Family Tax Issues – Page 4 – SMALL BIZ TAX LADY

business taxes, Family Tax Issues, General Information, Self Employed, Tax Reduction, TAXES

Now that you’ve filed, do you need to tell your employer to withhold more or less income to pay your 2019 taxes?

April 19, 2019April 19, 2019 Howard Tax Prep LLC

Reprinted with changes, edits, & permission by the IRS.

Was your refund lower than expected, or did you have an unexpected tax bill when you filed this year? In our south loop Chicago tax preparation office, we saw a slight decrease in income tax refunds for personal 1040 taxes. On the other hand, many of our Chicago business tax preparation clients saw a decrease in their taxes dues thanks to the Tax Cut and Jobs Act. If you are concerned about your tax bill for the 2019 tax year, there are steps that you can take steps to make sure your federal income tax withholding is on the right track for this year.
Checking your withholding at the beginning of the year helps ensure you don’t have too little or too much withheld from your paychecks throughout the year. This is especially
important if you changed your withholding in 2018. A mid-year withholding change in 2018 can have a different full-year impact in 2019. You should also check your withholding any time your personal or financial information changes. Use the Withholding Calculator to help you decide whether you need to change your
withholding.

Federal taxes operate on a pay-as-you-go basis. This means that you need to pay most of your tax during the year, as you earn the income. Paying too much tax throughout the year will result in a refund while not paying enough can lead to a tax bill, penalties and interest when you file. One way to avoid owing a balance is to correctly calculate and adjust how much tax you should have withheld from your wages. Use the Withholding Calculator to help you decide whether you need to change your withholding.

Another option is to consider making quarterly estimated tax payments. Those who
don’t pay taxes through withholding, or don’t pay enough tax that way, may still use the Withholding Calculator to determine if they have to pay estimated tax quarterly during the year to the IRS. Those who are self-employed generally pay tax this way. See Form
1040-ES, Estimated Taxes for Individuals, for details. Visit IRS.gov/payasyougo to learn more about withholding and to determine if you should be making estimated tax payments. You are in the driver’s seat. Check your withholding today.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Strategies, business taxes, Family Tax Issues, General Information, Retirement Income, RUNNING YOUR BUSINESS, Self Employed, TAXES

Let’s face it, no one really likes to pay taxes.

March 1, 2019March 1, 2019 Howard Tax Prep LLC

Author Trudy M. Howard

Let’s face it, no one really likes to pay taxes.

Unfortunately, while most Americans don’t like to pay taxes, we know that taxes have to be paid. As a self employed person, and business owner, not only do you have to pay local & state taxes, but you must also make Federal estimated tax payments throughout the year. Whenever I work with Chicago South Loop small business tax preparation customers, I find that they are often very surprised to hear about the estimated tax concept.

The American tax system is a a pay as you go system, not a pay once a year, or pay when you feel like it system. According to the IRS, “taxpayers must generally pay at least 90 percent of their taxes throughout the year through withholding, estimated tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty.” In most cases, you must pay estimated tax for 2019 if both of the following apply: 1. You expect to owe at least $1,000 in tax for 2019, after subtracting your withholding and refundable credits. You expect your withholding and refundable credits to be less than the smaller of: a. 90% of the tax to be shown on your 2019 tax return, or b. 100% of the tax shown on your 2018 tax return. Your 2018 tax return must cover all 12 months.

If you are a self employed driver (think UBER, LYFT, DOORDASH), contractor, real estate agent, barber, beautician, makeup artist, blogger, home care provider, etc. you need to have an EFTPS® account to make your Federal estimated tax payments. EFTPS® is a system for paying federal taxes electronically using the Internet, or by phone using the EFTPS® Voice Response System. EFTPS® is offered free by the U.S. Department of Treasury, however, you must setup an account to use the system. Listed below are the estimated quarterly tax payment dates for sole proprietors, and the quarterly payment dates for S-corp owners and C-corporations.

Estimated tax payment due dates for 2019:

April 15, 2019: Income tax due date AND the due date for your first quarterly estimated tax (QET) payment. In April, you’ll pay quarterly estimated taxes on the income you made in January, February, and March 2019.

June 17, 2019: This is when you’ll pay quarterly estimated taxes on the income you made in April, May, and June 2019.

