Profit Sharing Plans for Small Businesses

WHY PROFIT SHARING PLANS?

ESTABLISHING A PROFIT SHARING PLAN

Profit sharing plans can be a powerful tool in promoting financial security in retirement. They are a valuable option for businesses considering a retirement plan, providing benefits to employees and their employers.

Employers start a profit sharing plan for a host of reasons:

❑ A well-designed profit sharing plan can help attract and keep talented employees.

❑ Contributions to a profit sharing plan are discretionary. The employer can choose when and how much to contribute.

❑ This type of plan gives employers flexibility in design of key features.

❑ A profit sharing plan benefits a mix of rank  and-file employees and owner/managers.

❑ The money contributed may grow through investments in stocks, mutual funds and other investment vehicles.

❑ Contributions and earnings generally are not taxed by the Federal government or by State governments until they are distributed.

❑ A profit sharing plan may allow participants to take their benefits with them when they leave the company, easing administrative responsibilities.

SHARING PLAN

When you establish a profit sharing plan, you must take certain basic actions. One of your first decisions will be whether to set up the plan yourself or to consult a professional or financial institution — such as a bank, mutual fund provider, or insurance company — for help with establishing and maintaining the plan. In addition, there are four initial steps for setting up a profit sharing plan:

❑ Adopt a written plan document, 

❑ Arrange a trust fund for the plan’s assets, 

❑ Develop a recordkeeping system, and 

❑ Provide plan information to participants.

Adopt a written plan document — Plans begin with a written document that serves as the foundation for day-to-day plan operations. If you have hired someone to help with your plan, that person likely will provide it. If not, consider obtaining assistance from a financial institution or retirement plan professional. In either case, you will be bound by the terms of the plan document. A profit sharing plan allows you to decide (within limits) from year to year whether to contribute on behalf of participants. If you do make contributions, you will need to have a set formula for determining how the contributions are divided. This money is accounted for separately for each employee. Your contributions to the plan can be subject to a vesting schedule (which provides that an employee’s right to employer contributions becomes nonforfeitable only after a period of time). Annual testing ensures that benefits for rank-and-file employees are proportional to benefits for owners/managers. Once you have decided on a profit sharing plan for your company, you will have flexibility in choosing some of the plan’s features — such as when and which employees can participate in the plan. Other features written into the plan are required by law. For instance, the plan document must describe how certain key functions are carried out, such as how contributions are deposited in the plan. Unless it includes a 401(k) cash or deferred feature, a profit sharing plan does not usually allow employees to contribute. If you want to include employee contributions, see 401(k) Plans for Small Businesses (Publication 4222). A profit sharing plan can be for employers of any size.

Arrange a trust fund for the plan’s assets — A plan’s assets must be held in trust to assure that assets are used solely to benefit the participants and their beneficiaries. The trust must have at least one trustee to handle contributions, plan investments, and distributions. Since the financial integrity of the plan depends on the trustee, selecting a trustee is one of the most important decisions you will make in establishing a profit sharing plan. If you set up your plan through insurance contracts, the contracts do not need to be held in trust.

Develop a recordkeeping system — An accurate recordkeeping system will track and properly attribute contributions, earnings and losses, plan investments, expenses, and benefit distributions. If a contract administrator or financial institution assists in managing the plan, that entity typically will help keep the required records. In addition, a recordkeeping system will help you, your plan administrator, or financial provider prepare the plan’s annual return/report that must be filed with the Federal government.

Provide plan information to participants — You must notify employees who are participants in the plan about certain benefits, rights, and features. In addition, a summary plan description (SPD) must be provided to all participants. The SPD is the primary vehicle to inform participants and beneficiaries about the plan and how it

operates. The SPD typically is created with the plan document. 

