MANY FLORIDA FORMS CAN NOW BE FILED ONLINE

The state of Florida continues to upgrade its internet web site to offer more information and services including registration, filing, payment and new hire reporting.

Online Registration

The state of Florida now offers a paper‑free registration system for initial registration of most all types of state taxes including:

Ø                  Sales and Use Tax

Ø                  Use Tax only

Ø                  Solid Waste Fees

Ø                  Unemployment Tax

Ø                  Gross Receipts Tax on Electrical Power and Gas

Ø                  Gross Receipts Tax for Dry‑cleaning

Ø                  Documentary Stamp Tax

Ø                  Communications Services Tax

The state's site utilizes an interactive wizard that will first help you determine your tax registration requirements, then guide you through an application interview, and finally submit to the department your responses in the form of an application. 

Online Filing

A limited number of state tax forms can be filed directly with the Department of Revenue.  Most of the returns eligible are zero‑due type returns including:

Ø                  Form DR‑15EZ, Sales & Use Tax Return

Ø                  Form UCT‑6, Employer's Quarterly Report

Ø                  Intangible Personal Property Tax ‑ limited to returns showing no tax due

To register your company to file returns online, you are required to complete Form DR‑653W, Internet Registration/Authorization Agreement.

$30,000 Electronic Filing and Payment Rule for Florida Taxes

A new Florida law requires businesses that collect more than $30,000 in the last year in sales or fuel tax from their customers to file their tax returns and pay tax electronically. Also, the law requires Florida individual taxpayers to file intangible tax electronically if the individual taxpayer, couple or business owes $30,000 or more in tax.

In addition, the law requires electronic filing of unemployment compensation tax quarterly reports and e-payment of tax for businesses that had 10 or more employees in any calendar quarter in the 12 months ending June 30.

Businesses should enroll for the new filing methods starting in September 2002. Businesses will be required to file and pay tax using the new methods starting January 1, 2003. Businesses required to e-file unemployment compensation tax will be required to file reports and pay tax electronically for the quarter ending March 31, 2003.

While the new law will require a change in how businesses file tax returns, the change should be easy. The Department has worked to make e-filing safe, convenient and low in cost. To comply with the electronic filing requirements, businesses may utilize the Department's secure, Web-based filing site, free of charge, or choose certified commercial software that may contain additional features and functionality.

Also, the new filing requirements apply to:

• So-called "zero" tax returns in sales, unemployment, fuel, communications services or intangible tax. These are returns in which taxpayers owe no tax but still are required to file a return. Individuals and couples owing no intangible tax are not required to file returns and are not affected by this provision.
• Businesses that have operations in more than one county and that file consolidated tax returns.
• Any business or individual that filed unemployment compensation tax reports for five or more employers during the previous year.

While state law allows very limited exceptions for businesses required to e-file tax returns electronically, the law does not allow exceptions for e-payment of tax by businesses that fall into the mandatory filing category. These businesses are required to pay tax electronically, through electronic funds transfer, by credit card or by ACH transfer. Since businesses already must pay tax electronically, the businesses probably will find it convenient to file their tax returns electronically as well.  Contact our office if you have questions about the new law or visit the State website at http://www.myflorida.com/dor/forms/efile.html

FLORIDA INCOME TAX CREDIT FOR SCHOLARSHIP FUNDING

A Florida corporate income tax credit is available for corporate contributions to nonprofit scholarship funding organizations.  The available credit will be approved on a first‑come, first‑serve basis.  Corporations applying for the credit will be able to make an application directly through an online internet application form.  Applicants will need to provide information about their organization such as name, address, phone number, parent corporation (if consolidated), Federal Employer Identification Number (FEIN), the tax year, the amount of the contribution, type of federal tax return filed, etc.

Corporations make an application in advance of the planned contribution.  Once the applicant receives written confirmation and approval for the credit from the Department of Revenue, it is expected to make such contribution or donation.  Any credit allocated to a taxpayer cannot be rescinded by the taxpayer or returned to the department for reallocation to another taxpayer.

