Government Relations
Tax Season Cometh…
This time of year club and restaurant owners find themselves asking their accountant questions on an assortment of tax related questions for employees, specifically, tipped employees. Below, the National Restaurant Association has put together a nice summary of several tipped-employee tax related questions and answers.
• Many restaurateurs are required to file tip-reporting data with the IRS. If you operate a business where food and beverages are served for on-site consumption and tipping is customary, and you employed more than 10 workers whose combined hours exceeded 80 on a typical business day in the previous calendar year, you are required to file Form 8027 with the Internal Revenue Service for each food-and-beverage establishments. The Employer’s Annual Information Return of Tip Income and Allocated Tips is due Feb. 29 for employers who file the form on paper, or April 2 for employers who file the form electronically. Form 8027 requires employers to show gross receipts, charged tips and the amount of tips employees reported during the preceding year, among other data. Visit the IRS website to download the form and instructions.
• Restaurateurs might qualify for a federal income tax credit for the FICA payroll taxes they pay on certain employee tips. Employers are required to pay FICA payroll taxes, currently 7.65 percent, on all tip income that employees receive. The law allows employers to take a dollar-for-dollar federal income-tax credit for a portion of the FICA taxes they pay on certain employee tips. The so-called 45B credit, named for its place in the Internal Revenue Code, can yield significant savings for restaurateurs. Claim the credit by filing Form 8846 when you file your federal tax returns. The form, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, can be downloaded from the IRS website.
• It’s a good time to remind employees about what the law requires on tip reporting. Employees who receive $20 or more in tips in a month are required to report them to their employer at least once a month. Employees who haven’t reported and paid taxes on their tips throughout the year can declare and pay taxes on those tips at tax time. However, they could face penalties for having failed to report income the way the law requires. The National Restaurant Association sells a Tip Reporting Education Kit that includes an employer guide, employee brochures, posters and other materials to help operators convey the message to employees about how to report tips correctly.
IRS Backtracks on 1099-K Reporting Requirement
The Internal Revenue Service (IRS) has decided to pull the plug on a proposed requirement forcing businesses to report total receipts on their business income tax forms with the amounts that third parties, such as credit card companies or Pay Pal, report paying to merchants to reconcile merchant-card transactions.
The IRS’s original proposal, slated to take effect December 1st, 2011, would have required businesses accepting credit cards or other third-party payments, to reconcile the gross receipts they report on their tax returns with the totals that third-party payers report to them using a new 1099-K information-reporting form.
After business groups repeatedly approached the IRS on the feasibility of the new requirement and the sheer volume of increased paperwork that would be involved in this new reporting, IRS delayed the proposed date of implementation by one year to December 31st, 2012, then removed the program altogether earlier this month. MORE
Several members of congress are working to ensure the IRS does not attempt to resurrect this proposal in future years. Earlier this month, Senate Finance Committee members John Thune (R-S.D.) and Maria Cantwell (D-Wash.) introduced a Senate bill, after Reps. Aaron Schrock (R-Ill.) and Bobby Schilling (R-Ill.) introduced the same bill in the House.
GCSAA Releases 2012 Legislative/Regulatory Priorities
The Golf Course Superintendents Association of America recently released their legislative and regulatory priorities for 2012. The priorities range from issues relating to the Americans with Disabilities Act compliance, new fertilizer and pesticide regulations, immigration requirements (H-2B Visa), watershed management issues and the overall promotion of the value golf provides to America in terms of economic impact, job creation, etc.
Over the next several weeks, VGM Club Government Relations will examine these topics, and others, indept; detailing the current legislative/regulatory landscape and likelihood of movement on key issues affecting the golf industry and Club members across the country. For more information on the GCSAA release, click here.
Federal Unemployment Tax (FUTA) Offset Reduction on 2011 Returns
Employers that operate in states that borrowed funds from the federal government to supplement their state unemployment benefits during the recession, but which have not yet returned the funds, will see a increased tax bills this year.
Employers typically pay a 6 percent federal unemployment tax (FUTA) on employee wages up to $7,000. Employers are then able to offset the 6 percent federal tax with a 5.4 percent credit for state unemployment taxes paid. However, employers will see this credit typically used to offset their federal unemployment tax collections reduced from 5.4% to 5.1% on their 2011 tax returns, if their state has not yet repaid borrowed federal funds, according to a newly released bulletin from the IRS.
The IRS released a bulletin last month listing the 21 “credit reduction” states. These “credit reduction” states are listed below; employers in most of these states will be limited to a 5.1 percent credit against FUTA taxes for 2011.
| States | Reduction Rate |
|---|---|
| Arkansas | .003 |
| California | .003 |
| Connecticut | .003 |
| Florida | .003 |
| Georgia | .003 |
| Illinois | .003 |
| Indiana | .006 |
| Kentucky | .003 |
| Michigan | .009 |
| Minnesota | .003 |
| Missouri | .003 |
| Nevada | .003 |
| New Jersey | .003 |
| New York | .003 |
| North Carolina | .003 |
| Ohio | .003 |
| Pennsylvania | .003 |
| Rhode Island | .003 |
| Virginia | .003 |
| Virgin Islands | .003 |
| Wisconsin | .003 |
Employers in these states must use the Schedule A (Form 940) (PDF) to compute the credit reduction and attach the Schedule A to their Form 940. More information on the credit reduction, including an example on how to calculate the credit reduction is on the Schedule A (Form 940) and also in the Instructions for Form 940 (PDF).
Restaurant, Golf Industries Push Tax Credit Renewals
The golf and restaurant industries are continuing to push for the extension and inclusion of key tax credits designed to spur development and speed the economic recovery by offering incentives to hire certain long-term unemployed individuals, allowing businesses to build new restaurants or redevelop existing properties and helping golf courses that have been ravaged by natural disaster in recent years.
The restaurant industry is throwing its weight behind two key measures, the extension of the 15 year depreciation schedule for new restaurant construction and improvements and the Work Opportunity Tax Credit, both of which expired at the end of 2011. Both tax credits were included in a larger “tax extenders” bill that the industry hoped would be part of the year end spending agreeement passed by the House and Senate at the end of 2011, but the extenders package proved too expensive to include in the final legislation, causing both programs to lapse on January 1, 2012.
The golf industry is continuing our push to be included in disaster tax relief legislation in and around the gulf coast. Golf courses were initially carved out of disaster relief legislation in years past, but continued lobbying efforts focused on the impact golf courses have on our economy, the jobs we contribute and the difficult situation many courses have found themselves in cleaning up after recent natural disasters, have created a much more positive environment for golf courses to be able to take advantage of the benefits offered.
Contact VGM Club Government Relations for additional information or help contacting your elected officials on these important issues facing our industries.