OPERATING A PROFIT SHARING PLAN Once you have established a profit sharing plan, you assume certain responsibilities in operating the plan. If you hired someone to help in setting up your plan, that arrangement also may have included help in operating the plan. If not, another important decision will be whether to manage the plan yourself or to hire a professional or financial institution — such as a bank, mutual fund provider, or insurance company — to take care of some or most aspects of operating the plan. Elements of operating profit sharing plans include the following:

❑ Participation 

❑ Contributions

❑ Vesting 

❑ Nondiscrimination 

❑ Investing profit sharing plan monies

❑ Fiduciary responsibilities

❑ Disclosing plan information to participants 

❑ Reporting to government agencies 

❑ Distributing plan benefits

Participation

Typically, a plan includes a mix of rank-and  file employees and owner/managers. However, some employees may be excluded from a profit sharing plan if they:

❑ Have not attained age 21;

❑ Have not completed a year of service (2 years

in certain plans); or 

❑ Are covered by a collective bargaining

agreement that does not provide for participation in the plan, if retirement benefits were the subject of good faith bargaining. Employees cannot be excluded from a plan merely because they are older workers.

Contributions

In a profit sharing plan, you can decide on your business’s contribution (if any) to participants’ accounts in the plan. You have the flexibility of changing the amount you contribute to the plan each year, according to business conditions.

If you do make contributions, you will need to have a set formula for determining how the contributions are allocated to participants’ accounts. The simplest, and most common, allocation formula specifies that the employer contribution is allocated so that each participant receives an amount that is the same percentage of his or her compensation.

Contribution Limits

Employer contributions and forfeitures (nonvested employer contributions of terminated participants) are subject to a per-employee overall annual limitation. This limit is the lesser of:

❑ 100 percent of the employee’s compensation, or

❑ $49,000 per year for 2009 and 2010.

Employers can deduct amounts that do not exceed 25 percent of aggregate compensation for all participants and the per-employee limits mentioned above.

Vesting

In profit sharing plans, you can design your plan so that employer contributions become vested (nonforfeitable) over time, according to a vesting schedule. If you require 2 years of service to participate, all contributions are immediately vested. All employees must be vested according to plan terms.

Nondiscrimination

In order to preserve the tax benefits of a profit sharing plan, the plan must provide substantive benefits for rank-and-file employees, not just business owners and managers. These requirements are called nondiscrimination rules and compare both plan participation and contributions of rank-and-file employees to owners/managers. Traditional profit sharing plans are subject to annual testing to assure that the amount of contributions does not discriminate in favor of owners and managers. If you allocate a uniform percentage of compensation to each participant, then no testing is required because your plan automatically satisfies the nondiscrimination requirement.

Investing Profit Sharing Plan Monies

After you decide on a profit sharing plan, you can consider the variety of investment options. One decision you will need to make in designing a plan is whether to permit your employees to direct the investment of their accounts or to manage the monies on their behalf. If you choose the former, you also need to decide what investment options to make available to the participants. Depending on the plan design you choose, you may want to hire someone either to determine the investment options to make available or to manage the plan’s investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants.

Fiduciary Responsibilities

Many of the actions needed to operate a profit sharing plan involve fiduciary decisions. This is true whether you hire someone to manage the plan for you or do some or all of the plan management yourself. Controlling the assets of the plan or using discretion in administering and managing the plan makes you or the entity you hire a plan fiduciary to the extent of that discretion or control. Thus, fiduciary status is based on the functions performed for the plan, not a title. Be aware that hiring someone to perform fiduciary functions is itself a fiduciary act.

Some decisions with respect to a plan are business decisions, rather than fiduciary decisions. For instance, the decisions to establish a plan, to include certain features in a plan, to amend a plan, and to terminate a plan are business decisions. When making these decisions, you are acting on behalf of your business, not the plan, and therefore, you would not be a fiduciary. However, when you take steps to implement these decisions, you (or those you hire) are acting on behalf of the plan and thus, in making decisions, may be acting as fiduciaries.

Basic Responsibilities

Those persons or entities that are fiduciaries are in a position of trust with respect to the participants and beneficiaries in the plan. The fiduciary’s responsibilities include:

❑ Acting solely in the interest of the participants and their beneficiaries;

❑ Acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan;

❑ Carrying out duties with the care, skill, prudence, and diligence of a prudent person familiar with such matters;

❑ Following the plan documents;

❑ Diversifying plan investments.

