Tuesday, August 13, 2019

MA DOR Update: Meals NOT Exempt From Tax For Sales Tax Holiday

As previously reported, recent legislation included meals in a list of items to be exempt from sales tax during the Sales Tax Holiday. That legislation was amended on August 1 to remove meals as an item to be exempt from tax during the Sales Tax Holiday.

If you ordinarily charge sales tax on meals that you sell, nothing will change for you during the Sales Tax Holiday. You will continue to charge sales tax on meals. 

The Sales Tax Holiday for 2019 will take place on August 17 and 18.

You can find more information on the sales tax holiday, including FAQs on what’s included, what’s excluded, and what to do if you accidentally charge sales tax on an excluded item.

Friday, August 9, 2019

MA DOR Announces Relief For Taxpayers Affected By The Cape Cod Tornado.

The Department of Revenue has announced it is taking steps to address the concerns of taxpayers in Barnstable, Brewster, Chatham, Dennis, Harwich, Mashpee, Sandwich, and Yarmouth who have been affected by the recent tornadoes.

The Department recognizes that taxpayers in these areas might be unable to comply with their tax filing or payment due dates occurring on or after the date of the tornadoes and would like to assist those taxpayers as much as possible.

The Department is announcing that it will waive any penalties associated with any late-filed return or payment that was due on or after July 23rd, and before November 15th. The Department will waive penalties for four months, and will later revisit whether any further extensions should be granted.

If any taxpayer in the affected areas receives notice of a penalty for this period they should contact the Department of Revenue at (617) 887-6367.

Thursday, August 8, 2019

IRS Changing 1040 Forms, Again, For TY 2019

Form 1040 Returns Looks Similar to Previous Versions

The IRS published a re-formatted form 1040 in its website repository. Among the design changes, the form is no longer two half pages, but two 7.25 inch pages.  The 3rd party designee, taxpayer and preparer signature sections have returns to the bottom of page two. Amounts from wages to taxable income moved to the front page  Foreign address information has returned to the address header of page one, so that Schedule 6 is now obsolete.  IRA and pension income amounts are on separate rows; lines 4a & 4b for IRA and lines 4c & 4d for pensions. In 2019, IRA and Pension incomes were combined on lines 4a for the gross and 4b for the taxable amount. Capital Gains are reported on the front page. Payments and refundable credits have moved to page two of the 1040 making Schedule 5 obsolete.

Senior Citizen 1040 Draft Form

The IRS published a draft version of the new 1040-SR on the forms webpage.  The two page 24 line form has the more traditional 1040 layout. It references support items from Schedule A, B, D, 1, 2, and 3 and forms 8814, 4972, 8863, 8812, 8888, 8995 & 8995-A. At the bottom of page one is a traditional standard deduction chart. Form 1040-SR was mandated by Congress a few years ago.

Wednesday, July 31, 2019

Massachusetts & Rhode Island Take Over the NATP National Conference

Greetings from the Windy City!! Just a couple of notes from NATP Annual Conference in Chicago!

We are happy to report that we have 18-Massachusetts Members and 4-Rhode Island members in attendance. All have attended different classes and have been very happy with the courses being offered, the instructors are great.

Some have attended classes taught by Kathy Morgan, who will be presenting at our Annual Meeting on October 22nd. This is definitely an event you should not miss!!

We were honored to have Commissioner Charles Rettig as a speaker yesterday. Overall everyone found him to be very personnel, he comes from a tax background and seems to understand the problems we encounter when dealing with the IRS. Opinions seem to be, let’s give him a chance and hope Congress gives him the tools to make changes. It won’t happen overnight but it feels more positive that things will happen.

Charles Rettig
IRS Commissioner

Last evening was the Charity Auction, there were many baskets donated by various chapters. Here is a picture of our basket which ended with a final bid of $200.

MA/RI Chapter
Charity Basket

Fun was had by all who participated!! They will announce the total raised for CASA Thursday night at the closing ceremony. Stay tuned for the final figure!

This evening we had our Chapter Dinner held at Gino’s East, famous for Chicago Pizza. It was excellent. 15 members were able to join us!

Wednesday, June 26, 2019

Update on the Massachusetts Family & Medical Leave Tax

First, you will be delighted to know that it is unclear as to whether this is a tax (for purposes of claiming a deduction) or if it is something else (what else it may be is also unclear). 