Credit Requirements

The allowed credit is 100 percent of the eligible contributions made during the taxable year, but cannot exceed 75 percent of the tax due after the application of all other credits.  The credit granted must be reduced by the resulting decrease in federal income tax when considering this credit and the overall impact it has on the federal income tax due.  The amount of the credit taken is added back to federal taxable income in arriving at Florida taxable income.

The total amount that may be granted by the state of Florida each year is $50 million.  Of this amount, $2.5 million is reserved for taxpayers that meet the definition of a small business under Section 288.703(1), Florida Statutes (F.S.), at the time of application.  Each taxpayer, including a group filing a consolidated corporate income tax return, cannot contribute more than $5 million to any single, eligible, nonprofit scholarship funding organization each year.  If the credit is not fully used in any one year, the unused amount may not be carried forward.  The credit cannot be conveyed, assigned, or transferred to another entity unless all of the assets of the taxpayer are conveyed, assigned, or transferred in the same transaction.

Eligible Scholarship Funding Organizations

A list of eligible nonprofit scholarship funding organizations is available from the Department of Education's Internet site at http://www.firn.edu/doe/choice/corp_cont.html or by calling the Department of Revenue at (850) 488‑5011.

The taxpayer is required to make a separate application for each scholarship funding organization it intends to support.

Other Details

For full details, visit the DOR web site at https://taxapp2.state.fl.us/gta/cit-sfo/

INDIVIDUALS AND BUSINESSES CAN NOW PAY FEDERAL TAXES ONLINE USING EFTPS

The Electronic Federal Tax Payment System (EFTPS) was developed by the IRS to enable taxpayers to pay their federal taxes electronically.  This free service allows taxpayers to use the phone or the internet to initiate tax payments directly from your checking account to the IRS.

You register your personal bank account with the service.  All payments are drafted directly from the bank account identified during the registration process.  Multiple bank accounts can be registered for tax payments.  Payments are only drafted from your account upon your authorization either by logging on to the EFTPS service through the internet or through the automated telephone payment system.

The following individual tax payments can be made using EFTPS:

Ø                  Form 1040ES ‑ Quarterly Estimated Tax Payments

Ø                  Form 1040 ‑ Personal Income Tax Return Payments & Installments

Ø                  Form 706 ‑ Estate tax Payments

Ø                  Form 709 ‑ Gift Tax Payments

The service can be used to make payments on your individual taxes.  The service also provides tax payment history information.  To find out more about the service, visit the IRS EFTPS website at http://www.EFTPS.gov.

2002 PERSONAL MARGINAL INCOME TAX RATES

After the tax rate reductions are fully implemented in the year 2006, the highest marginal income tax bracket will decline to 35% from the maximum rate for 2002 of 38.6% for taxable income above $307,050. 

2002 Marginal Tax Brackets

SELF‑EMPLOYED HEALTH INSURANCE DEDUCTION INCREASES

For 2002, self‑employed individuals and S corporation shareholders who received wages can deduct 70% of their health insurance premiums on their personal income tax returns.  The deduction is allowed directly from gross income and you are not required to itemize in order to get a deduction.  Over the next two years, the self‑employed health insurance deduction rate will increase as follows:

Ø                  70% deduction for 2002

Ø                  100% deduction in 2003 and after

STANDARD MILEAGE RATE FOR 2003

Effective January 1, 2003, the standard mileage rate decreases to 36 cents per mile for business use of an automobile. The standard mileage rate for the year 2002 was 36.5 per mile.

The standard mileage rate for use of an automobile for charitable purposes remains at 14 cents per mile, and the mileage rate for medical purposes decreases to 12 cents per mile for 2003 compared to 13 cents per mile for the year 2002.

SOCIAL SECURITY LIMITS FOR 2003

For 2003, the maximum taxable wage base threshold for Social Security tax purposes will rise to $87,000 from $84,900 for 2002.  The earnings threshold for the Medicare portion remains unlimited for 2002.  The total Social Security tax rate remains unchanged at 7.65% (6.2% OASDI, 1.45% Medicare tax).  The maximum Social Security tax employees and employers will each pay in 2003 is $5,394.00.  This is an increase of $130 from the 2002 maximum of $5,263.80.

