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NJ Tax Amnesty Program -Running Now!

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The Clock is Ticking…NJ Tax Amnesty Program Runs Through Jan. 15, 2019  

Gift from State of NJ

Businesses and individuals with unpaid NJ tax liabilities may be able to get a break on penalties under the Amnesty Program  which is in effect from November 15, 2018 through  January 15, 2019.  The measure applies to all state taxes including  gross income,   corporate business tax and sales and use tax.  However, it does not apply to unemployment  type taxes administered by the Department of Labor.   

 Why should I do this now? Because under this limited-time offer the Division of Taxation will forgive all penalties, and one-half of the accrued interest due at Nov. 1, 2018. 

 Here are some of the details 

  • NJ Amnesty will provide relief for 2008 – 2016 delinquent individual or business tax return filers. 
  • Requests for amnesty must be filed electronically 
  • The Division of Taxation recently mailed a letter to all taxpayers who are known to have amnesty-eligible deficient and/or delinquent accounts 
  • If you didn’t receive a letter and you want to participate, you will need to register or self-report through the Non-Outreach Portal 
  • Federal tax liabilities are not included under the program 

 Is there a hitch? Sort of. The bad news is that if a taxpayer is eligible for amnesty and does not take advantage of it, an additional 5% penalty will be added to the already imposed penalties and interest on the original tax liability.   

To see if this program might be right for you, please contact our Tax Manager, Steven Citron.   

 

 

NJ Employers- August Deadline to Reduce Unemployment Rates

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Did you check your NJ SUI rates?

On July 28, 2017, the annual Notice of Employer Contribution Rates were mailed to all New Jersey employers. This is not a bill, but rather a summary of the way the NJ Department of Labor calculates the employer contribution rate for unemployment and disability. This form enables you to determine whether a voluntary contribution would save you money in the subsequent year.

Can I reduce the NJ SUI rate?

A voluntary contribution increases your reserve balance and may reduce your contribution rate. Each employer should calculate the amount of the voluntary contribution required to reduce the rate. The required voluntary payment should be compared to the savings realized from a lower rate.

The unemployment expense is a substantial component of your labor cost. Business owners should give it careful attention. If you wish to make a voluntary contribution to your reserve balance you only have 30 days from the notification date to do so. We recommend that you verify all the NJ DOL calculations including the amount of the employer contributions and the benefits charged to your account. Report any discrepancies to the NJ Dept. of Labor. 

Checked your TWES Account?

Good news…if you didn’t receive the Notice and have a Tax Web Enabled System (TWES) account online – you can find your contribution rates there as well. The TWES system provides a wealth of information allowing employers to review their account status, open balance, payment history, employer and worker contribution rates, credit balance and any delinquency.   You can log on to the TWES website at https://my.state.nj.us/

Remember – doing your summer homework now may save you money down the road!

If you would like assistance in determining if a voluntary contribution will save you money, please do not hesitate to contact us immediately.

 

NJ Tax Amnesty: Cool Savings Despite Sizzling Summer Heat

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 Businesses and individuals facing unpaid NJ tax liabilities may be able to get a break on penalties according to the tax amnesty measure signed into law on July 1, 2018. The amnesty period will not begin before November 1, 2018 and will end by January 15, 2019. The program will apply to state tax liabilities for tax returns due on and after February 1, 2009 and prior to September 1, 2017. The measure will apply to all state taxes including gross income, corporate business tax and sales and use tax. However, it does not apply to unemployment type taxes administered by the Department of Labor. 

Why should I do this now? Because under this limited-time offer (remember, the clock runs out by January 15, 2019) the Division of Taxation will forgive all penalties, and one-half of the accrued interest due at Nov. 1, 2018. 

Here are some more details

    • The program will also apply to amounts currently under audit or being contested with the NJ Div. of Taxation.
    • A start date for the program has not yet been announced.
    • NJ Amnesty will provide relief for 2009 – 2016 delinquent individual or business tax return filers.
    • The program also forgives all penalties and 50% of interest for delinquent sales and use tax filings for quarters ending Dec. 31, 2009 – June 30, 2017.

Is there a hitch?  Sort of. The bad news is that if a taxpayer is eligible for amnesty and does not take advantage of it, an additional 5% penalty will be added to the already imposed penalties and interest on the original tax liability.

To see if this program is right for you, please contact our Tax Manager, Steven Citron

 

 

Should I Pay My Child Wages?

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Children Running Office

Does It Make Tax Sense to Pay Jr?

Your child probably knows a lot more about technology—from designing a website to posting on social media—than you ever will. At many family businesses, Junior may already be helping with a variety of digital and other tasks.

Have you considered paying your kids for their work? Besides motivating them, putting kid(s) on the payroll is an attractive way to transfer assets to them while saving taxes. You might be able to help them fund their college costs or purchase a home while getting a tax break.

That’s because your company can take a deduction for the salary you’re paying them. The kid’s tax bracket will almost certainly be lower than yours, so the family unit saves thanks to the difference in the tax rates. It’s up to you to match their skills with your business’ needs, but we can help with some of the tax aspects.

Goodbye to Payroll Taxes

Are your children under 18? And are you a sole proprietor, a single-member LLC, or operate a partnership where the only members are you and your spouse? If so, congrats—your children won’t have to pay Social Security, Medicare taxes or NJ unemployment if they work for you. If your child’s earned income—generally salary, as compared to interest and dividends, is less than the standard deduction of $6,350 in 2017, he won’t have to file his own income tax return.

What are my Tax Savings?

