Action Tax Service in Rockford

THE TAX ATTIC with Jerry Coon

September 8, 2011 // 0 Comments

New, changed forms Just to shake things up a bit for tax professionals, from time to time the Internal Revenue Service changes how a form will look or will even do something more sinister: they develop a new form. For 2011, they did both. First, they created a new Form 1099-K, Merchant Card and Third Party Network Payments. I have discussed this form in a previous article, but we get clarifications from time to time on what transactions are to be reported. As it stands now, merchant card processors and payment settlement entities such as MasterCard, Visa, Discover, and eBay will be required to report the gross amount of merchant card and third party network payments that they process for taxpayers. For example, Action Tax Service accepts Visa and MasterCard as payment for services rendered. We are considered an entity that receives payments directly from the processor. We will receive a 1099-K that shows the gross amount of collections paid through our processor, which happens to be PNC Bank. The 1099-K will also show the amount of collections broken down on a monthly basis. We will report that gross amount as a separate line on our tax return so the IRS can tie out the 1099-K and our tax return amounts. Because we are a direct receiver of merchant cards, we will receive a 1099-K even if we only process one transaction during the year. The sticky wicket appears to come into play when someone uses a third party, such as PayPal through eBay, to accept and process payments. The interpretation we have now is that people selling on eBay will receive a 1099-K only if they process at least $20,000 in gross sales and process a minimum of 200 transactions. A person that sells their boat on eBay for $5,000 will not meet the minimum gross sales threshold or the minimum number of sales threshold, so they won’t receive a 1099-K. Previously, it looked like even that one transaction for $5,000 would result in the receipt of a 1099-K. The difference is being a direct receiver of credit cards, like Action Tax Service, versus having a third party, like PayPal through eBay, process the credit card and just deposit the money into a directed […]

THE TAX ATTIC with Jerry Coon

February 24, 2011 // 0 Comments

Main points of Snyder’s plan discussed Holy cow! Governor Synder has really upset the apple cart. Of course, he would argue that the apple cart needed to be upset this time. No one should be too surprised, since he was elected just over three months ago, running on a platform of fixing Michigan’s financial condition. At least he somewhat uniformly upset everyone’s apple cart. The state of Michigan has been in a tough spot for some time now. The last few years they have used smoke and mirrors to balance the budget. One year it was the cigarette lawsuit settlement. Another year it was a combination of items, including the $250 lifetime trailer license plate fees. Last year it was stimulus money and this year it was stimulus money and the federal “edujobs” dollars. There just aren’t any more rabbits in the hat. Next year was going to be a 1.8 billion dollar deficit problem. So last Thursday, the governor presented his ideas of how to right the ship. His proposed budget for the October 1, 2011 through September 30, 2012 fiscal year still spends 47 billion dollars. It does cut total spending by 1.2 billion dollars and increases revenues by 1.7 billion dollars. His idea is to flatten out and simplify the tax code. Is this the beginning of a nationwide movement to a flat tax? I would bet there are quite a few states looking at what is going on in Michigan—peacefully going on in Michigan—and waiting to see how it works out. Perhaps our federal government should be paying attention as well. Let’s go over the main tax points of the governor’s plan. There are a few main provisions and lots of minor provisions. First, corporations will pay tax at a flat 6% tax rate based upon the corporation’s federal taxable income. His bill eliminates the Michigan Business Tax (MBT) in totality. This will free up a whole staff of MBT experts to work somewhere else in the Treasury Department. If not one other simplifying measure was instituted, just getting rid of the diabolical MBT has to cut several hundred or even thousand pages out of the tax code. Good riddens. Second, the personal income tax rate will drop to 4.25% from […]