Other limits associated with Social Security taxes are as follows:

Ø                  Maximum monthly Social Security benefit ‑ $1,741

Ø                  Earnings required to earn a quarter of coverage ‑ $890

Ø                  Maximum earnings before benefits are reduced: Age 62‑64 ‑ $11,520

Ø                  For Retirees age 65 and over, benefits cannot be reduced regardless of their income

EMPLOYER RETIREMENT PLAN CHANGES FOR 2003

There are very few changes in retirement plan contribution and deduction limits for employers in 2003 over and above the large increases experienced in 2002.

Ø                  Compensation Limits for Contribution Amounts – remains at $200,000

Ø                  401K Plans ‑ employee elective deferrals increased to $12,000, over age 50 catch‑up contributions of $2,000

Ø                  Defined Contribution Plans ‑ employee contribution limit remains at $40,000, employer contribution limit is 25% of eligible wages

Ø                  Defined Benefit Plans ‑ annual benefit limit remains at $160,000

Ø                  SEP plans ‑ employee contribution limit remains at $40,000, employer contribution limit is 25% of eligible wages, over age 50 catch‑up contributions of $2,000

Ø                  SIMPLE Salary Deferral Contribution Limits ‑ raised to $8,000 from $7,000, over age 50 catch‑up contributions of $1,000

401K Plans

Increase in Participants’ Contribution Limits

The dollar limit on annual elective deferrals under 401(k) plans are as follows:

Over 50

Maximum                   Additional

Year                    Deferral             (See Below)

2002                  $11,000               $1,000

2003                   $12,000               $2,000

2004                   $13,000               $3,000

2005                   $14,000               $4,000

2006                   $15,000               $5,000

After 2006, the limit increases with indexing in $500 increments

Under the 2001 Act, elective deferral contributions to 401(k) plans are not subject to the defined contribution plan deduction limits.  Some 401(k) plans subject elective deferrals to the normally applicable defined contribution plan deduction limits.  For example, a 401(k) plan may limit elective deferrals to the lesser 15% of compensation or $10,500 (the elective deferral limit in 2001).  This type of provision can restrict or limit contributions to the plan for lower‑paid participants.  It also creates administrative burdens for plan administrators, because the 15% limit often is monitored on a payroll‑by‑payroll basis. Under the revised provision, all participants are able to contribute amounts up to the generally applicable 401(k) plan limit ($11,000 in 2002) if permitted under the plan, and plan administrators will no longer have to monitor the 15% limit.  The 2001 Act provides that the otherwise applicable dollar limit on elective deferrals under a 401(k) plan is increased for certain individuals.  The catch‑up contribution provision does not apply to after‑tax employee contributions.  The provision applies to individuals who are at least age 50 before the end of the plan year and may not make additional elective deferrals to the plan due to 401(k) plan limitations.

Defined Contribution Plans

Contribution Amount $40,000

For 2002 and 2003, the maximum additions to a participants account is limited to the lesser of:

Ø                  $40,000, or

Ø                  100% of eligible compensation

Employer Deduction Limit Raised

For 2002 and 2003, the definition of compensation for purposes of the deduction rules includes employee elective deferrals. In addition, the annual limitation on the amount of deductible contributions to a profit sharing plan is increased to 25% of eligible compensation of the employees covered by the plan for the year.

Defined Benefit Plans

For 2002 and 2003, the annual benefit limit under a defined benefit plan is $160,000.  The dollar limit is reduced for benefit commencement before age 62 and increased for benefit commencement after age 65.   the maximum annual benefit payable at retirement is:

The lesser of:

Ø                  100% of average compensation, or

Ø                  $160,000

The dollar limit is adjusted in $5,000 increments.  Also, currently, the dollar limit is reduced if benefits under the plan begin before the Social Security retirement age (currently age 65) and increased for benefits beginning after normal retirement age.

SEP Plans

For 2002 and 2003, the maximum contribution to a SEP account is $40,000. Employers are able to deduct up to 25% of eligible employees’ wages.