Let’s assume, you pay your high school son, your computer tech, a salary of $6,300. He will pay no US or NJ income taxes on this salary. If you are in a high tax bracket, your US and NJ tax savings can be as high as $3,000!  And he will not have to file a tax return.

What If My Children Are Over 18?

Now let’s assume that your college daughter does the graphics and social media for the business. Or your child is under 18 but you own a “C” or “S” Corporation. You pay her $15,000. These wages are subject to Social Security & NJ unemployment. Her federal and N.J. income taxes plus the payroll taxes will be about $3,500. However, at your higher tax bracket, the federal and NJ income tax savings could be as high as $7,500. So the net tax savings to the family may be $4,000. Still a good deal!

The Retirement Savings Credit Saves More…

If your child over 18 who is not a full-time student contributes up to $2,000 into a Roth or traditional IRA, she will receive a Retirement Savings Credit of up to 50%. In our example, her tax burden of $3,500 will be only $2,600. And the family saves $4,900. A homerun!

The Bottom Line

Hiring your kids can be a good experience, while potentially offering some nice tax breaks. There are some twists: you must pay the salary in that tax year, and the pay must be “reasonable”. If your kid sweeps floors, forget about paying enough to cover his college costs and then trying to deduct it as salary expense. The state tax implications may differ from the federal. Before you go ahead and pay your child, it is a good idea to consult with your tax advisor. It could end up saving you money later.

Should I Pay my Spouse a Salary?

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 It’s not worth the Taxes, Right? 

Spouses Working Together

It is not uncommon for one’s spouse to work in the family business, whether as manager or in some other capacity. Assume that Nicole Neurologist owns a medical practice. Her husband, Josh, supervises billing and IT operations. Is it worthwhile for both spouses to receive a salary? It may seem pointless. After all, their money ends up in the same bank account anyway. If Nicole has reached the maximum Social Security and unemployment thresholds, why pay Josh a salary and incur additional steep payroll taxes? While that is true, there are several advantages to employing the spouse that are worth considering.

Social Security Disability Benefits and Lost Wages

If Josh became permanently disabled, he would not receive Social Security benefits for his disability unless he satisfied two different earnings tests.  He must meet a “recent work” test based on his age at disability. For example, at age 31 or more, an individual must work five out of the ten years prior to claiming disability. He must also satisfy a “duration of work” test based on his age at disability. At age 50, he needs to have worked seven years in total prior to his disability.  If Josh was injured by an insured party, unless he has proof of a history of employment, he would not be able to recover any lost wages.

Enjoy Self-Employment Tax Savings

If Nicole’s business income is reported on Schedule C, she deducts the medical insurance expense for her and her family on page 1 of Form 1040. However, if Josh is an employee, then he can be the insured. She can deduct the medical insurance as a business expense on Schedule C.  This would result in significant tax savings, as she now saves the 3.8% Medicare portion of the self-employment tax; good deal for an expense she is incurring anyway.

Good Credit is Essential

Even if Nicole is the breadwinner, there may come a time that Josh will need to rely on his own credit history. If he is paid a salary it will be easier to obtain the credit he will need.

Boost his Social Security Benefits

The amount of Social Security benefits one receives is determined by the average of the 35 highest yearly salaries. Even if Josh’s earning power appears meager, one never knows what the future holds. If he eventually gets a more lucrative job, the years he received a salary from Nicole’s firm may ultimately boost his benefits significantly.

Maximize Pension Contribution

As an employee, Josh can be enrolled in the company pension. This allows the company to make contributions on his behalf. By adding Josh’s pension contribution to Nicole’s, the couple will enjoy increased tax free growth on their retirement funds, while the couple saves on both US and NJ income taxes.

Get a Dependent Care Credit

Unless both spouses have earned income they are not entitled to the dependent care credit, which is currently up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children.

Additional Benefits

There are additional benefits to paying your spouse a salary. Call for a consultation.

 

 

New NJ Program Offers Siestas instead of Layoffs

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Alternative to Slow-Period Layoffs:

NJ Program Helps Maintain Your Workforce 

Businesses that are thinking about laying off employees because of a slowdown in activity—but fear losing talented labor or getting socked with an increased Unemployment Insurance (UI) tax rate—may have an alternative, thanks to an innovative state program. Under the “shared-work” legislation a company that has to slice payroll expense by significantly cutting employees’ work hours may be able to have the NJ Department of Labor partially offset workers’ reduced pay by giving them “short-time” unemployment benefits. 

Employers may find that their UI tax rate is lower under the “short-time” approach, compared to having laid-off employees collect full unemployment. In addition to getting at least some of their pay, employees will be able to keep their health insurance and other benefits while they work fewer hours.

Here’s the fine print

For each company, the state may approve the program for a period no longer than one year and may, upon employer request, renew the approval of the program for additional periods.  Of course, there are certain filing and other requirements. For one thing, the business needs to complete a formal Shared-Work Plan Application and submit it to the New Jersey Department of Labor, Shared-Work Approval Unit (the application is available at NJ Department of Labor, Shared-Work Application).

 The business must have at least 10 employees; and the “affected unit” of the company—a specified plant or other facility, department, shift or other definable unit, must be composed of two or more employees.  Among other requirements, the reduction in weekly work hours of the affected employees must be not less than 10% and not more than 60% of the “usual weekly hours of work”.

 Not everyone’s eligible

Some kinds of employment—like subsidized seasonal employment during off-season, and employment that is temporary or intermittent on an ongoing basis—are not eligible for this program. 

Our recommendation

This program could cut payroll expenses for some businesses while enabling them to retain valued employees during a time of economic disruption. Still, disclosure, documentation, UI costs and other issues should be considered. Please contact one of our CPAs to see if this program is suitable for you.