Specializing in the Internal Revenue Code as it relates to forestry investments

2011 New Developments

New developments for the year through July 20, 2011

Federal

FUTA Tax - Beginning July 1 the FUTA tax surcharge, which has been in place since 1976 and extended 8 times, has expired. The new FUTA tax rate is 6.0% (versus 6.2%). The maximum 5.4% credit results in a net FUTA tax rate of 0.6% (versus 0.8% prior to July 1, 2011).

Mileage Rate Changes - They did it again! They changed the rates part way through the year. You not only need to keep track of total mileage for the year, you need to keep track whether that mileage was put on before or after the year's midpoint. The rates for 2011 are as follows (cents per mile):

Wisconsin

College Savings Account Subtraction - Beginning January 1, 2011, the owner of a college savings account may authorize another person to make contributions to the same account. This effectively eliminates the requirement of setting up a separate account to take that contribution, even if the beneficiary was the same person.

In order for the contributor to take the subtraction on the WI return, the beneficiary must be the contributors child, grandchild, great grandchild, niece or nephew. The new act does not specify that the beneficiary of the account can be "you" or "your spouse" as was allowed in 2010 and previous years. I have asked for clarification as to whether or not contributions made to your own or your spouse's College Savings Program will be allowed as a subtraction on 2011 Wisconsin returns. Hopefully we can clear up this question soon.

Tell this to the Out-of State Seller - If tangible personal property is delivered to the buyer's location in Wisconsin by a shipping company, the sale takes place in Wisconsin and is taxable to Wisconsin, regardless of whether the buyer or the seller hires the shipping company. Of course, if the seller doesn't collect the sales tax, you as the buyer need to remit the tax (now called "use" tax) to the State.

Wisconsin Disaster Areas - On April 15, 2011, President Obama declared the following Wisconsin Counties as qualifying disaster areas due to a severe winter storm: Dane, Dodge, Grant, Green, Iowa, Kenosha, Lafayette, Milwaukee, Racine, Walworth, and Washington.

If you sustained a loss in 2011 from the disaster, you now have the choice of claiming that loss on an amended 2010 return or on your original 2011 return. Claiming on an amended 2010 return prevents you from having to wait until 2012 to get benefit of the deduction.

Health Savings Accounts - for 2011, Wisconsin is the same as federal. No adjustments!

Relocation of Business - Beginning January 1, 2011, a subtraction is provided for income earned by a business that relocates to Wisconsin from another State. "Locates to this State" means moving either 51% or more of the workforce payroll or paying (in Wisconsin) at least $200,000 of wages. The subtraction of income earned is for two consecutive taxable years beginning with the taxable year the business relocates to Wisconsin.

For those businesses already here, the Job Creation Tax Deduction, also beginning January 1, 2011, allows a subtraction from income based on the increase in number of full-time-equivalent (FTE) employees employed in Wisconsin during the taxable year. The subtraction is $4,000 per FTE if the business has gross receipts less than or equal to $5,000,000 or $2,000 per FTE if the business has gross receipts greater than $5,000,000.