Tidbits From the Law – September 2010

By Denice A. Gierach September 2010

The following items may be of interest to you:

… Many of you have heard of “Cash Dash”, which is a program that the State of Illinois has established to post abandoned bank accounts and other property on a website and in the newspapers to hopefully find its rightful owner. If the property remains unclaimed, the property goes to the state. For instance, a bank may turn over a bank account that was in your name that you had not had any activity on for a number of years. Several people who had found that the state had property that had belonged to them that they received back from the state recently filed a class action lawsuit, stating that the State of Illinois should owe them interest on the property. The Illinois Supreme Court held that a person is not entitled to interest on the previously abandoned property, suggesting that any interest that may be earned helps the state to compensate itself for performing a long-term safekeeping and reclamation service for neglectful owners.

…When will Congress act on the lapsed estate taxes? Most commentators now agree that it will be later, rather than sooner. The Senate Democrats just blocked a vote on a bipartisan plan that would allow a choice for 2010, either use the current rules in effect and pay no estate taxes with less exemption in the future or use 2009 rules. With questions of the constitutionality of retroactive reinstatement of the tax, the likelihood of anything being done which will apply to 2010 is diminished. Current thought is that any such change will occur after the November elections.

…Owners of S-corporations cannot avoid payroll taxes by taking a nominal salary and getting the rest of the profits taxable as dividends, according to a district court. The Senate has been haggling over a change in the law that would levy a self employment tax on all profits of small personal service S-corporation. The IRS has always disliked having taxpayers claim a small salary in order to not have to pay payroll taxes on the balance. Even though the Senate bill did not pass, expect to see this issue again in the future.

…Beginning in 2012, businesses could have to file hundreds of millions of new 1099 information reports with the Internal Revenue Service. These forms will be due whenever a business buys more than $600 a year in goods or services from a vendor, even a giant company like OfficeMax. Many feel that the burden of this additional reporting will fall on the shoulders of sole proprietors, small businesses and small nonprofits. Prior to this law being passed, the business had to file a form 1099 for payments it made to an unincorporated business or sole proprietor, rather than an incorporated business. This law can cause a lot of extra burden, but the IRS estimates that under the old system more than $100 billion in taxes are evaded annually by small, non-farm businesses underreporting their income. Expect more paperwork!