IRS Proposes New Rules for Tax Preparers

The IRS has recently announced a new set of proposed rules for tax preparers. If enacted, the new rules would become effective January 1, 2011.  According to the proposed rules, all paid tax preparers would be required to:

1. Register with the IRS and obtain a preparer tax identification number. Once a preparer is registered, the IRS will be able to verify that the preparer has filed his or her personal tax returns and business and employment tax returns, along with paying the taxes on those returns. If the paid tax preparer has not filed those returns timely or paid the taxes due, penalties can be imposed by the IRS, including a prohibition on filing tax returns for clients.

2. Submit to a competency test. This rule does not apply to attorneys and certified public accountants that are active and in good standing with their licensing agencies.

3. Obtain continuing professional education. Again this rule does not apply to the attorneys and certified public accountants of Demorest Law Firm, PLLC, or Numerico, P.C. since we have our own requirements from the Michigan Bar Association and the Michigan Association of Certified Public Accountants.

In my opinion, the proposed new rules are long overdue. Currently, only certified public accountants, attorneys and enrolled agents have standards that are implemented by their individual associations. For far too long, tax preparers have been able to put a sign up that says Joe’s Tax Service, yet they were not required to have any formal training, testing or registration requirements. The IRS is beginning to understand the complexities and dangers involved in regulating an industry with certain unregulated components.

Hopefully these proposed regulations will add a serious deterrent to the fraudulent or incompetent preparers that we hear about far too often in stories from individual taxpayers such as “I don’t know why I got such a large refund, my preparer just had me sign the return and I didn’t get all of the reported refund.” “ I didn’t know that I hadn’t been filing returns, I thought my preparer had already filed them.” “What do you mean that I have not paid my employment taxes for my business or filed my employment tax forms? I gave my paid tax preparer access to my Company’s bank account and electronic withdrawals for the employment taxes were taken from my bank account.”

To read the IRS proposed regulations please click here.

Happy New Year – See You Next Week!

Importance of I-9 (Work Eligibility) Forms

Recently, the US Immigration and Customs Enforcement Agency assessed over $40,000 in fines to a Detroit-area company because the company failed to properly complete I-9 eligibility forms for about 100 of its workers. There was no allegation that the company knowingly hired illegal workers. The fine was assessed for failing to complete the proper forms. The government has now filed a lawsuit to collect those fines. The eligibility forms attest to the fact that the employee is indeed eligible to work in the United States. Business owners need to be proactive in seeking documentation of work eligibility before hiring new employees. It is much easier to deal with these issues up front than it is to deal with Immigration and Customs Enforcement and substantial fines for not complying.

Read the recent Detroit Free Press Article Here

Favorable Roth Conversion Rules around the Corner

Way back in 2006 Congress included a provision in the Tax Increase Prevention & Reconciliation Act (TIPRA) that eliminated the modified adjusted gross income phase out rules in regards to Roth IRA Conversions that occur in 2010.

It is amazing to me that the current occupants of Congress and the White House have not removed this provision due to soaring budget deficits. After all they are taking the short sighted view of getting tax money today while they are in office, at the expense of getting no tax money in future years from traditional IRA distributions, when they may no longer be in office.

As we have seen over the years anything written into law can also be undone when it no longer benefits the party that is in power. However let’s assume that the politicians decide to enact this provision in the law. Should you take advantage of this opportunity, well it depends on your facts and circumstances, as well as where you think that tax rates are headed in the future.

Susan Tompor’s of the Detroit Free Press in an article entitled “Roth IRA conversion isn’t for everyone” provides a good summary of the pros and cons in regards to whether your should entertain the idea of a Roth IRA conversion.

To read her article please click here. http://www.freep.com/article/20091119/COL07/911190463/1088/Roth-IRA-conversion-isnt-for-everyone

You can also check out our Roth conversion calculator at http://www.numerico.com/calc-section.php?category=Retirement Then click on the Roth IRA Transfer Evaluator link to run the calculation.

This article was written by Jay Kossen, CPA at Numerico, PC. Click here to view Numerico’s website.

Time to Give Thanks! (See you Monday)

As we all know, 2009 has not been an easy year for businesses, especially here in the Detroit area.  However, economic struggles often create new opportunities, and we hope that this Blog is helping you with your business opportunities.  It’s time to give thanks for those opportunities (and maybe to give thanks that 2009 is almost over).

Those of us at Detroit Business Law, Demorest Law Firm, and Numerico are thankful for the opportunity to provide our readers with information, as well as the opportunity to reach a new audience.  Be sure to let us know if there’s a specific issue that you’d like us to cover in the future.

Enjoy your Thanksgiving and we’ll be back with a new post on Monday, November 30.

This article was written by Melissa L. Demorest, Associate at Demorest Law Firm.

New York Times Article – “Eleven Easy Ways to Destroy Your Company”

Blogger Jay Goltz of the New York Times wrote an article recently entitled “Eleven Easy Ways to Destroy Your Company”.  This is certainly worth a read for any business owner.

The article ends with a great line, “an ounce of prevention is worth a pound of cure.”  We talk to our clients on a daily basis about making sound decisions and proper planning.  Hopefully this article is a step in that direction for your business.

Please let us know how we can help.

Click here to read.

Our 50th Post

We wanted to take a moment to thank those of you who have been reading DetroitBusinessLaw.com for the past several months.  We are excited to have reached the 50 post mark.

We are committed to helping your business stay informed and get ahead.  Please feel free to invite other business owners you know to read our articles as well, and please comment with your insights!

Crain’s Detroit Article: Detroiters’ emotional attachment increases, despite economy

Soul of the Community Study – Detroit

Crain’s Detroit Article

Michigan Corporation and LLC Information Update Forms

Each year, limited liability companies (LLC) and corporations must file an Information Update with the State of Michigan.  The State sends the necessary form each year to the registered address of the business.   The form asks for some basic information about the company, and a small fee is required to file it.  If an LLC or corporation does not file its annual information update for two consecutive years, the company will be automatically dissolved in the third year.

If your company has been automatically dissolved, it can be reinstated by filing the delinquent annual Information Update forms.   While additional fees will be owed because of late filing of the forms, the reinstatement of the company to good standing will be retroactive.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Revised I-9 Form and Employer Guide

The Department of Homeland Security has released a revised I-9 Form (Click for a PDF version).  The I-9 is the form used to verify the eligibility of an employee based upon citizenship.  The most significant change is that expired documents will no longer be accepted.  For example, an out of date drivers license will no longer be acceptable.   A few new forms of identification are also available; the most widely used is the U.S. Passport Card.

Along with the new form the Department of Homeland Security has also released an accompanying Handbook for Employers (Click for a PDF version).  It is important that a business be thorough and accurate when obtaining and reviewing I-9 Forms.  There can be significant penalties for non-compliance.  If you own or operate a business it is important that you review the new Handbook.

This article is provided free of charge by the expert employment law attorneys of Demorest Law Firm, PLLC.