These are the responsibilities that fiduciaries need to keep in mind as they carry out their duties. The responsibility to be prudent covers a wide range of functions needed to operate a plan. And, since all these functions must be carried out in the same manner as a prudent person would, it may be in your best interest to consult experts in various fields, such as investments and accounting.

The plan must designate a fiduciary, typically the trustee, to make sure that contributions due to the plan are collected. If the plan and other documents are silent or ambiguous, the trustee generally has this responsibility. As part of following the plan documents in operating your plan, the plan document will need to be updated from time to time for changes in the law.

Limiting Liability

With these responsibilities, there is also some potential liability. However, there are actions you can take to demonstrate that you carried out your responsibilities properly as well as ways to limit your liability. The fiduciary responsibilities cover the process used to carry out the plan functions rather than simply the end results. For example, if you or someone you hire makes the investment decisions for the plan, an investment does not have to be a “winner” if it was part of a prudent overall diversified investment portfolio for the plan. Since a fiduciary needs to carry out activities through a prudent process, you should document the decision-making process to demonstrate the rationale behind the decision at the time it was made.

In addition to the steps above, there are other ways to limit potential liability. The plan can be set up to give participants control of the investments in their accounts. For participants to have control, they must have sufficient information on the specifics of their investment options. If properly executed, this type of plan limits your liability for the investment decisions made by participants. You can also hire a service provider or providers to handle some or most of the fiduciary functions, setting up the agreement so that the person or entity then assumes liability.

Hiring a Service Provider

Even if you do hire a financial institution or retirement plan professional to manage the whole plan, you retain some fiduciary responsibility for the decision to select and keep that person or entity as the plan’s service provider. Thus, you should document your selection process and monitor the services provided to determine if a change needs to be made.

Some items to consider in selecting a plan service provider:

❑ Information about the firm itself: affiliations, financial condition, experience with profit sharing plans, and assets under their control;

❑ A description of business practices: how plan assets will be invested if the firm will manage plan investments or how participant investment directions will be handled, and proposed fee structure;

❑ Information about the quality of prospective providers: the identity, experience, and qualifications of the professionals who will be handling the plan’s account; any recent litigation or enforcement action that has been taken against the firm; the firm’s experience or performance record; if the firm plans to work with any of its affiliates in handling the plan’s account; and whether the firm has fiduciary liability insurance. Once hired, these are additional actions to take when monitoring a service provider:

❑ Review the service provider’s performance; ❑ Read any reports they provide; ❑ Check actual fees charged; ❑ Ask about policies and practices (such as trading, investment turnover, and proxy voting); and ❑ Follow up on participant complaints.

Prohibited Transactions and Exemptions

There are certain transactions that are prohibited under the law to prevent dealings with parties that have certain connections to the plan, self-dealing, or conflicts of interest that could harm the plan. However, there are a number

of exceptions under the law, and additional exemptions may be granted by the U.S. Department of Labor, where protections for the plan are in place in conducting the transactions.

One exemption allows the provision of investment advice to participants who direct the investments in their accounts. This applies to the buying, selling, or holding of an investment related to the advice as well as to the receipt of related fees and other compensation by a fiduciary adviser. Please check www.dol.gov/ ebsa for more information.

Another exemption in the law permits you to offer loans to participants through your plan. If you do, the loan program must be carried out in such a way that the plan and all other participants are protected. Thus, the decision with respect to each loan request is treated as a plan investment and considered accordingly.

Bonding

Persons handling plan funds or other plan property generally must be covered by a fidelity bond to protect the plan against loss resulting from fraud and dishonesty by those covered by the bond.

Disclosing Plan Information to Participants

Plan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts.

The summary plan description (SPD) — the basic descriptive document — is a plain- language explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan. It also informs participants about the plan features and what to expect of the plan. Among other things, the SPD must include information about:

❑ When and how employees become eligible to participate in the profit sharing plan;

❑ The contributions to the plan; 

❑ How long it takes to become vested; 

❑ When employees are eligible to receive their

benefits; 

❑ How to file a claim for those benefits; and 

❑ Basic rights and responsibilities participants have under the Federal retirement law, the Employee Retirement Income Security Act (ERISA).

The SPD should include an explanation about the administrative expenses that will be paid by the plan. This document must be given to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan.

