Due to the Jobs Bill , Tax Bill , Health Care Reform and pending Immigration reform , plus a myriad of others that I may have overlooked, there are some major changes to how we do business in Colorado/USA and I'd like to draw your attention to the ones that go into effect starting in January, 2011. Please consult your tax accountant or tax preparer to see how these changes could affect your business.
#1) Minimum wage in Colorado increased January 1st to $7.36 per hour (and $4.34 for tipped). When the State and the Federal amounts don't match, you're obligated to pay the higher one, and this time it is the State of Colorado.
#2) With the extension of the Bush-era tax cuts now in place, how is FICA (Social Security) going to be affected? You will be deducting 2% less but just in 2011. The savings is on the side of the employee. Instead of using the 6.2% rate, it will be 4.2% of wages paid. Employers have until January 31, 2011 to implement the new payroll tax rates, and make any necessary adjustments or corrections by March 31, 2011. The employer tax rate for social security (6.2%) and Medicare (1.45%) tax remain unchanged from 2010.
#3) Reporting for 1099-Misc is probably going to be changing in phases. Be prepared to report to the IRS the amount you paid each of your vendors if it was over $600 for the year. In order to best prepare (this legislation has the possibility of being appealed/modified ), start requesting a completed IRS W-9 from each vendor. You can download these forms from the IRS web site in order to have the complete legal name, address and Tax Identification Number (EIN or SSN) for your vendor. This is being phased in, some apply in 2011 (i.e. for landlords dealing with unincorporated service providers) and others in 2012. Penalties for not filing 1099s will double in 2011, so please consult a professional on this topic.
#4) If you took part of the HIRE act, it does not pertain to any wages paid after December 31, 2010.
#5) Small businesses can benefit from deducting health care plan expenses.
#6) The IRS announced that the mileage reimbursement rate for 2011 will be $0.51 per mile.
#7) Still pending, but it looks like employers should get familiar with E-Verify , the electronic way to confirm legal status for employees. Stay tuned.