The DJIA was down about 100 points immediately following the release of the minutes, showing that investors may have wanted to see more support from the Fed.

The accepted theory had been that those areas hit hardest by the recession would also have the most vibrant recoveries. This appears not to be happening this time. The story sites Amir Sufi, whose study shows that, “The sharpest drops happened in areas where people reported little income beyond their homes.” Basically, the same areas where you had a boom of new home owners and house prices skyrocketing, you also saw the largest numbers of people with their house as their only asset, and plenty of debt financing tied to that asset. When the boom went bust, those areas where the residents had high debt burdens and lost the value of their only asset, are not surprisingly experiencing slower growth, and probably will be for years to come.

You can read the full case decision here: http://bit.ly/GSbM3j

These figures are more evidence of building economic momentum, particularly because a large chunk of the increase was in automobile sales, up 1.6%. This may be evidence that the high gas prices haven’t dampened consumer spending, at least not yet. However, keep in mind that gas prices in February weren’t averaging $4/gallon, which they are very close to now.

These numbers are part of a growing list of data points which show  economic momentum, and these in particular show the American consumer to be fairly healthy. However, if oil prices continue their charge upward these numbers could change rapidly. For the moment at least, we can look forward with guarded optimism.

The basic problem is that the U.S. economy is highly dependent on consumer spending, and there is nothing that hurts consumer spending more than high gas prices. The more consumers have to pay at the pump, the more they have to cut back on other purchases, which could drive down retail sales and ultimately stunt economic growth.

The rise in oil prices can mainly be attributed to geopolitical concerns over Iran, which could worsen or alleviate from day to day. Regardless of the the cause of high oil prices, historically the effect has been bad news for the U.S. economy.

The Tax Relief Act of 2012 also repeals the 2% recapture tax for individuals that were paid more than $18,350 in January and February 2012, which was meant to keep those individuals from gaining more benefits from the temporary tax cut than those not paid more than that amount.

What does this mean for you? Basically, it means that the status quo remains the same.  Your employees who are subject to social security tax will still see the same 2% tax reduction they have seen since January 2011.  Be sure to thank your congressperson.

The minister is solely responsible for the entire Social Security & Medicare liability, regardless of whether the minister has opted-out of self employment tax.  Ministers cannot opt-in to having Social Security & Medicare taxes withheld.

But ministers, don’t worry! You’re not doomed to a big tax bill in April!  We recommend that if ministers choose not to opt-out of self employment tax (by filing Form 4361 with the IRS), that you elect to have an additional amount of income withheld above the regular federal income tax withholding to make up for the shortfall – you can indicate an additional flat amount on box 6 on Form W-4.  Keep in mind the self employment tax rate is 13.3% for 2011.

Also, church administrators, if you’re not sure if you’re handling Social Security & Medicare taxes for ministers correctly, give us a call.  We’d be happy to review your records and get you heading in the right direction!  Also, a great resource is Publication 15-A from the IRS (http://www.irs.gov/pub/irs-pdf/p15a.pdf) which gives guidance on this and many other employment tax matters.

• Guidance on the IRS website walks you through the process of determining the classification of a worker
  • http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
• IRS Form SS-8
  • This form permits you to request a determination of the classification of a worker.
  • http://www.irs.gov/pub/irs-pdf/fss8.pdf

Another January has come and gone, and for us accountants, that means the headache of 1099’s is behind us for another year. The best way to avoid those January woes is to stay on top of collecting W-9’s throughout the year. Here’s a brief rundown of who you need to collect a W-9 from and then who you need to send a 1099.

Who should I collect a W-9 from?

It is a good practice to collect a W-9 from all new vendors. However, you won’t need to issue 1099’s to corporations (unless they provide legal or medical services), so you really only need to collect a W-9 from individuals, partnerships, LLC’s and all legal and medical practices.

Who should I send a 1099 to?

A 1099 must be sent to all eligible recipients when over $600 payments are made in the calendar year. The 1099 amount is determined by payments made, not by the amount that has been invoiced. Take a look at a W-9. Here’s a quick rundown of how the federal tax classification determines if the vendor should receive a 1099:

• Individual/sole proprietor – A 1099 must always be issued if the payments were for services. Notable exceptions include expense and mileage reimbursements/advances and benevolence.
• C Corporation – Unless the vendor provides legal or medical services, a 1099 does not need to be issued to C corporations.
• S Corporation – Unless the vendor provides legal or medical services, a 1099 does not need to be issued to S corporations.
• Partnership – A 1099 must always be issued to partnerships.
• Trust/estate – A 1099 must always be issued to trusts and estates.
• Limited liability company – If the LLC doesn’t identify their tax classification, go ahead and issue them a 1099.
  • C – LLC’s that have elected to be taxed as C corporations do not need to be issued a 1099 unless the vendor provides legal or medical services.
  • S – LLC’s that have elected to be taxed as S corporations do not need to be issued a 1099 unless the vendor provides legal or medical services.
  • P – LLC’s that have elected to be taxed as partnerships must always be issued a 1099.

These growth numbers, coupled with a modest, normal inflation forecast of 2.5%, make 2011 the most economically optimistic year in recent memory. While the U.S. economy still has a long way to go to make up for the losses of the past few years, 3.5% growth is a good start.