September 16, 2019: Quarterly estimated taxes for the months of July, August, and September 2019 are due on this date.

January 15, 2020: Quarterly estimated taxes for the months of October, November, and December 2019 are due on this date.

For those that are S-corps or Corps. Remember that you are considered an employee, and a shareholder. This means that you’ll need to pay your income, social security, and Medicare taxes as the employer & the employee. In addition to making the deposits, you will also need to file quarterly payroll tax return. C-corporation owners will need to file estimated taxes on the corporations income, and file a 941 quarterly payroll return.

Here are the quarterly payroll tax return due dates for 2019:

April 30, 2019: File Form 941 – Employer’s Quarterly Federal Tax Return. If you made all required payments in full by the due dates, you have 10 more days to submit this form (by February 10).

July 31st 2019: File Form 941 – Employer’s Quarterly Federal Tax Return. If you made all required payments in full by the due dates, you have 10 more days to submit this form

October 31 2019 File Form 941 – Employer’s Quarterly Federal Tax Return. If you made all required payments in full by the due dates, you have 10 more days to submit this form.

January 31, 2020: File Form 941 – Employer’s Quarterly Federal Tax Return. If you made all required payments in full by the due dates, you have 10 more days to submit this form.

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Family Tax Issues, General Information, TAX DEBT RELIEF, Tax Reduction, TAXES

CAN I FILE BANKRUPTCY FOR TAX DEBT?

January 30, 2019January 30, 2019 Howard Tax Prep LLC

Once the IRS assesses a tax bill, it generally has 10 years to collect that amount before the statute of limitations expires. Holy smokes! That’s a long time to have a creditor chasing you! And this isn’t any ordinary creditor. The IRS has a lot of power that it can use to collect your late payments. The IRS can garnish wages, file a notice of federal tax lien, and empty your bank account.

If your tax bill has exploded beyond what you can pay, you’re probably already feeling the hot breath of the IRS. At this point, you need to consider your options for how to reduce or eliminate your tax bill.

If you have thought about bankruptcy, you need to be aware of its limitations. Tax debts are particularly sticky—many of them stay with you even after the bankruptcy process is complete. And it’s important to know that bankruptcy is not your only recourse. The IRS gives you four avenues of relief to help you get out of tax debt that you can read about here. Depending on your circumstances, one or more of those IRS methods could entirely eliminate that horrible tax cloud hanging over your head, or you can look into filing bankruptcy.

It is important to note that bankruptcy is not a simple process and has many lingering effects, such as the potentially decade-long hit to your credit. However, bankruptcy can be the perfect tool in the right situation—and it can permanently eliminate some of your income tax liabilities, including penalties and interest.

The following rules determine whether you can discharge your income tax debt in bankruptcy. You have to meet all three rules to qualify:

RULE #1: Debts must be more than three years old. You have to wait at least three years after the filing deadline for the tax years at issue (normally April 15 for calendar year taxpayers) before you file your bankruptcy petition. In other words, if you file your petition on April 15, 2016, you can discharge tax debts for tax years 2013 and earlier. But note that an extension pushes your filing deadline to October 15. So if you got an extension in 2013, you must wait until October 15, 2016, to file your bankruptcy petition before you can discharge tax debts from 2013.

RULE #2: You must file all tax returns. You have to wait at least two years after you filed your tax return before you file your bankruptcy petition. So what happens if you didn’t file a return for a year? To discharge that debt, you must file that return now and then wait for two years before you file for bankruptcy.

RULE #3: Wait eight months after IRS assessment. You must wait at least 240 days after the IRS assessed your taxes before you file the bankruptcy petition.

As you can see, timing is important. If you want to ensure that the bankruptcy proceeding will clear your tax debts, you must:

Make sure you have filed all of your returns.
Wait until enough time has passed so that you qualify for relief.
Commit No fraud. Bankruptcy will not discharge your debt if you committed fraud or willfully evaded taxes.

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Family Tax Issues, General Information, Self Employed

Tax Consequences of Bartering & Trading

January 11, 2019January 11, 2019 Howard Tax Prep LLC

Author Trudy M. Howard

When it comes to filing taxes in Chicago, many residents believe that they don’t have to file taxes because they were not paid via a W2, 1099, or with cash payments. However, even if you don’t receive cash in exchange for work done, if you receive property or you “bartered” services, you have to report the FAIR MARKET VALUE of the service/property as SELF EMPLOYMENT INCOME!

