning a privately held business? If a very safe investment such as a Certificate of Deposit or a Treasury Note is paying 2 to 4%, a more risky investment, such as one in a privately held business, should pay a higher rate of return. To accept more risk, the investor wants the potential for a higher reward. Knowing the return or reward and the acceptable rate of return allows the appraiser to assign a value to the business.

In either case the value of your business doesn’t have to remain a mystery. There are proven techniques that specially trained appraisers can use to answer the question, “What is my business worth?

Protecting Your Wallet Before It's Stolen

2009-12-21T01:00:00.020-05:00

We all get the emails..... internet jokes, the latest urban legend, the hilarious YouTube video - all forwarded to your Inbox. I recently received an email from an attorney detailing a personal experience with a stolen wallet. Now, this, is one email I am happy to share.

Read this and make a copy for your files in case you need to refer to it someday. A corporate attorney sent the following to his employees. Maybe we should all take some of his advice!

1. Do not sign the back of your credit cards. Instead, write “PHOTO ID REQUIRED”.

2. When you are writing checks to pay credit card accounts, do not write the complete account number on the “For” line. Instead, write only the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Write your work phone number on your checks instead of your home phone. If you have a PO Box, use that address instead of your home address. If you do not have a PO Box, use your work address. Never have your social security number printed on your checks. You can add it if it is necessary.

4. Make a photocopy (both sides) of all your wallet contents. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.

I also carry a photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that is committed using stolen name, address, Social Security number, credit cards, etc.

Unfortunately, I, an attorney, have first-hand knowledge because my wallet was stolen last month. Within a week, the thieves ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.

Here is some critical information to limit the damage in case this happens to you or someone you know:

5. We have been told we should cancel credit cards immediately in the case of theft. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where the theft took place. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

But here is what is most important of all (I never even thought to do this):

7. Call the three national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing this until advised by a bank that called to tell me an application for credit in my name was made over the Internet.

The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend (someone turned it in). It seems to have stopped them dead in their tracks.

Here are the numbers to contact if your wallet has been stolen:

1.) Equifax: 1-800-525-6285

2.) Experian (formerly TRW):1-888-397-3742

3.) Trans Union: 1-800-680 7289

4.) Social Security Administration (fraud line): 1-800-269-0271

States Grant Amnesty to Ease Budget Pains

2009-12-15T14:05:00.000-05:00

New York is the latest state to create a tax amnesty program. Many states have adopted such programs as a means to not only raise revenue, but also to enter more taxpayers into the system. The details of the program as outlined by the New York Department of Finance and Taxation are as follows:

The program, which will take effect sometime in the first quarter of 2010, is expected to raise $250 million in the 2009-10 fiscal year and provide $100 million in recurring revenues in subsequent years. It was passed as part of a package of bills to eliminate the state's midyear budget deficit of some $3 billion.

Under the program, which is called an “accounts receivable discount program,” penalties will be reduced by 50 percent for tax liabilities that are between three and six years overdue. Penalties would be reduced by 80 percent for liabilities that are overdue by more than six years.

In a statement, Paterson said the program would raise revenues for the state, while helping taxpayers repair their credit histories and avoid costly legal action. In addition, local governments would receive about $84 million from their share of previously uncollected taxes, he said.

The Department of Taxation and Finance will establish the specific terms of the program, including the effective date.

Under the law, taxpayers who have been convicted of a crime under the Tax Law or have been subject to penalties for fraud are not eligible for the program.

Are you Ready for the New Audit Standards?

2009-12-09T11:37:00.009-05:00

As you prepare for your audit this year, we want to make you aware of a new auditing standard, Statement on Auditing Standards (SAS) 115: Communicating Internal Control Related Matters Identified in an Audit, which supersedes SAS No. 112 of the same name. SAS No. 115 goes into effect for all financial statement audits for periods ending on or after December 15, 2009. As with SAS No. 112, SAS No. 115 requires that we evaluate deficiencies in internal control that we identify during our financial statement audit to determine whether any of those deficiencies, individually or in combination, are significant deficiencies or material weaknesses.

SAS No. 115 provides new definitions of the terms material weaknesses and significant deficiencies and provides us with additional direction and guidance as to how to evaluate whether a deficiency in internal controls is a significant deficiency or materials weakness. This additional guidance enables us to further draw upon our professional judgment as we apply these definitions to each unique situation.

As with SAS No. 112, SAS No. 115 also requires that we communicate, in writing, to your management and those charged with governance, those deficiencies that we consider to be significant deficiencies or material weaknesses, including those communicated to you during previous audits, either orally or in writing, if they have not yet been remedied.

Communicating any identified significant deficiencies or material weaknesses in writing is important to heighten your awareness of internal control over financial reporting and to enable management and those charged with governance in your organization to better assess the costs and benefits of implementing any new controls that would help minimize the risks of financial statement misstatements, including those caused by fraud.