SEP plan participants over age 50 will be eligible to make additional "catch up" contributions $1,000 for 2002, $3,000 for 2003.

SIMPLE Salary Deferral Contribution Limits

The 2003 annual contribution limit for a SIMPLE is $8,000, which will be gradually increased until a $10,000 limit is reached in 2005.  Taxpayers over age 50 will be eligible to make additional "catch up" contributions of up to $1,000. Limits will be indexed for inflation after 2005. Increases are on the following schedule:

Tax Year   Contribution Limit                                    Over Age 50

2002                  $7,000                                              $    500

2003                  $8,000                                              $1,000

2004                  $9,000                                             $1,500

2005                  $10,000                                           $2,000

2006                  $10,000 indexed                             $2,500

INCREASE IN THE SECTION 179 BUSINESS EXPENSE DEDUCTION FOR 2003

The Section 179 expense deduction has been increased to $25,000 for 2003 from $24,000 for 2002.  The limit stays at $25,000 for 2003 and after.  For 2003, a business can expense in one year up to $25,000 worth of qualified fixed assets (mainly equipment and machinery purchases) instead of depreciating those assets over time.  The Section 179 deduction applies only to property you buy and put into service this year.  You make the Section 179 expense deduction election with your tax return for the year the assets are purchased.

SPECIAL RETIREMENT SAVINGS INCENTIVES FOR EMPLOYEES

IRA Contribution Credit

There is an income tax credit for up to $2,000 of contributions or elective deferrals made by certain low‑income taxpayers to IRAs, 401(k) plans, and other retirement plans.  The amount of the credit is 50% of the amount of the contribution made or up to $1,000 (50% x $2,000 maximum contribution).  The credit is reduced for adjusted gross income of joint returns above $30,000 ($15,000 single taxpayers).  The credit is fully phased out at joint adjusted gross income above $50,000 ($25,000 single taxpayers).  The credit is in addition to any deduction or exclusion that would otherwise apply with respect to the contribution.  Thus, for example, you can claim both the deduction for IRA contributions and the credit, if the requirements for both are met.

IRA Catch‑Up Contributions

In 2002 and 2003, individuals who have reached age 50 may make additional "catch‑up" IRA contributions.  These contributions can be made on a deductible basis, to the extent otherwise allowed, on a non‑deductible basis to a traditional IRA, or to a ROTH IRA, to the extent otherwise allowed.  Further, these additional catch‑up contributions can also be made to a 401(k) plan, a SEP or a SIMPLE (as well as a Section 403(b) annuity or a Section 457 plan) as long as those plans permit the additional elective deferrals (i.e., catch‑up contributions).  The maximum amounts allowed under each type of retirement plan is listed below:

The credit is available for any individual, other than a full‑time student, who has attained age 18 as of the close of the tax year and who is not claimed as a dependent by any other taxpayer for a tax year beginning in the calendar year in which the individual's tax year begins.  However, there are certain income restrictions. 

IRA Contribution Stays Same

For 2002 and 2003, the maximum contribution to the Traditional and Roth IRA accounts remains at $3,000.   The contribution is limited to the lesser of $3,000 ($3,500 ‑ age 50 & over) or 100% of an individual's earned income.  Contributions to Coverdell Education Savings Plans (Education IRAs) may be made by anyone on behalf of a student beneficiary as long as they meet adjusted gross income limitations (single ‑ under $110,000, joint ‑ $160,000).  Below is a list of the maximum contribution amounts including special catch‑up contributions for 2003:

IRS ENHANCES WEB SITE WITH NEW SERVICES

Effective for this 2002 filing season, the IRS will provide new functions not available last year which include the ability to check the status of your refund online and the ability for many taxpayers to file their 2002 income tax return online for free.

Check the Status of Your Refund Online Now

You filed your tax return and you're expecting a refund. You have just one question and you want the answer now - Where's My Refund? For the current year tax filing season, the IRS website at http://www.irs.gov , will have a link called “Where’s My Refund” that will allow you to access a secure web site to find out if the IRS received your return and whether your refund was processed and sent to you.

To get to your refund status, you'll need to provide the following information as shown on your return: