Essential Bulletin

IRS Expands Employment Tax Relief Program:

A Closer Look at Classifying Employees

Under the Voluntary Classification Settlement Program (VCSP), employers can voluntarily reclassify some or all of their workers from non-employees or independent contractors to employees for federal tax purposes. The VCSP offers partial relief from past federal employment tax obligations. At this time, only the IRS is offering federal tax relief. Recent program changes include:

Employers under IRS audit (other than an employment tax audit) can apply for, and potentially qualify for VCSP.
Employers allowed into the program will no longer be subject to a special six-year statute of limitations instead of the usual three-year limitation period that normally applies to payroll taxes.
Until June 30, 2013, the IRS is temporarily waiving the eligibility requirement that states an employer must file Forms 1099 with respect to workers they are seeking to reclassify for the past three years.
Clarify that a taxpayer is not eligible to participate if the taxpayer is contesting in court the classification of the class or classes of workers from a previous audit by the IRS or Department of Labor.

A taxpayer participating in the VCSP will agree to prospectively treat the class or classes of workers as employees for future tax periods. In exchange, the taxpayer will:

Pay 10% of the employment tax liability that would have been due on compensation paid to the workers for the most recent tax year.
Not be liable for any interest and penalties on the amount.
Not be subject to an employment tax audit with respect to the worker classification of the workers being reclassified under the VCSP for prior years.

However, understanding the distinction between what makes a worker an independent contractor and what makes them an employee is critical—misclassification can have significant consequences for your business.

For more information on classification, State law and consequences, click here; more information about the VCSP program can be found on the IRS website.

For specific questions about the VCSP program, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it Partner of Taxation.

Alternative Financing for your Business

By Jack Hasso of National Business Capital

Having access to money is imperative for a business to run successfully. Many business owners will face a time when they could use extra capital to make ends meet or take advantage of an opportunity. Unfortunately, the process of securing a bank loan is lengthy, which may mean a missed opportunity, and it can be difficult to get the loan approved. So what can a business owner do?

The answer may be found in non-traditional financing. The concept is new to some business owners, but for a majority of small and medium size businesses, both local and across the nation, it may be the only means to obtain financing.

Rates are typically higher with a non-traditional lender than they are with a bank. Before you get frustrated or rule out this option, consider the reason for the funding. Take the time to review the cost versus the project or opportunity. Will the funding allow you to take advantage of an opportunity to increase sales? By paying the higher rates and obtaining the alternative financing, will you improve your business or your Bottom Line? If you pass on the financing, and therefore miss the opportunity, how much money will you lose?

Alternative financing can be used for various reasons. It can be used to meet payroll, cover expenses, purchase/rent equipment, stock inventory, pay tax liens and more.

A bank denial does not have to hinder you from moving your business forward. Alternative financing provides many business owners the chance to keep their business running successfully and improve their Bottom Line.

Lines of Credit: Lessons from the Field

By: Barbara Libove, Nonprofit Finance Fund, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

A line of credit (LOC) is a valuable resource for most nonprofits. It can serve as a lifeline that allows organizations to continue delivering vital services while awaiting contract or grant payments. In some cases, an LOC can literally keep the lights on during periods of low liquidity. The need for an LOC stems from unevenly matched inflows and outflows of cash over the course of a year. Even organizations that budget properly and achieve year-end surpluses may need to access a line of credit occasionally to fund payroll, rent, and other critical expenses.

At the same time, misusing a line of credit is akin to playing with fire. Management must understand the risks as well as the benefits of drawing on and maintaining an LOC.

What are the benefits of an LOC?

If you have ever managed the finances of any organization, or even your own personal finances, you can appreciate how difficult it is to match up cash inflows and outflows. It is not unusual for a nonprofit to incur substantial upfront expenses associated with delivering services that are ultimately funded by a third party, such as a government agency or a foundation. The challenge here is the lag in between the expense on the front-end and the promised corresponding funding that may take weeks or even months to come...

Read the full article here.

IRS Introduces Simplified Method for Claiming Home Office Deduction

Recently, the IRS released Revenue Procedure 2013-13, which outlines a new, simpler method for determining the home office deduction for tax years beginning on or after January 1, 2013. The new method provides taxpayers with an optional safe-harbor method to calculate the amount of the deduction for expenses for business use of part of a residence during the tax year. Taxpayers may now elect to determine their home office deduction by simply multiplying a prescribed rate by the square footage of the portion of the taxpayer’s residence used for business purposes.

The new optional deduction is limited to $1,500 per year, based on $5 per square foot for up to 300 square feet. The simplified method is not effective for 2012 tax year returns being filed during the current 2013 filing season, but will become effective for 2013 tax year returns filed in 2014.