For example, let’s say one of my baker friends wanted to pay me with cakes (a girl can dream can’t she?) to prepare her taxes, and I agreed to take 5 $50 cakes in exchange for my tax preparation services. Once our transaction was done, the IRS would expect me to report the value of those cakes, and pay self employment taxes on the value of the services/property that what we bartered! Don’t believe me? Read the law for yourself below.

Per the IRS: “Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Generally, you report this income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). However, if the barter involves an exchange of something other than services, such as in Example 4, later, you may have to use another form or schedule instead.”

FACT CHECK me with IRS publication 525 PAGE 19. I’ve included the link to the IRS tax publication here: https://www.irs.gov/pub/irs-pdf/p525.pdf

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Family Tax Issues, General Information, Retirement Income, TAXES

Tax Consequences of Paying Your Retired Parents To Watch Your Children

January 6, 2019 Howard Tax Prep LLC

Author: Trudy M. Howard

QUESTION: Can I claim the money I pay my mom to watch my children after school? She is on S.S. and I would not want to impact her benefits as she is retired. I pay her $260 a week.

ANSWER: With the IRS most answers usually begin with “it depends” and this is one of those answers; it depends. There are several moving parts to this scenario that will determine the tax benefit/liability to you, and the tax benefit/liability to your mom. Tax liability is determined by figuring what location the child care is taking place in, your marital status, the age of the child, and your mom’s total income. It is unclear to me if you have a business, and you are wanting to “claim the money” as in deduct the total amounts paid from your taxable income as a business expense (which you cannot do), or if you want to “claim the money” for the dependent care credit. I’ll get into the dependent care credit later in the article, but for now, let’s start with is your mom an employee, or an independent contractor.

If your mom is doing the babysitting in your home, you may be considered a household employer, and you will NEED TO PAY EMPLOYER TAXES on the money that you paid to your mom. Employer taxes are Federal Unemployment taxes of 6% of the first $,7000 in wages, 6.2% for Social Security, and 1.45% for Medicare. However, as with everything concerning the IRS there is an exception to this rule. You do not have to count the wages paid for social security and Medicare taxes if:

The child is under 18 years of age, or has physical or mental condition that requires the personal care of an adult for at least 4 continuous weeks, AND

You’re divorced and haven’t remarried.
You’re a widow or widower.
You’re living with a spouse whose physical or mental condition prevents him or her from caring for your child for at least 4 continuous weeks in the calendar quarter services were performed.

If your mom is watching your child outside of your home, (say you are dropping your child off to your mom), then your mom would be considered a “self-employed person” which means that she will need to pay self-employment taxes on her income. The reason she will need to pay report and pay self-employment taxes is because she would have earned over $400 in self-employment income.

TAXES MOM WILL HAVE TO PAY.

Because your mom is self-employed, she would have to pay SELF EMPLOYMENT TAXES in the amount of $1,591.20 (calculated using the 20% qualified business income deduction only, not with any business expense deductions), and if she has over $25,000 in income (social security income plus self-employment income), she may also have to pay INCOME TAXES on the earnings.

TAX BENEFIT TO YOU:

By paying your mom to watch your child, you may be eligible to claim the nonrefundable child and dependent care tax credit. The Child and dependent care tax credit ranges from 20%-35% of either $3,000 or $6,000 depending on your adjusted gross income. A qualifying individual for the child and dependent care credit is:

Your dependent qualifying child who is under age 13 when the care is provided.
Your spouse who is physically or mentally incapable of self-care and lived with you for more than half of the year.
An individual who is physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (i) is your dependent; or (ii) could have been your dependent except that he or she has gross income that equals or exceeds the exemption amount, or files a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2018 return.

Once your AGI (adjusted gross income) is over $43,000 the max tax credit you will receive is $600 for 1 child, and $1,200 for 2 children. Each child must be under the age of 13. This credit is nonrefundable, so if you have a $0 tax liability & you receive the $600 credit, you would not receive a tax refund check for the $600.

