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3 posts from September 2014

09/23/2014

How Changing Your Name Affects Your Taxes

As we approach the 4th quarter of 2014, it’s a good time to review any unusual life events creating documentation changes that will affect your individual income tax filing.

Name ChangeFor example, if your name or a dependent’s name has changed, you’ll need to take some action before filing a tax return.

A name change must be reported to the Social Security Administration (SSA) before you file your tax return with the IRS. This is important because the name on your tax return must match SSA records or you will receive an IRS notice and any income tax refund may be delayed.

You should file SSA Form SS-5 at an SSA office or by mail if you have been married or divorced and you changed your name, or a dependent experienced a name change (such as an adopted child changes his or her last name).

Along with updating your name on your social security card consider other accounts and licenses that may also need to be changed including your current passport, driver’s license, bank account(s) and financial records, vehicle title and registration, insurance policies, professional licenses, and medical records. Don’t forget you should also notify the postal service.

Contact us at McRuer CPAs to help you file the necessary paperwork and correct tax filing status providing you the correct deductions.

09/16/2014

Being Deskilled by Technology: Losing Jobs to Computers

Computerized automation and software upgrades continue to push workers out of their jobs.  This phenomenon is now being called “deskilled”; i.e. If your job has been "deskilled", it means you’ve been replaced by technology. 

Computer man versus human worker imageA new report by one of the largest online placement agencies, CareerBuilder, says 25% of companies have replaced workers with technology in the last 18 months. Organizations with more than 500 employees report a higher deskill rate of 30%.

Researchers say while the technology is replacing many occupations, the replacement technology itself must have people to customize, maintain, and operate it; so, while companies are deskilling one position, they may be creating another position requiring new technology-related skills.  Yet, numbers show the correlation of jobs lost to jobs created is far below one-to-one.

In fact, the research shows overall one third of American occupations are experiencing a deceleration on the path to being replaced by other more rapidly growing technology-related occupations like web and software developers, market research analysts/specialists and management analysts.

Among those who have lost their jobs, 4 in 10 of these jobless are now classified as long-term unemployed because they have been actively looking for work for more than 27 weeks. The percent of long-term unemployed who are aged 50 and older is now at more than 30% of all unemployed who want to work.  Most of them report what they are experienced at doing is disappearing in the job market.

In an interesting twist, the report reveals that 35% of the firms who deskilled workers had to either hire them back or replace them because the technology did not work as promised, or the cost savings backfired when customers complained.

Jobs that are most in danger of being deskilled:

  • Customer Service  35%
  • Information Technology  33%
  • Accounting and Finance   32%
  • Assembly and Production   30%
  • Shipping and Distribution   25%
  • Sales   17%

Overall, the researchers say a marked transition is occurring that shows today’s workforce requirements will continue to be more deeply connected to technology, engineering, science, and math.  The question is, what kind of training and how long will it take to help deskilled workers re-enter the job market and at what economic cost?

09/09/2014

Tax Cuts and Credit Woes: A Review of Kansas and Missouri Tax Bills

Tax Cuts GraphicKansas’ second credit rating downgrade by a bond rating agency has rekindled debate on how tax cuts affect budget bottom lines, taxpayer pocketbooks, and quality of life.  In August, Standard and Poor’s reduced the state’s credit rating from AA+ to AA. This follows last April’s credit and bond downgrade announced by Moody’s Investors Services citing a concern over revenue declines and a lack of budget cuts to make up the difference.

The 2012 Kansas tax cuts reduced the personal income tax bracket from 6.45% to 4.9%, and more importantly for some, eliminated the income tax on small business income.

Three months ago, the 2014 Missouri legislature overrode the Governor’s veto to enact more modest tax cuts of its own.  The Missouri tax cuts have a more gradual implementation format that will begin in 2017.  The Missouri tax changes include a reduction in individual income tax rates eventually bringing the top tax bracket down to 5.5%.  It also phases in a new 25% deduction for business income reported on personal income tax statements which is designed to provide tax relief to sole proprietors and owners of “pass-through” entities such as partnerships, S corporations and most limited liability corporations.

Ohio, Oregon and South Carolina have also passed laws to provide similar tax relief to some small business owners and individual taxpayers.

Though the Kansas tax cuts were initially promoted as a “shot of adrenaline” to the state’s economy, the rapid drop in revenues affecting the state’s credit and heavy media exposure is now affecting voter confidence as Governor Sam Brownback seeks re-election. Economists say it could be ten years before the actual benefits of the tax cuts will be revealed as it takes time for businesses to grow and new businesses to start.

Kansas Secretary of State Kris Kobach issued a statement that business formation has hit an all time high two years in a row.  Kobach said, “This is not a one-year outlier; it is a meaningful trend. Kansas is clearly becoming a great place to start a business.” But the release also said the increase is due to the fact that filing to become a business has been made easier and has little to do with the state’s tax laws.

Some small business associations say business owners see their number one problem is not income tax, but rather the lack of access to capital and the high cost of credit.

In Missouri, experts predict the new tax cuts say won’t be fully realized until 2022.  The Missouri tax cuts also can only be implemented if annual revenue thresholds are not achieved which could delay results even longer.

While taxpayers may wait a few years to realize the affects of tax cuts on their tax bill, state revenue collections have already dropped significantly in Kansas and it appears the power of politics and media influence is moving faster than legislative budget solutions. If the upcoming elections result in new leadership with different tax philosophies, Kansas’s income tax climate could again change.

Nationally, eyes are on states who are working to pass some kind of tax reform even as federal individual income and self-employment taxes are on the rise and businesses face looming expense hikes due to health care reform mandates.  How things settle for Kansas and Missouri, especially through the 2014 and 2015 tax seasons, could determine how other states develop their own solutions for tax and revenue troubles.

Regardless of the tax environment, here at McRuer CPAs we constantly monitor these developments and advise our clients about the best strategies and actions to meet their individual and business tax planning goals.  Feel free to contact us for more information or set up an appointment to review how state and federal tax changes may affect your bottom line.

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