William Delaney, EA
Westwood, MA
Second, you will be delighted to know that it has not been determined if these leave payments are exempt income (such as disability payments) or fully taxable income (such as unemployment compensation).  The MA Dept. of Family and Medical Leave (DFML) is in discussions with the Internal Revenue Service on this issue (why the discussion is not being led by the Mass. Dept. of Revenue is unclear).

Third, but not the least of all, it is still unclear as to whether the employee withholding will be pre-tax or after-tax.  This is also under discussion.  Why it should be pre-tax is anyone’s guess, but you never know.

Every W-2 employee is subject to the “tax” withholding.  Every employer is subject to the withholding requirement (if there is at least one W-2 employee or, in the absence of payroll, if the majority of the “employees” are 1099 contractors).  Certain categories of payroll employees and 1099 contractors are exempt.  The law follows the “shall not include” provisions of MGL Ch. 151A, Sec. 6.

The effective date for withholding is October 1, 2019.  All employers presently in the MATaxConnect system as subject to withholding of income tax will be automatically registered and this “tax” will appear along with any other tax withholding/tax filing requirements on the TaxConnect web site.

There is a “tax” calculation worksheet on the DOR web site.  Here is an example for a small employer who is NOT required to make a contribution…

Total Contribution (using $10,000 of quarterly W-2 income – one employee) –
$10,000 x .0075% = $75.00.

The DFML has allocated this “tax” to the two applicable state programs being funded.  82.5% to Medical Leave; 17.5% to Family Leave.

The employee’s contribution amount is…

Medical Leave – 82.5% x $75.00 = $61.88  Family Leave – 17.5% x $75.00 = $13.12

The employer (under 25 employees) is NOT required to make a contribution.
The employee, on the other hand, IS required to make a contribution (via withholding) equal to…

Medical Leave – 40% of $61.88 = $24.76
Family Leave – 100% of $12.12 = $12.12

Now to how to remit quarterly, using MATaxConnect.  Go to your already established TaxConnect employer account and click on the “needs attention” box associated with this “tax.”  Be sure to click on the various options so that the pop-up boxes will appear.  Use them to enter the total tax (by category) to be remitted.

When you wish to enter employee detail, two options are offered.  One – enter the detail for each employee (and/or contractor, if applicable) in the same manner that you make employee entries into the stste DUA system (this becomes important in a minute or two).  The system will then compute the total contribution due (see $10,000 example – above).  Pay what is owed and it works (for the 25 or more employees employer).  For the employer exempt from making a contribution, the system (we hope) will recognize that the employee withholding will be less than the automatically calculated total contribution (how that will happen is unclear).

Fast forward to the second quarter (Jan-Mar 2020) and start to file a return.  OK, the system already has the data base, so we don’t need to repeat the same employee information again, but wait---that’s a false assumption.  According to the MA DOR and the DFML the employee data base will NOT be retained.  It must be re-entered (because it may change, said they).  If you think that Bill Delaney is on life support and did not hear them correctly---I checked with Jeff Schweitzer, who was also there.  He heard the same thing.  So, warm up those typing fingers guys and gals.  This isn’t going to be easy.

Oh, did I mention that the system does not store accumulated wages and, therefore, it cannot track when the maximum wage base has been reached (it’s the same amount as the social security wage base maximum).  I kid you not---it’s the stone age, guys and gals.

Now for a few chuckles.  If that 1099 payment is made to a single-member LLC which files as a Schedule C (default option), that payment is not considered to part of what the employer (i.e. work provider) counts for purposes of determining if the contribution calculation must include 1099 contractors.  This isn’t a “contractor;” it’s an LLC (don’t you see)!  This MAY change; it is still under discussion.

Finally, for something serious and important.  Suppose (somehow) your taxpayer client either doesn’t file or files each quarter and declares -0- wages?  Let’s suppose one of his (I don’t have any) employees decides to apply for this leave.  DFML will search the MA DOR data base (the one which you [mostly] so dutifully type into each quarter) and discover that it is showing zilch.  However, the employee is entitled to and will receive a benefit.  The employer will be audited by MA DOR and assessed for the “tax,” interest and penalty.  In addition, the employer must also pay the full amount of the employee benefit.