Dillon Law PC

Health Care Law slips one in for the IRS

 

 

Deep with in the mountainous pages of the Patient Protection and Afford Care Act (Health Care Bill), the IRS had a couple of its code sections modified, that had nothing to do with health care. Starting in 2012, corporations (other than 501(c) non profits) will have additional reporting requires to the IRS. This is an expansion of what types of entities have to report certain types of transactions to the IRS. Further, the IRS now has expanded reporting requirements for 1099’s to include amounts paid for property (not just real property), gross proceeds of any type. The impact of the two changes goes like this. Businesses will have to issue 1099’s to ANY business (not just sole proprietorships) when it purchases property from ANY business (except a non profit) when the purchase exceeds $600. This could be a record keeping night mare. Need a new pump for the sprayer, better make sure that you get the selling business’s Employer identification number and address. Purchase a computer at Best Buy, have fun asking the blue shirts for the EIN for the entire business. This makes little sense, I hope law makers will tweak this reporting requirement before enactment.

Other fun things jammed into the health care bill without much fan fare include the new 3.8% tax on couples who earn more than $250,000 for Medicare Hospital Insurance and the removal of private industry from the student loan process.

 

Hobby Loss

An accountant for 20 years also operated a thoroughbred horse racing and breeding enterprise. Upon examination and subsequent court case, it was determined that no losses could be taken from the enterprise. The court looked at (1) No business like manner of the activity, to include a separate checking account or records to determine profitability (2) no changes designed to increase profitability (3) failure to obtain personal expertise advice of experts in an attempt to make a profit (4) No horse ever sold for more than $750 (5) the accountant had no experience in operation of any type of business (6) the losses went on for 20 years (7) the losses shielded income from the accounting business. The lesson to take home for the night and weekend farmers are to make sure you have a separate checking account, hit an ISU seminar or a field day and make a record of attending, make a record of your consultations with herd improvement, crop consultants or area managers of service providers regarding your enterprise and have a written plan on how you intend to make profit at your endeavor. Finally consider how you can manage your taxes to show a profit once every five years or so.

 

 

HIRE Law

A new incentive law was enacted designed to get employers to hire employees. The provision allows the forgiveness of the employers contribution to employment tax between 18 March 2010 and Dec 2010 for employees that started after 3 Feb and have not worked for more than 40 hours during the 60 days prior to the start date. Further, the new hire can’t replace a worker unless the work was fired for cause or quit voluntarily. Also an incentive is provided to retain workers newly hired in 2010.

The act also kept a high dollar amount deprecation (which was slated to be reduced dramatically this year) at $250,000.

 

As issued by the IRS, these appear to be the biggest areas dealing with farm tax returns.

My concerns are if the IRS is issuing a list, it must be a focal point for enforcement efforts.