A summary of material modification (SMM) apprises participants of changes made to the plan or to the information required to be in the SPD. The SMM or an updated SPD must be automatically furnished to participants within a specified number of days after the change.

An individual benefit statement (IBS) shows the total plan benefits earned by a participant, vested benefits, the value of each investment in the account, information describing the ability to direct investments, and (for plans with participant direction) an explanation of the importance of a diversified portfolio. Plans that provide for participant-directed accounts must furnish individual benefit statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.

A summary annual report (SAR) is a narrative of the plan’s annual return/report, the Form 5500, filed with the Federal government (see Reporting to Government Agencies for more information). It must be furnished annually to participants.

A blackout period notice gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants due to corporate mergers or acquisitions. During a blackout period, participants’ rights to direct investments, take loans, or obtain distributions are suspended.

Reporting to Government Agencies

In addition to the disclosure documents that provide information to participants, plans must also report certain information to government entities.

Form 5500, Annual Return/Report of Employee Benefit Plans 

Plans are required to file an annual return/ report with the Federal government, in which information about the plan and its operation is disclosed to the IRS and the U.S. Department of Labor. Beginning with the reports for 2009, plans that must file the Form 5500 must do so electronically. These reports are made available to the public.

Depending on the number and type of participants covered, most profit sharing plans must file one of the following forms:

❑ Form 5500, Annual Return/Report of Form 5500,

Employee Benefit Plan,

❑ Form 5500-SF, Short Form Annual Return/ Report of Small Employee Benefit Plan (available January 1, 2010), or

❑ Form 5500-EZ, Annual Return of One- Participant (Owners and Their Spouses) Retirement Plan

Most one-participant plans (sole proprietor and retirement plan professional to see what further partnership plans) with total assets of $250,000 action is necessary to terminate your profit or less are exempt from the annual filing requirement. However, regardless of the value of the plan’s assets, a final return/report must be filed when a plan is terminated.

Form 1099-R

Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc. is given to both the IRS and recipients of distributions from the plan during the year. It is used to report distributions (including rollovers) from a retirement plan.

Distributing Plan Benefits

Benefits in a profit sharing plan are dependent on a participant’s account balance at the time of distribution.

When participants are eligible to receive a distribution, they typically can elect to:

❑ Take a lump sum distribution of their account, 

❑ Have their account transferred directly to an

IRA or another employer’s retirement plan, or 

❑ Take periodic distributions.

TERMINATING A PROFIT SHARING PLAN 

Profit sharing plans must be established with the intention of being continued indefinitely. However, business needs may require that employers terminate their profit sharing plans. For example, you may want to establish another type of retirement plan in lieu of the profit sharing plan.

Typically, the process of terminating a profit sharing plan includes amending the plan document, distributing all assets, and filing a final Form 5500. You must also notify your employees that the plan will be discontinued. Check with your plan’s financial institution or a sharing plan.

COMPLIANCE

Even with the best intentions, mistakes in plan operation can still happen. The U.S. Department of Labor and IRS have correction programs to help profit sharing plan sponsors correct plan errors, protect participants, and keep the plan’s tax benefits. These programs are structured to encourage early correction of the errors. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations. 

A PROFIT SHARING PLAN CHECKLIST

Have you decided how much to contribute to the plan this year? Have you decided to hire a financial institution or retirement plan professional to help with setting up and running the plan? Have you adopted a written plan that includes the features you want to offer, such as how contributions will be allocated and when they will be vested? Have you notified participants and provided them with information to help in their decision making? Have you arranged a trust fund for the plan assets or will you set up the plan solely with insurance contracts? Have you developed a recordkeeping system? Are you familiar with the fiduciary responsibilities? Are you prepared to monitor the plan’s service providers? Are you familiar with the reporting and disclosure requirements of a profit sharing plan?

