Ah, Spring a time when a person’s fancy turns to…taxes! Ok, maybe not everyone but there is a looming tax deadline coming up and if you haven’t already gotten your work done then maybe you should really get started on the task.
Since you are going to be getting out your receipts and deposits for the year, this is a great time to do something else: assess how you fared financially last year. What do I mean? Well look over the information from the year we just finished and ask some questions of yourself.
Did you meet your goals for the year? Are you better off this December 31st than the previous December 31st? If your answers are No, or Maybe, or, how about this: Goals? I didn’t set any goals for the year! Then maybe you need to add a new section to your getting ready for the tax return procedures and add some realistic goals for 2012 to the program.
Here are some ideas for goals for 2012. First on the income side your goals will depend on where your income comes from. If you are an employee at a small business then maybe one goal is to discuss your position with the owner and assess how they feel about your work. Most small businesses should have an annual evaluation process so this discussion may happen as a part of that process, or, if not, you can set your goal to try and initiate the discussion. That’s right, take the initiative and the lead on this. Go into the discussion with some information you have developed such as the number of years you have been at the company; the length of time at your current position; your current rate of pay and for how long you have been there; your current fringe benefits, etc. Also consider your position and if there are any “certifications” or indicators of advancement in the position. Do you have any? Can you get some? How would the business feel about the additional knowledge you can document and possess?
If you own a small business your goals would be different in the specifics but maybe not in the direction. For a small to medium size business there are known metrics that can be applied to your operations and financial condition to gauge how you have done this past year as well as how you have fared over the past four or five years. Is your business operation getting stronger and better? Is the financial condition of the business improving, stabilizing or deteriorating? In short you have a lot of details at your fingertips and you should be using them to manage your business. And now is a great time of the year to sit down quietly and assess your progress.
Do you provide your employees with cell phones or pay their cell phone bills? Well then you will be interested in this news, as this week the Internal Revenue Service (IRS) issued guidance on how a business should be treating employer-provided cell phones. As you know, providing something of value to an employee is going to be taxable to the employee and deductible by the business. The exception to this situation is when a business provides an employee with a tax-free fringe benefit. How does a benefit get to be “tax-free” is summarized as follows: Congress says so. Congress hasn’t said cell phones are a tax-free fringe benefit so they are taxable to the employee at the fair market value of the employer gift or payments.
But, now, with the new guidance from the IRS, the situation is a little better. For instance, the cell phone you gave to your employee may be exempt from tax for the employee if you gave it to the employee for “noncompensatory business reasons.” An example of this would be if you gave your employee the cell phone so they could talk to clients when they are away from the office. The IRS guidance specifically says that if the cell phone is provided to promote employee morale or goodwill then it is not provided for noncompensatory business reasons and the value of the phone is taxable income to the employee.
If you can get over the “noncompensatory business reasons” for giving the employee a cell phone then the IRS will treat the employee’s use of the cell phone as related to the employer’s business and thus as a working condition tax-free fringe benefit. That means that the payment of the cell phone bill is also not subject to tax to the employee. And one more benefit of clearing this hurdle, is that the IRS will treat any personal use of such a cell phone as a de minimis fringe benefit, excludible from the employee’s income.
This guidance is effective as of December 31, 2009 and thereafter. (Notice 2011-72)