We are available at any time to discuss any questions you may have related to internal controls, examples of deficiencies in internal controls, or other matters related to your audit. If you would like to schedule a meeting to address your questions or discuss this new standard in advance of your audit, please feel free to contact Sharon Kennedy, Partner at 401-831-0200 or sharonk@pgco.com.

The "Greatest Generation" Looks to the Future

2009-12-04T01:00:00.003-05:00

One of the most troublesome issues for a closely held business to deal with is succession planning and transfer of business interests. With the aging of the "greatest generation", those individuals who started businesses in the early 1950's are now looking for assistance in preserving and passing on the businesses that they have built.

For the reasons discussed in the Financial Advisor article, "Time Ripe for Family Business Transfers", the current state of the economy has given business owners some timely factors to accomplish these transfers. Business owners need to act now to achieve these advantages that the current economic climate has created.

Electronic Bill Payment Makes Life Easier

2009-12-01T08:00:00.001-05:00

About ten years ago I started paying my bills online through my bank's processing service. Back then I was using Rhode Island Hospital Trust's online system and it actually had more features available than the system I currently use. Of course we all know what happened to Rhode Island Hospital Trust Bank, but today paying bills via electronic funds transfer or having the bank prepare and process checks based on the consumer's instructions has never been safer or easier.

Paying bills is no longer the chore it once was with envelopes and postage. And of course I don't miss the occasional surprise of finding a bill ready for mailing in the jacket pocket of a suit I wore ten days ago, that I had intended to mail on that day in order to have it reach my vendor on time. Now I simply tell the bank who to pay and when to pay it, scheduling the payment on the last possible day in order to maximize the float and keep my money working at the magic interest rate of less than 1 percent!

All of the information can be integrated into Quicken or Quickbooks which allows me to track where my money is being spent.

Now CPA's can offer the same kind of functionality to clients with a few more bells and whistles that make it attractive to business environments. Working with a secure third party vendor utilizing a portal, electronic bill pay is available to businesses along with a system that stores and catalogs bills, essentially creating the paperless environment. The system also allows for the routing of bills for approvals and prompts all the responsible parties to the process so that everyone knows if there is something in the cue for them to deal with. It also allows for better tracking.

All this is accomplished without loss of control. Another by-product is that the system provides a great transaction history or audit trail which should contribute to audit efficiency. This system does not come without a cost, however, but that cost is illustrated to be much less than working with paper, stamps and envelopes.

If this is something you thing you would be interested in learning more about, please contact me at frankd@pgco.com.

IRS Works to Close the “Tax Gap” this Fall

2009-11-28T08:00:00.000-05:00

The IRS this week indicated that its previously-announced employment tax examination program will commence this November. In the initial stage, approximately 6,000 employers of all sizes and types will be randomly selected nationwide for audit. These audits are intended to be a key part of IRS efforts to increase revenue collection & close the "tax gap", as well as provide perspective on where best to target future audit resources. The reviews will concentrate on four primary areas of employment tax - worker classification, fringe benefit taxation, reimbursed expenses and compensation of owner employees.

The federal Government Accountability Office recently released a report on misclassification of employees as independent contractors. The report covers employer incentives to misclassify, the current extent of misclassification, Department of Labor and Internal Revenue Service efforts to address the problem, and GAO recommendations for more effective prevention. The IRS and DOL estimate that between 10-30% of employers may be misclassifying workers, resulting in a significant loss of tax and unemployment insurance revenue. We anticipate this report to be a precursor for more robust enforcement in this area, including via the audit process described above.

Sounding off on "The Working Waterfront"

2009-11-25T08:00:00.000-05:00

In a recent Providence Journal editorial, the author expressed delight that a developer had thrown in the towel on the concept of developing a hotel/condo/marina project on the Providence waterfront. The author states that "our leaders" should be pushing for the full development of all of the state's ports, encouraging marine based industry, trade and the creation of high paying jobs.

Sounds good in theory, but this appeal goes out to leadership which over the years has not been able to stem the tide of businesses leaving the state. Having worked with business owners across the State for close to thirty years, it seems to me hat leadership has not been able to respond to the challenges these faced by these individuals. As a result, manufacturing has given way to tourism in Rhode Island.

If you have been to San Diego's waterfront or the River Walk in San Antonio http://www.thesanantonioriverwalk.com , you have an idea of what leadership can do to capitalize on tourism and revive an economy.

In the case of San Diego, the downtown area had become desolate and forgotten. Leadership began the process of reviving the area with the dredging of the bay. The material was then deposited to extend the downtown footprint and on the new real estate, hotels, marinas, restaurants, museums and parks were built. Soon thereafter the interior sections away from the water were renovated and restored. Shopping and restaurants followed. The area is now vibrant and a great place to vacation.

San Antonio's Riverwalk is simply spectacular with hotels, restaurants, shopping and entertainment venues surrounding the river which is still bordered by lush gardens and waterfalls. The water taxi system is efficient and a pleasure to ride.

