The changes in the payroll tax

rates which will affect your first payroll paid in 2017 are as follows: The F.I.C.A. tax withholding rate for the employee for 2017 is 7.65%; base wages increase to $127,200. The F.I.C.A. tax withholding rate of 7.65% is a combination of 6.2% social security tax and 1.45% Medicare tax. The 6.2% is taxed on the first $127,200 in wages. The 1.45% is taxed on all wages. Pursuant to the Health Care Act, beginning in 2013 a .9% additional Medicare premium must be withheld from all employees once their gross W-2 income reaches $200,000. Do not start withholding this until the employee has reached the $200,000 threshold. The S.D.I. tax remains at .9%, base wages increase to 110,902. The maximum amount of S.D.I. withheld is $998.12. For Federal, some taxpayers will be required to make semi-weekly deposits. (See Semi-weekly rule below.) Remember that the Employment Development Department requires the deposit of personal income tax withholding (PIT) and state disability insurance contributions (SDI) whenever a deposit of federal income tax (FIT) is required. The Internal Revenue Service and the Employment Development Department have issued new withholding tax tables effective January 1, 2017. If you did not receive them, please call the IRS & EDD for your booklets as you will need them for all payrolls paid after this date.

Semi-weekly Rule An employer is a semi-weekly depositor for a calendar year if the total employment taxes during its look-back period were more than $50,000. Under the semi-weekly rule, amounts accumulated on payments made on Wednesday, Thursday, and/or Friday must be deposited by the following Wednesday. Amounts accumulated on payments made on Saturday, Sunday, Monday, and/or Tuesday must be deposited by the following Friday. By now, all employers should have received a letter from the IRS telling them if they are a monthly or semi-weekly depositor.

New Employers During the first calendar year of your business, your tax liability for each quarter in the look-back period is considered to be zero. Therefore, you generally will be a monthly depositor for the first year of your business.

Electronic Deposit Requirement (EFTPS) Effective January 1, 2011 all Federal tax payments MUST

be made electronically through EFTPS. EDD Employee Registry Law (DE-34)

In order to assist in locating parents to secure payment of delinquent child support obligations, state legislation requires employers to report to the Employment Development Department any employees who have been hired, rehired, or return to work within 20 days of such event. Penalties will be imposed for failure to comply.

California Form DE 542 Any business that is required to file a Federal Form 1099-MISC for services performed by an independent contractor must comply with the state independent reporting requirements. The reports must be made within 20 days of entering into a contract for $600 or more in any calendar year with an independent contractor, or within 20 days of making payments totaling $600 in any calendar year to an independent contractor, whichever occurs earlier. Penalties will be imposed for failure to comply.

The State of California requires any individual or business with gross income in excess of

$100,000 that is not required to have a seller’s permit, to register for and pay California Use Tax.

A Use Tax Return is due annually by April 15th for the previous year to pay use tax on any out-of-state purchases for business or personal use.

What this means is that anything you buy that would have been subject to sales tax if purchased in California, but you did not pay sales tax at time of purchase, you now are required to pay the Use Tax instead. A partial list of examples of purchases is below.

Internet purchases; Amazon, Craigslist, online catalogues, etc.

Certain foreign purchases Mail-order purchases; and

2017 PAYROLL AND 1099 REQUIREMENTS KEEP HANDY ALL THROUGH THE YEAR!

CALIFORNIA USE TAX

2017 PAYROLL TAXES

2710 W. Burbank Blvd.

Burbank, CA 91505

(818)841-5451 Fax (818)566-8522 www.epbcpa.com

Phone-ordered purchases These are some common examples of items subject to use tax:

Machinery and equipment Computers, printers and other electronic

equipment Office furniture and supplies Computer programs shipped on a disc CD’s and books

Both the IRS and the state of California have regulations on the

taxation of household workers. Both Federal and State require reporting for payments in excess of $1,000 per quarter for the state and $2,000 per year for the IRS. The $2,000 threshold applies separately to each employee.

Household employees are defined by the state to include, but are not limited to, cooks, waiters, waitresses, butlers, housekeepers, governess’, governors, maids, valets, baby-sitters, janitors, laundresses, furnace men, caretakers, home health caregivers, handymen, gardeners, chauffeurs, crews of private yachts, and pilots of private airplanes for family use. If you are subject to the Nanny tax you will be required to obtain an employer account number for the State. This form (DE-1HW) can be obtained by calling our office. You must also have a taxpayer identification number (TIN). A Form SS-4 is used to obtain your TIN. You can also call us to get this form. This area is one that is targeted by both Federal and State. We recommend that everyone not take this lightly. Penalties will be assessed for non-compliance.

Starting January, 2014, California has updated the wage and hour regulations for

both in home and residential care facility workers. Please visit our website for a complete summary and reference materials.

