The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

Have you ever hired someone and not known whether to treat the person as an independent contractor or an employee? There can be steep penalties for misclassification of workers. The Federal government has introduced a program that will allow employers to reclassify workers. The program is called Voluntary Classification Settlement Program (VCSP) and it allows taxpayers to voluntarily reclassify their workers as employees that were misclassified as independent contractors, for future tax periods for employment tax purposes.

A. EMPLOYERS MAY PAY HIGHER FEDERAL UNEMPLOYMENT TAX RATES IN 2011 and 2012

Do you find yourself wanting to clean out old records from time to time, either at home or at your business, but don’t because you aren’t familiar with the rules for retaining your tax records?  If the IRS decides to audit a personal or business tax return, the burden of proof falls to the taxpayer.  You must be able to substantiate the income that was reported and the deductions that were claimed.

Individual income taxes, whether paid through employer withholding or quarterly estimates, are probably one of your largest annual expenditures.

So, just as you would shop around for the best price for food, clothing or merchandise, you want to consider opportunities to reduce or defer your annual tax obligation. This Tax Letter is intended to assist you in that effort. Also, at the end of this Tax Letter is a list of federal tax law provisions to help individuals save and pay for higher education costs.