CAN YOU DEDUCT THE TOTAL $13,520 FROM YOUR TAXABLE INCOME?

Per IRS PUBLICATION 926 The deduction that can be taken on Schedules C and F (Form 1040) for wages and employment taxes applies only to wages and taxes paid for business and farm employees. You can’t deduct the wages and employment taxes paid for your household employees on your Schedule C or F.

WILL THIS MONEY HAVE AN IMPACT ON YOUR MOM’S RETIREMENT BENEFITS?

There are several types of retirement income. Pension, 401k, IRA, Annuities, Social Security, SSI, Social Security Disability, Disability Payments from a Privately Owned Insurance Plan, etc. For purposes of this article I will be focusing on government sponsored retirement plans.

SOCIAL SECURITY RETIREMENT INCOME: –If your mom’s is unmarried, and her base income (including social security and all other income) is $25,000 or less, she will not have to pay any INCOME tax (remember income tax and self-employment taxes are two different taxes).

Per the benefits planner retirement section on the social security website, if your mom is at full retirement age she can earn as much as she wants, and have unlimited resources and still receive her benefits. However, if your mom is younger than full retirement age and makes more than the yearly earnings limit, her earnings may reduce her benefit amount.

“(Full retirement age is 66 for people born between 1943 and 1954. Beginning with 1955, two months are added for every birth year until the full retirement age reaches 67 for people born in 1960 or later.) If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2018, that limit is $17,040.”

To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with

the total of:

One-half of your benefits, plus
All your other income, including tax-exempt interest

SOCIAL SECURITY DISABILITY: –This benefit is based on an inability to work, and work history. Per the disability section on the social security website: “Social Security Disability Insurance pays benefits to you and certain members of your family if you are “insured,” meaning that you worked long enough and paid Social Security taxes.” While there are limits on what a person can earn while on disability, they can receive help from outside sources and retain their benefits.

SSI–SOCIAL SECURITY SUPPLEMENTAL INCOME--The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have financial need, and limited income/resources. This benefit pays a small amount to those that are disabled, but don’t qualify for regular social security disability. The basic monthly SSI payment for 2019 is the same nationwide. It is:

—$771 for one person; or

—$1,157 for a couple.

Not everyone gets the same amount. You may get more if you live in a state that adds money to the federal SSI payment. You may receive less if you or your family has other income. Where and with whom you live also makes a difference in the amount of your SSI payment. SSI eligibility is based on a person’s access to money & assistance, (aka means, aka support, income, total household income), and per the SSA “Income is any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter. Income also includes (for the purposes of SSI), the receipt of any item which can be applied, either directly or by sale or conversion, to meet basic needs of food or shelter.” Resources are limited to $2,000 for single people.
Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Family Tax Issues, General Information, TAXES

5 Steps To Take When Someone Illegally Uses Your Child’s Social Security Number On A Tax Return.

January 3, 2019January 3, 2019 Howard Tax Prep LLC

Author Trudy M. Howard

It’s the end of tax season, you’ve finally gotten all of your documents together, and then it happens; your electronically filed tax return is rejected. Here in our South Loop Chicago Tax Preparation office, I work with many Chicago tax preparation clients that receive the dreaded IRS Reject Codes R0000-507-01 and F1040SSPR-507 . Rejected electronic file codes R0000-507-01 and F1040SSPR-507 mean that the IRS system recognizes the child’s social security number as being claimed on another return. While it may be frustrating, if you are truly entitled to file the child/dependent in question, there are steps you can take to claim your child on your refund after someone filed them.

Step 1: Complete a paper tax return claiming all of your rightful dependents.

Step 2: Complete an IRS Identity Theft Affidavit (IRS form 14039)

Step 3: Locate the IRS mailing address for your state, and mail your paper tax return along with the completed form 14039.

Step 4: Wait on acknowledgment letter that form 14039 was received, and allow the IRS from 120-180 days to resolve your case.

Step 5: The IRS may determine that you need to placed into the PIN program, which means that on an annul basis you will receive a 6 digit Identity Protection pin number that has to be entered on your tax returns.

Also per the IRS Website: “If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490 (Monday – Friday, 7 a.m. – 7 p.m. local time; Alaska and Hawaii follow Pacific time).”

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