Obama Expected to Sign JOBS Act: What’s in it for You

by | Accounting News, Tax, Uncategorized

On Tuesday, March 27, the House of Representatives approved the JOBS Act with a vote of 380 to 41. The bill, which amends portions of the Sarbanes-Oxley Act, will now go to President Obama who has indicated he will sign the legislation.

The Jumpstart Our Business Startups (JOBS) Act has been touted as the latest attempt to revive and stimulate the economy, with its key element focused on applying a concept called crowdfunding to small businesses. Crowdfunding is a term used to encourage donations of money to help artists and non-profit ventures. One element of this program has been that often those who donate get some token gift in return for their donation.

Taking crowdfunding to the small business arena, investors will be able to put money into small businesses in exchange for a share of equity without the company needing to jump through all of the hoops normally required by the Securities and Exchange Commission (SEC) of companies that want to issue shares of stock.

This is excellent news for investors who would like to take part in initial public offerings (IPOs) that would normally only be offered to certain qualified institutional investors and for small companies looking to grow capital without having the restrictions that were previously in place.

Here are the key elements of the JOBS Act:

Small privately-held companies with revenue under $1 billion (or $2 billion if the company provides potential investors with audited financial statements) will be able to sell up to $50 million in shares as part of a public offering without having to register with the SEC.

New public company start-ups with revenue up to $1 billion are excused from having an outside audit of internal controls for five years.

Small Companies will be able to have as many as 2,000 shareholders (previous limit was 500) or 500 unaccredited investors without registering with the SEC. According to the SEC, an accredited investor is an individual with a net worth of over $1 million not including primary residence, has earnings of at least $200,000 – or $300,000 for joint earners – for the past two years, or is a general partner, director, or executive officer of the company issuing the security.

A crowdfunding investor is limited to investing in all private companies that are governed by this Act the lessor of $10,000 or 10 percent of his income if the investor earns less than $100,000 a year.

Businesses will be able to use advertisements to solicit new investors.

You should be talking to your clients about these points:

Because SEC registration is no longer required for these small private companies, the standard disclosures to investors will not be required. Companies that want to take advantage of these new rules should consider what types of disclosures they expect to make that will encourage but not mislead potential investors.

Companies considering using crowdfunding techniques need to develop controls to prevent potential fraud and abuse. An accountant is well-suited to help the companies develop these controls.
Remind clients that assurances to potential investors should include descriptions of the controls that will guarantee the safety of investments.

Websites already exist that provide a platform for companies to make themselves available for crowdfunding investments. Sites such as Launcht, Crowdfunder, 40Billion, MicroVentures, and many more help businesses reach a wide audience. Accountants can help their clients choose the right site for their business and also monitor progress and performance.

Clients who are interesting in investing in small companies using crowdfunding techniques should be aware of potential fraud and abuse. Encourage them to learn as much as they can about the companies, their products, their history, and their leaders, before investing. Also work with your clients to explain how they should oversee the investments they make.

Full Article: http://www.accountingweb.com/topic/cfo/obama-expected-sign-jobs-act-whats-it-you

IRS Eases up on Worker Misclassifications

by | Accounting News, Bookkeeping, CPA, IRS, Resources, Tax, Uncategorized

Posted by AccountingWEB in Tax, Payroll Tax on 10/07/2011 – 08:38

By Ken Berry

The Internal Revenue Service (IRS) is extending an olive branch to employers that may have misclassified “employees” as “independent contractors.”

Under a new initiative announced by the IRS on September 21, 2011 (IR-2011-95), employers can resolve – at a low cost – uncertainties relating to the employment status of workers by voluntarily reclassifying workers. The Voluntary Classification Settlement Program (VCSP) enables employers to avoid time-consuming and potentially expensive audits by paying small amounts to cover past payroll tax obligations.

“Two features make the VCSP particularly attractive,” says Kathy Mort, a managing director with PwC’s Tax Controversy and Dispute Resolution department. “First, the cost of entering into an agreement under the VCSP is minimal and will make the program very appealing in many cases. For example, employers who are aware of potentially misclassified workers but have avoided reclassifying them prospectively because of the tax exposure such reclassification might cause for prior years, may seek an agreement under the VCSP. Additionally, the VCSP is structured so that participation in the program does not impact the affected worker’s prior year income tax return.”

The VCSP requires employers to prospectively treat workers as employees. It is generally available to businesses, tax-exempt organizations, and government entities that have mistakenly treated workers as nonemployees, including independent contractors. To qualify, an employer:

* Must have consistently treated the workers in the past as nonemployees;
* Must have filed all required Forms 1099 for the workers for the previous three years; and
* Cannot currently be under audit by the IRS, the Department of Labor, or any state agency concerning the classification of the workers.

An employer may apply for the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, at least sixty days before it begins treating the workers as employees. Once an employer is accepted into the program, it must pay an amount effectively equal to slightly more than 1 percent of the wages paid to reclassified workers for the prior year. No interest or penalties will be due, and the employers will not be audited on payroll taxes relating to those workers for prior years. For the first three years in the program, participating employers are subject to a six-year statute of limitations instead of the usual three-year period that generally applies to payroll taxes.

For original article – click here.