F

Gustavo A. Viera, CPA

        

Form to Claim Payroll Tax Exemption for Hiring New Workers Now Available

The Internal Revenue Service has posted on its website the newly-revised payroll tax form that most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010.
Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.
Employers who hire unemployed workers this year (after Feb. 3, 2010, and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from the employer’s share of Social Security tax on wages paid to these workers after March 18. This reduction will have no effect on the employee’s future Social Security benefits. The employee’s 6.2 percent share of Social Security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now posted on IRS.gov.
How to Claim the Payroll Tax Exemption
Form 941, Employer’s QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return. The form and instructions are now available for download on IRS.gov.
The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. Employers can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, released last month, to meet this requirement. Though employers need this certification to claim both the payroll tax exemption and the new hire retention credit, they do not file these statements with the IRS. Instead, they must retain them along with other payroll and income tax records.
These two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify as long as they are replacing workers who left voluntarily or who were terminated for cause and otherwise are qualified employees. Family members and other relatives do not qualify for either of these tax benefits.
Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.
Gustavo A. Viera, CPA
        

IRS Offers Details on New Small Business Health Care Tax Credit

The Internal Revenue Service today issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health care tax credit under the Affordable Care Act and how large a credit they will receive. The guidance makes clear that small businesses receiving state health care tax credits may still qualify for the full federal tax credit. Additionally, the guidance allows small businesses to receive the credit not only for regular health insurance but also for add-on dental and vision coverage.
Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small employers determine whether they qualify for the credit and estimate the amount of the credit. The notice also requests public comment on issues that should be addressed in future guidance.
Included in the Affordable Care Act approved by Congress in March and signed into law by the President, the small business health care tax credit, which is in effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.
In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt organizations, the IRS will provide further information on how to claim the credit.
More information about the credit, including a step-by-step guide and answers tofrequently asked questions, is available on the Affordable Care Act page.

Gustavo A. Viera, CPA

        

IRS Audits of Wealthy Taxpayers Up, Enforcement Revenues Down

Internal Revenue Service enforcement revenues fell from $56.4 billion in fiscal year 2008 to $48.9 billion in FY 2009, the IRS Oversight Board said in its 2009 annual report to Congress, despite the fact that the number of audits performed increased, particularly for individuals with incomes exceeding $1 million.

The examination coverage rate for taxpayers with incomes greater than $1 million is six times higher than that for lower income taxpayers, the report said. Audits of individuals with incomes in excess of $1 million increased by 29 percent from FY 2008 to FY 2009.

Likewise, corporations with larger assets had a higher examination rate than corporations with smaller asset categories. Audits of corporations with assets of more than $10 million grew by 1.4 percent from FY 2008 to FY 2009, the report said.

However, because more corporate returns were filed, the coverage rate decreased from 15.3 percent to 14.5 percent.

“The IRS has been looking at more returns, but in terms of what they have collected in FY 2009, revenues fell from 2008, but they fell to more historic numbers,” Paul Cherecwich, IRS Oversight Board chairman told BNA May 12.

“In 2007 and 2008, we had a lot of tax shelter settlements that boosted revenue numbers way up. So examination results are back to being consistent with historical numbers,” he said.

Collections also dropped in the last two years, he said, most likely because of the economy. The IRS put more people in installment agreements, and allowed taxpayers to skip a payment, and there were a lot of companies that experienced losses, he said. “It's a little hard in a down economy to just look at what was collected in a particular year, because that doesn't really reflect the amount of work that is being done by the service,” he added.

The report also noted that FY 2009 saw a dramatic increase in the number of math error authority contacts, from 2.8 million in FY 2008 to 12 million in FY 2009. Approximately 75 percent of MEA notices in FY 2009 related to the recovery rebate credit, the report said, some of which included errors that were in the taxpayers' favor because they did not realize they were entitled to the credit.

Higher Volume of Toll-Free Calls

The report also said the service met most of its service goals for fiscal year 2009, but the most significant challenge was keeping up with the additional volume of calls on IRS toll-free telephone lines.

Not only has the level of service declined, but taxpayers also waited longer for assistance, the report said. The 2007 year was the most recent filing season during which the level of service exceeded 80 percent, the level that the Oversight Board considers to be a minimum acceptable level.

The report also described IRS's performance during the past year, as well as the agency's progress in meeting long-term goals through 2013.

The long-term goals include reducing the $290 billion tax gap—the difference between taxes owed and taxes paid—and improving the IRS Business Systems Modernization program, which the Government Accountability Office has designated as high-risk because of its dependence on obsolete automated systems.