Why con't these things be incorporated into Providence? The downtown revival in Providence has been significant, but the next step could be taken to further enhance Providence as a tourist destination and infuse dollars into our state economy.

While I agree with the author that valuable waterfront land should not be littered with condominium developments, we need to capitalize on the fact that Rhode Island is such a nice place to visit by building more infrastructure so that once again people in Rhode Island will be employed and we can say that Rhode Island is a great place to live as well.

With more tourism dollars flowing in, we could alleviate the stress on small businesses and make Rhode Island a place that both existing and small businesses can thrive in.

Rhode Island’s New E-Pay Mandate

2009-11-22T08:00:00.003-05:00

The Rhode Island Tax Administrator wants to change the way you pay your payroll, sales and use taxes – no more snail mail! Beginning January 1, 2010, any person required to withhold and remit tax under this section with ten (10) or more employees as well as any person required to collect and remit sales and use tax to the state of Rhode Island who had an average monthly sales and use tax liability of two hundred dollars ($200) or more per month must make the payments by electronic funds transfer or other electronic means defined by the tax administrator.

Recent legislative changes to RIGL44030-71 state that in the case of failure of any person required to deposit taxes by electronic funds transfer or other electronic means defined by the tax administrator, unless such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax required to have been electronically transferred five percent (5%) of the amount or five hundred dollars ($500) per required payment, whichever is less.

For more information, click here Rhode Island Division of Taxation http://www.tax.state.ri.us/.

Massachusetts has Written your Information Security Program

2009-11-19T08:00:00.002-05:00

We have been closely following the Massachusetts Privacy Law and note the deadline for full compliance has been pushed back once again to March 1, 2010. Read on to learn more about the new regulations.

Recently the Commonwealth of Massachusetts enacted M.G.L. c. 93H called Security Breaches. This newly enacted law required the establishment of minimum standards necessary to safeguard personal information in both paper and electronic form. The promulgated standards, 201 CMR 17 called, Protection of Personal Information of the Residence of the Commonwealth, applies to all persons that own, license, store or maintain personal information about a resident of the Commonwealth.

The standards establish what is deemed to be personal information triggering the required implantation of 201 CMR 17. If a person defined as, a natural person, corporation, association, partnership or legal entity has the first name and last name of a Massachusetts resident along with one of the following; his or her social security number; or driver’s license; or state issued identification card; or financial information which can be either financial account number, or credit or debit card number, or access codes, or personal identification number, or password, will be required to develop, implement, and maintain a Written Information Security Program (WISP).

The WISP must be consistent with industry standards, provide for an ongoing risk assessment, and contain defined safeguards for administration, technical, and confidentiality matters. As business owners we need to examine the various methods that confidential information is stored and transmitted on and off our premises.

In the electronic world, we store and transmit data in a multiple of ways that include but are not limited to; desktop computers, notebook computers, file servers, back-up tapes, remote back-up devices, thumb drives, compact disks (CD), internal and external e-mails. We will be required to examine the various components of our computer network that include routers, switches, wireless points and remote access functionality. Other areas of concern include:

E-mail encryption that includes attachments.
Portable device encryption, for example notebook computers.
Backup tape encryption.
Password policies, including required use of complex passwords.
Providing physical security for servers and network equipment.
Training employees on established security measures.
Cell phones that have connectivity to personal information.

The program complexity will vary for each business depending on the business size, resources available, amount of stored information, and the need for security and confidentiality of consumer and employee information. Each program will require the following:

Designate one or more employees to maintain the WISP.
Identify and assess reasonably foreseeable risks (Internal and external).
Develop security policies for keeping, accessing and transporting records.
Impose disciplinary measures for violations of the program.
Prevent access by terminated employees.
Verify and contractually ensure vendor compliance.
Limit collection to that information that is reasonably necessary to accomplish a legitimate purpose.
Determine where personal information is stored unless all information becomes subject to the WISP.
Restrict physical access to records.
Monitor security practices to ensure effectiveness and make changes if warranted.
Review the program at least annually.
Document responsive actions to breach.

The effective date for full compliance with 201 CMR 17 is March 1, 2010.

Welcome to the New Piccerelli, Gilstein & Company, LLP Blog

2009-11-19T08:00:00.000-05:00

Since 1973, we have made it our business to build strong proactive relationships with our clients and the community. After 36 years, sharing our expertise and insight with you has made us better business advisors. Our vision from the beginning has been to provide services delivered at a very personal level with special emphasis on maintaining close personal contacts. For P&G, it’s all about strengthening those bonds and connecting. Enter PG wire, our blog. We can now connect in the virtual world.

We are excited to have entered the blogosphere and want to make this an interactive adventure. We will share with you our insights on finance, business, both large and small, tax and audit news, and the events that move us will offer an even greater opportunity to connect. We encourage you to visit often, offer feedback, challenge us and help create a valuable resource for the P&G community. Welcome to the conversation!