The 1099 filing requirements for payments made in 2016 are as follows:

Every person engaged in a trade or business, including a partnership and a non-profit organization, must file information returns for each calendar year for certain payments made during such year in the course of the payer’s trade or business. The following information returns are to be furnished to the IRS and the recipient by January 31, 2017. A partial list of 1099’s to be issued is as follows: *Form 1099-INT – Use this form to report payments of $10 or more in interest payments, including interest on bearer certificates of deposits, other than original issue discount. *Form 1099-MISC – Use this form to report payments of $600 or more for services performed for a trade or business by persons not treated as employees (i.e., subcontractors and directors). For example, some qualifying payments are commissions, fees, repairs, rents and prizes. Some examples of people to whom a 1099 would be issued are for professional services, subcontractors, janitorial services, landlords (not your personal residence), gardeners, etc. Even though this applies only to payments in excess of

$600, we recommend that you keep good records of all payments made. *Form 1099 –MISC (For Royalties) – Use this form to report payments of $10 or more in royalty payments. In order to comply with the regulations, and facilitate the filing of these forms, you will need to keep complete and accurate records. A Form W-9, (a copy is available on our website) is the proper form for requesting taxpayer information. This form should be sent to all Non-Corporate payees that you think you will pay $600 or more in the calendar year. An exception to this rule is all legal fees paid need a Form 1099, even if paid to a corporation. The IRS and FTB may disallow deductions if no 1099 is filed.

Penalties (Increased 2016)

The following penalties generally apply to the person required to file information returns. If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The amount of the penalty is based on when you file the correct information return. The penalty is: 1) $50 per information return if you correctly file within 30 days after the due date by March 30; maximum penalty $532,000 per year ($186,000 for small businesses). 2) $100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,596,500 per year ($532,200 for small businesses). 3) $260 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,193,000 per year ($1,064.000 for small businesses). You are a small business if your average annual gross receipts for the most recent three tax years (or for the period you were in existence, if shorter) ending before the calendar year in which the information returns were due are $5,000,000 or less.

Backup Withholding Backup withholding requirements are as follow: The backup withholding provisions apply to all payments made. The provision calls for a flat 28% withholding with respect to any “backup withholding payment”. The withholding provisions apply in any circumstances where, prior to such payment, the payer had requested the payee to furnish a taxpayer identification number (TIN) and where: 1) The payee fails to furnish his or her TIN to you, OR 2) The IRS notifies you to impose backup withholding because the payee furnished an incorrect TIN, OR 3) You are notified that the payee is subject to backup withholding (under section 3406(a), (1), (c), OR If you are unable to obtain the TIN, you MUST withhold 28%, and report and pay the withholding on Form 945.

NANNY TAX

1099 REQUIREMENTS

MINIMUM WAGE Effective January 1, 2017, the minimum

wage is $10.50 an hour.

2017 CAREGIVER RULES

One of the most asked questions our office receives is

“Can I pay my workers as independent contractors?” As each day passes, another company has been notified by the IRS (or other agency) that they are going to audit their payroll tax returns for the preceding three years. This is usually a very simple audit, except when the company has paid out monies in the form of independent contractors (1099’s). If a worker is an employee, the company must pay its share of social security taxes (FICA), federal unemployment taxes (FUTA), state unemployment taxes (SUI), as well as the usual fringe benefits that its other employees receive (health insurance, sick pay, vacation pay, pension plan and/or 401K plans). In addition, the company must pay workers compensation insurance. The determination as to whether an individual is an employee or an independent contractor is based on whether the person the individual works for has control, the more likely that person will be considered an employee. The following questions, if answered yes, are still used by the IRS to determine if the worker is an employee or an independent contractor: 1) Do you provide the worker with instructions as to when, where and how work is performed? 2) Did you train the worker in order to have the job performed correctly? 3) Are the worker’s services a vital part of your company’s operations? 4) Is the person prevented from delegating work to others? 5) Is the worker prohibited from hiring, supervising and paying assistants? 6) Does the worker perform services for you on a regular and continuous basis? 7) Do you set the hours of service for your company? 8) Does the person work full time for your company? 9) Does the worker perform duties on your company’s premises? 10) Do you control the order and sequence of the work performed? 11) Do you require workers to submit oral or written reports? 12) Do you pay the worker by the hour, week or month? 13) Do you pay for the worker’s business and travel expenses? 14) Do you furnish tools or equipment for the worker? 15) Does the worker have a “significant investment” in tools, equipment and facilities? 16) Is the worker insulated from suffering a loss as a result of the activities performed for your company? 17) Does the worker perform services solely for your firm? 18) Does the worker not make services available to the general public? 19) Do you have the right to discharge the worker at will?

20) Can the worker end the relationship without incurring any liability? While the above criteria are not all of the criteria to determine independent contractor status, it can help you recognize when you have a questionable situation. If after determining that the person in question is in fact an independent contractor, the following items should be done: 1) An independent contractor agreement should be prepared. 2) Invoices should be received on the independent contractor’s letterhead for work performed. 3) The independent contractor should have his own business license and workers compensation insurance. 4) 1099 information returns should be sent out to all independent contractors to whom you paid more than $600 during the calendar year. Effective January 1, 2012 California has a new law, Senate bill 459 (SB 459) which significantly increases penalties.