The IRS made little measurable progress in correcting either of these weaknesses, the report said.

However, its initiatives on tax preparer identification and taxpayers who hide money in foreign jurisdictions provide hope for the future, the report said. The tax preparer initiative will help close the tax gap, the report said, while restructuring the Customer Account Data Engine program into CADE 2 will modernize technology and help the IRS complete the taxpayer account database.

Each of those actions “has the potential to change the relationship between the IRS and taxpayers in fundamental ways,” the report said. Whether the potential is achieved has yet to be seen, it added.

Gustavo A. Viera, CPA

        

IRS Issues Spring 2010 Statistics of Income Bulletin

The Internal Revenue Service today released the spring 2010 issue of the Statistics of Income Bulletin, which features data on high-income individual income tax returns filed for tax year 2007, gift tax returns filed in 2008 and trust income from the 2002 through 2006 period.
For example, taxpayers filed over 4.5 million returns with adjusted gross income of $200,000 or more for 2007, up from over 4 million returns in the prior year. These high-income returns represent over 3 percent of all returns filed for 2007.
This issue of the quarterly Bulletin also contains articles about the following:

• Individual taxpayers who itemized reported $59 billion in deductions for noncash charitable contributions in 2007. Of these nearly 24 million taxpayers, almost 7 million reported close to $53 billion in deductions on Form 8283, Noncash Charitable Contributions.  The number of Form 8283 filers increased 12 percent from 6 million in 2006, and the amount claimed in donations increased to nearly 13 percent from $47 billion.
• About 257,000 gift tax returns were filed in 2008, 96 percent were nontaxable.  The reported total amount of gifts was $45 billion.  Cash was the predominant type of asset gifted, representing 46 percent of the total, while corporate stock accounted for 24 percent and real estate 17 percent.  The majority of gift tax returns, almost 52 percent, were filed by female donors.
• Of the more than 400,000 simple trusts analyzed in a panel study, total income was $15 billion in 2002 and reached $26 billion in 2006. Total deductions grew from $12 billion to $15 billion over the same period for simple trusts. For the more than 700,000 complex trusts analyzed in the panel study, reported total income increased from $28 billion in tax year 2002 to $60 billion in tax year 2006. Total deductions increased from $15 billion in 2002 to $20 billion in tax year 2006 for complex trusts.

Issued quarterly, the SOI Bulletin provides a series of articles containing in-depth statistical data based on tax returns filed by individuals, corporations, tax exempt organizations, partnerships and other entities.
Gustavo A. Viera, CPA
        

As the IRS Nationwide Tax Forums are about to begin, the IRS invites enrolled agents, certified public accountants, certified financial planners and other tax professionals to make their reservations for one of six forums being held throughout the country this summer. Those who sign up by the pre-registration date will save $129.
The IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by IRS experts and partner organizations. The forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.
2010 Registration Fees, Dates and Locations:
The cost of enrollment for those who pre-register is $206 per person, a savings of $129 off the late or on-site registration price of $335. Pre-registration ends two weeks prior to the start of each forum.

Location	Forum Dates	Pre-Registration Deadline
Atlanta	June 22-24	June 8
Chicago	July 13-15	June 29
Orlando , Fla	July 27-29	July 13
New York	August 10-12	July 27
Las Vegas	August 24-26	August 10
San Diego	August 31 – September 2	August 17

This year, 43 separate seminars and workshops are being offered, each of which qualifies for continuing professional education credit for enrolled agents and certified public accountants.  Additionally, these seminars may qualify for continuing education credit for certified financial planners, pending review and acceptance by the Certified Financial Planner Board.
Members of the participating associations below qualify for discounted enrollment costs if they meet the pre-registration deadlines above. Members should contact their association directly for more information:

• American Bar Association (ABA)
• American Institute of Certified Public Accountants (AICPA)
• National Association of Enrolled Agents (NAEA)
• National Association of Tax Professionals (NATP)
• National Society of Accountants (NSA)
• National Society of Tax Professionals (NSTP)

