Effective January 1, 2013, employers must withhold an additional Medicare tax of 0.9% from the wages of employees who earn $200,000 or more. The IRS issued Frequently Asked Questions (FAQs) to help employers implement this new tax. The FAQs state that the employer must withhold the additional tax beginning with the pay period in which it pays wages in excess of $200,000 to an employee. The tax applies only to the wages over the $200,000 threshold. There is no requirement to notify employees once the employer begins withholding the additional tax and there is no employer contribution required with respect to the tax. The IRS plans to release revised Forms 941, 943 and the tax return schemas for the Form 94X series of returns. The IRS’ FAQs can be found here.
The Internal Revenue Service recently released a Revenue Ruling allowing an employer using an accrual method of accounting for income tax purposes to take a deduction in the current year for a fixed total amount of bonuses payable to a group of employees, even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year. A current year deduction is allowed where the total amount of the bonuses is determinable through either (1) a formula that is fixed prior to the end of the taxable year, or (2) other corporate action made before the end of the taxable year that fixes the bonuses payable to the employees as a group. The Revenue Ruling is available here.
The Trade Adjustment Assistance Extension Act of 2011 increased the health coverage tax credit (HCTC) that is generally available to eligible individuals under the Trade Adjustment Assistance Program and the Alternative Trade Adjustment Assistance Program. As amended, the HCTC allows a taxpayer to take a credit equal to 72.5 percent of the amount paid by the taxpayer for coverage of the taxpayer and family members under qualified health insurance during the taxable year. The increased credit applies to all coverage months beginning after February 12, 2011. A copy of the Trade Adjustment Assistance Extension Act of 2011 is available here.
>In the Economic and Fiscal Strategy Report and Financial Statement and Budget Report issued today by the Chancellor of the Exchequer for the United Kingdom, one of the key strategy points raised in conjunction with the overall fiscal strategy of the United Kingdom was to introduce “tax relief for the UK’s video games industry.” Recognition at the highest levels of government of the financial impact of the video game industry — it truly is becoming a Gamer’s World.
>We’ve previously discussed here on the blog the increasing interplay between virtual assets and real-world money. In the coming years, the waves of government regulation and legal action will continue to build amplitude as the virtual assets created within virtual worlds become more easily and profitably converted to real world money. With virtual worlds growing in size and the online gaming player population booming, the development of the law in this area will have wide-reaching ramifications. The Supreme Court of Korea marked its involvement on Sunday, ruling that virtual currency used in online games may be exchanged for real-world cash. The ruling was the result of the acquittal of two gamers, who were originally charged with violating a Korean law targeted at online gambling, which banned the exchange of virtual currency for hard currency. The gamers were accused under the law with selling virtual currency know as “Aden” from a… Continue Reading
>Second Life continues to increase its “mainstream” presence. This article from CNN.com explains how musicians have created careers for themselves in Second Life, illustrating with the example of a single mother who has earned $10,000 through her performances. Further, her performances are arranged by her Second Life booking agent.Although this article does not itself explore the various legal aspects presented by Second Life, here the interactions so closely parallel traditional “real world” arrangements, they are readily apparent: tax implications for the artist’s income based on tips; the contractual relationship, if any, between the artist and her booking agent; potential copyright issues with the artists music as it is streamed to her audience, etc. All this is particularly interesting considering the artist, her agent, and the audience members are essentially anonymous, even as they interact. Further, one entering a virtual world such as Second Life should consider what court, if any,… Continue Reading