EMPLOYEE OR INDEPENDENT CONTRACTOR?

Employment Eligibility Verification (Form I-9) Changes in the U.S. Immigration laws have resulted in the requirement that employers verify the identity and eligibility for employment

in this country of individuals who work here, even if they are U.S. citizens. If an employee renders services as or through an independent contractor (and not as an employee), the form does not have to be completed. At the time the form is completed, the

law requires the employer to examine original documents that approve the employee’s identity and the employee’s eligibility for employment in this country. As a general matter, the law requires that the form be completed within three days of the time the

employee commences employment and kept on premises at all times. A copy of Form I-9 is available on our website. Penalties can be excessive when not complying with this.

FORM W-4 The IRS requires employers to obtain and retain a Form W-4 or W-4A from all employees. Failure to do so will result in

withholding on the basis of one exemption (if single) or two exemptions (if married). It is a good idea to review your files to make sure that you have a W-4 on file for each employee.

A Form W-4 remains in effect until the employee gives you a new one.

A copy of Form W-4 is available on our website.

Please visit our website www.epbcpa.com

and sign up for our free monthly e-newsletter. It will keep you up to date on many tax and business changes.

WORKERS COMPENSATION INSURANCE Any employer who has one or more W-2 employees

is required by law to obtain Workers Compensation insurance.

Officers/shareholders who own 15% or more stock can elect to be excluded, but need to sign a waiver.

Please contact your insurance agent for a review of your policy.

City Business Licenses The City of Los Angeles, as well as many other cities has

increased their search for individuals and businesses that operate in their city without a business license. Whether your business or rental is located in LA or not, this may still apply to you. Check with your city for their requirements to see if you need to register.

The City of Los Angeles (AB63 tax discover program) is sending notices out to individuals or businesses that filed a Schedule C or Schedule E on prior year tax returns but did not have their business registered with the City of Los Angeles.

If you do not already have a city business license, now is the time to apply. When filling out your business tax application they will ask you for gross receipts going back eight years to the year 2008. The City of Los Angeles can go back and tax you for all eight years if you reported gross receipts or expenses on your Schedule C or Schedule E during that period. This application, as well as the 2017 City Business Tax Renewal is due by February 28, 2017.

Workers Compensation Change Effective January 1, 2017

Assembly Bill 2883 was signed into law in August of this

year. This new law addresses who can be EXCLUDED from Workers Compensation coverage. The biggest changes are as follows:

Effective January 1, 2017 if you are an officer of a Corporation and wish to be excluded from Workers Compensation coverage, you must now own at least 15% of the issued and outstanding stock of the Corporation.

1. If you wish to be excluded from Workers

Compensation and the business is a Corporation, General Partnership or an LLC, you will now need to sign a written waiver of your rights under the laws governing Workers Compensation, stating under penalty of perjury that you are a qualified officer or director, or a qualifying general partner or managing member of an LLC. This form must be signed by all parties seeking to be excluded and they must be returned to the insurance carrier by January 1, 2017.

This new bill was written in such a way that instead of

making this change when your current Workers Compensation policy renews, it affects EVERY Workers Compensation policy in force on January 1, 2017. For example,

if your policy renews on March 1, 2017, AB2883 still applies to you on January 1, 2017.

Your current Workers Compensation carrier sent you an affidavit which all qualified parties who wish to be excluded, must sign and return to the insurance carrier before January 1, 2017.

SHORT SUBJECTS . . . IMPORTANT NEWS E-mail Ext. Paul@epbcpa.com 12 Diane@epbcpa.com 14 Veronica@epbcpa.com 15 Elmira@epbcpa.com 17 Adrine@epbcpa.com 21 Randy@epbcpa.com 16 Brenda@epbcpa.com 10 Christopher@epbcpa.com 11 Jessie@epbcpa.com 18

The information contained in this letter

expresses our views and interpretations

only and should not be relied on without

consulting us or your advisors. Since the

nature of the contents of this letter needs

to be applied to your specific facts and

circumstances, we are available to consult

with you upon your request.

2017 IRS Mileage Rates (cents per mile)

Business: 53.5 Medical expense: 17.0 Moving expense: 17.0 Charitable deduction: 14.0

REGISTER NOW! E. Paul Brodsky, CPA Net

Client Portal! As part of our recent software upgrade we are added a Net Client Portal that allows our clients to access their information 24/7 online through our private, secure portal. This portal is slightly different from our previous portal on our website. Net Client allows us to exchange documents, access software, and convey information with personal client portals. Your portal also acts like a filing cabinet where we can indefinitely store your important documents so that you may obtain copies of them whenever needed through online access. Call our office to get set up!!!

Congratulations to all our staff!

E. Paul Brodsky, CPA

An Accountancy

Corporation

Was again named “Best

Accountant for 2016”

In the “Best of Burbank” listing.

Happy New Year to All!