In addition to the seminars, the forums also feature a two-day expo with representatives from the IRS as well as other tax, financial, and business communities offering their products, services, and expertise designed with the tax professional in mind.  Attendees can visit the IRS Preparer Services Room and sign up to become an Authorized IRS e-file Provider or learn about other electronic Services to benefit their business.
Finally, attendees are invited to bring their most difficult unresolved case to the forums to work with IRS personnel in the Case Resolution Room for assistance.  Last year, representatives brought a total of 1,099 cases with a 95 percent on-site resolution rate.
In a survey of 2009 attendees, the forums received a 97 percent satisfaction rate. Attendees stated that their participation enabled them to offer greater technical expertise to meet their clients’ needs. 2010 marks the 20th year that the IRS has hosted these forums to help educate and interact with the tax professional community.
To register or to get more information visit the 2010 Nationwide Tax Forum web site.
View Presentations from previous Tax Forums: 2009
Gustavo A. Viera, CPA        

IRS.gov Undergoes a Quiet Evolution – Revealing Invaluable Online Tax Tools for Small Business

Once just the domain of downloadable tax forms and a prime candidate for a Plain Language overhaul, the IRS.gov web site has undergone a low-key, yet shout-out worthy, transformation in recent years – and this is good news for small business.

The IRS web site (www.irs.gov) is in fact now the home of numerous online tools designed to help small businesses and the self-employed better understand their tax obligations as well as help them improve their overall financial literacy.

This new customer-centric approach is all about using the speed, ease and accessibility of the Web to reduce the administrative burden that can weigh so many entrepreneurs down.

So without further ado, here’s a summary of some the most invaluable online tools and resources that IRS.gov has to offer small businesses.

1) IRS Virtual Tax Workshop for New Small Businesses

I first wrote about the IRS Virtual Small Business Tax Workshop earlier in April when tax season was in full swing. But, in fact, this interactive online tax information and training tool can help small business owners understand and navigate their tax obligations year-round. 

Launched in February 2010, the Virtual Small Business Tax Workshop (also available on CD) consists of nine stand-alone lessons that can be customized by users to meet their specific needs.  It literally covers all aspects of being a responsible tax payer and business owner – from record-keeping to filing, managing payroll taxes to maximizing business expenses and home office deductions.

Users can access the workshop online at http://www.tax.gov/virtualworkshop/. There are lots more IRS small business online learning and education products including the downloadable (and print edition) of the IRS Small Business Tax Calendar, resources in Spanish, and more.

2) IRS Video Portal for Small Business Taxpayers

I actually stumbled on this gem by accident when I entered www.tax.gov in my browser instead of www.irs.gov. What I found was the official IRS Video Portal which houses a library of video clips of tax topics, archived versions of live panel discussions and webinars, as well audio podcasts on a range of topics that are relevant to the small business taxpayer.

From income tax preparation and filing guidance, to tips on starting or changing your business, this site is a real goldmine for any business owner who really wants to get their arms around running a financially savvy business.

3) IRS Retirement Plans Navigator

Finding and managing the right retirement plan for you business (whether you have employees or are a sole-proprietor) is a huge undertaking and one not to be entered into lightly.

This online Retirement Plans Navigator was created by the IRS, to help small employers find and compare a variety of retirement plan options based on their particular needs. The tool also helps you maintain your plan in accordance with changing tax laws. You can even make the appropriate plan changes without having to notify the IRS. When it comes to money management and retirement planning, it doesn’t get much easier than this!

4) Sales Tax Deduction Calculator

Launched in 2007, the IRS Sales Tax Deduction Calculator is a free tool that makes it easier to deduct state and local sales taxes when filling out federal income tax returns. The calculator has sales tax rates already built-in making it quick and easy to calculate your deduction using just your zip code and some information from your 1040.

5) The IRS Meets YouTube

Hosting over a hundred videos and tutorials in English, Spanish and American Sign Language*, the IRS YouTube Channel* is constantly updated in synch with the tax calendar and includes business and individual tax tips and tutorials from tax experts and real IRS employees.  To hone in on tax videos specific to small business, visit the Business.gov Finance and Taxes YouTube Channel for easy navigation of IRS videos.

Gustavo A. Viera, CPA