Effective July 1, 2011, the 0.2% surtax on Federal Unemployment Tax (FUTA) is no longer in effect.  The tax rate has been reduced from 6.2% to 6.0% and applies to the first $7,000 of wages paid to each employee during the year. Generally, a credit for amounts paid into state unemployment funds can be applied against the FUTA tax.

What this means for employers

Employers are encouraged to separately track their FUTA tax calculations. The first group should be calculated using the 6.2% tax rate for the period covering January 1, 2011 through June 30, 2011. The second group should be calculated using the 6.0% tax rate for the period covering July 1, 2011 through December 31, 2011.

What employers can do to maximize their credit

The maximum allowable credit is 5.4% of FUTA taxable wages. This translates into a 0.6% total FUTA tax rate after June 30, 2011 (6.0% – 5.4% = 0.6%). Employers who pay their state unemployment taxes (SUTA) in full, on time, and on all the same wages subject to the FUTA tax will be eligible for the maximum credit, as long as their state is not a credit reduction state.  See IRS Publication 15 for more information.

How this will affect the 940 tax return

The IRS will revise Form 940, Employer’s Annual Federal Unemployment Tax Return, to handle the FUTA rate change for the calendar year 2011.

If you have any questions about how this rate decrease will affect you, feel free to contact us at Wallace Neumann & Verville, LLP .

In response to continually increasing gas prices, the IRS announced on June 23^rd that the optional standard mileage rate will see a 4.5 cent increase to 55.5 cents per mile for July through December 2011.  A 4.5 cent increase is also in effect for medical and moving mileage, raising the rate from 19 cents to 23.5 cents a mile.  If you use the standard mileage rates for recording automobile expenses or for employee reimbursements etc, please note this increase as of July 1^st.  Since charitable mileage rates are set by statute, they are not affected and remain at 14 cents per mile. Due to increased IRS scrutiny in the area of mileage reimbursements, it is imperative to keep a written log of all business miles driven with company and/or personal vehicles.

Updated mileage rates, in cents per mile:

If you have any questions about how these rate increases will affect you, feel free to contact us at Wallace Neumann & Verville, LLP .

If you purchase a heavy SUV before January 1, 2012, and use it entirely for business purposes, then the bonus depreciation allowance is 100% in accordance with the 2010 Tax Relief Act.

To ensure eligibility:

1. The SUV must have a gross vehicle weight (GVW) of 6,000 pounds or more to qualify as “Heavy”
2. The SUV must be acquired before January 1, 2012
3. The SUV must be placed in service as 100% business-use before January 1, 2012
4. The SUV must be “new” not “used”
5. There must be written documentation to support your business-use percentage

Let’s say a taxpayer purchased a heavy SUV in October of 2011 for $50,000 and used the vehicle 100% for business for the rest of 2011.  This taxpayer can write-off the full $50,000 cost of the vehicle as long as business usage can be supported.

To help you meet the IRS’s substantiation requirements, we have auto logs available upon request.

So, if you’re thinking about purchasing a new SUV and would like to discuss eligibility requirements for your specific situation, please contact Wallace Neumann & Verville, LLP.

When it comes to holiday parties the IRS is no scrooge!  In fact, the IRS says Employee holiday parties are 100% tax deductible (including beverages and decorations).  However, the IRS does have a few caveats.  The expenses cannot be extravagant or lavish (e.g. caviar, lobster, expensive wine or cigars, etc.), and the parties must be infrequent.

If you choose to host a party for your customers or clients, you may deduct 50 percent of the cost.  The expense must not be extravagant, and business must be discussed or conducted either during or adjacent to the event (e.g. going to lunch after a meeting).

WomenEntrepreneur has a fun article that discusses deductions for holiday parties and gift giving.  Please feel free to contact me at the Las Vegas CPA firm of Wallace Neumann & Verville LLP if you have any questions.  Have a wonderful Holiday Season!!!