5 Must Reads On Individual Tax Planning Strategies

5 Must Reads On Individual Tax Planning Strategies

by | Jun 6, 2018 | Individual Tax

Many of us don’t realize that managing taxes for the upcoming year actually begins the year before. If you are employed, that means making choices in your benefits enrollment that will help pay for certain things on pre-tax monies or helping you to save money for retirement faster.

If you didn’t take care of some of these issues during the end of last year, all is not lost for current year. There are still a few things you can do!

Maximize on your 401(k) or 403(b)

If you are employed by a company, you are probably familiar with the 401(k) term. If you work for a government or education entity, the 403(b) is the sister version in terms of tax planning. In both cases, it is money for your retirement, and the government gives you an incentive to save.

The IRS allows people under the age of 50 to contribute $18,500 tax exempt in 2018. If you are over 50, you can actually make an additional “catch up” contribution of $6,000. Now, if that sounds like it’s too much, that’s okay. Put what you can in – it’s for your future and every little bit helps!

If you employer matches your contribution to a certain percentage, you should be making a contribution for your company match. It’s free money! Why would you want to leave it on the table?

Example:  If your employer matches at 20% up to the first $1000 you put into your 401(k) or 403(b) account, you should be putting $1000 into that account! You would have automatically made $200 on that money without any investing, and chances are, you are not going to miss that $50 per month from your paycheck!

Keep Track of Medical Expenses

If you forgot to sign up for a Flexible Spending Account (FSA) or a Health Care Spending Account (HCSA), and you have a lot of medical expenses, then save those receipts. They will come in handy during tax time when your tax preparer asks for them and if these expenses exceed 7.5% of your adjusted gross income in 2018 (but the 10% threshold returns in 2019), they become deductible.

Speaking of Which, Plan Ahead for 2019

Keep an eye out for the benefit sign-up. Most companies start this around the October/November timeframe, but for tax planning purposes you should check with your human resources department to get more information about benefits enrollment. Once that occurs, remember to sign up for the FSA, HCSA, or HSA plans. These benefit plans can save you up to $2,650 on your reportable income, and allow you to sock away some hard earned cash for medical expenses. Do remember that each type of plan does have special advantages and disadvantages, so it’s best to weigh each option and figure out which is the right plan for you.

Need Some Education to Boost Your Skills?

Attending a professional training or taking a college course that is tied into your current job responsibilities can actually help lower your taxes by providing tax credits.

Decrease Your Withholding if You Owe a Lot of Taxes

If you owe a large tax bill every year, you can decrease your withholding amount so that you owe less taxes for the 2019 tax year. Of course, every situation is a bit unique and it is normally up to you how you want to allocate your taxes. If you need more help, please feel free to contact MiklosCPA and we’ll discuss a solution that works for you.

Want to find out how to save more money? Follow us on Twitter and Facebook to get notified when new tax tip articles are out!

Utilizing the Electronic Federal Tax Payment System (EFTPS)

Utilizing the Electronic Federal Tax Payment System (EFTPS)

by | Jun 9, 2017 | Business Tax

Nowadays you can do almost anything online, and that includes paying your taxes too! The US Department of Treasury has set up the Electronic Federal Tax Payment System (EFTPS), a free service to taxpayers who wish to pay their taxes to the IRS online.

Enrollment in EFTPS

Enrolling is a fairly straightforward procedure. You can either do it online or by phone. Once you have gone through the prompts and enrolled, you will receive a PIN number which you will use to log in and begin scheduling payments. Expats and other international taxpayers can also enroll with EFTPS, making it more convenient than having to mail tax forms from the other side of the world.

Scheduled Payments with EFTPS

While EFTPS is a convenient system, it is still the taxpayer’s responsibility to set up and initiate tax payments properly. Tax payments must be submitted to EFTPS by 8PM EST at least one calendar day before the tax due date. Taxpayers also need to make sure the appropriate funds are in the bank account designated for EFTPS payments. Taxpayers can check the status of payments made, schedule payments up to 365 days in advance, and can even schedule regular payments as weekly, biweekly, monthly, or quarterly payments. It is a fairly useful service for corporations who need to provide quarterly estimated payments. Payments can be canceled as well, however must do so by 11:59PM EST at least two business days before the tax due date.

If you have a payroll service that makes tax payments on your company’s behalf, you can still enroll with EFTPS. It is a useful way to make sure tax payments have been processed. It also provides some flexibility in case you may have to change payroll service companies in the future and will still have access to EFTPS.

With the convenience of online tax payments, business owners can save time and focus on other matters. Of course, the preparation of the taxes can be another issue, unless you have a proper supporting team for that as well. Which is where we can come in. MiklosCPA helps businesses with their back-room accounting and taxation needs, such as setting up EFTPS for your business and preparing the appropriate quarterly payments. If you would like to learn more about our services, please contact us.  Also, follow us on our social media pages for future tax tip articles like this one!

Employers and Employee Taxes You Must Know

Employers and Employee Taxes You Must Know

by | Apr 20, 2017 | Business Tax

Do you own a business, or at least have thought about running one? There are lots of steps involved in setting up a business, but for this article series, we will take a look at employee taxes. As part of the duties of managing a business, employers are also responsible for their employees and the taxes that are connected with retaining them.

Employees

Put briefly, employees are defined as workers that an employer has the right to control over the kind of work to be done and how that work will be done. All employees are subject to payroll taxes (Social Security, FICA, etc.) with some exceptions. For example, children under the age of 18 who do minor domestic work for their parent’s business, such as cleaning, may not be subject to payroll taxes if the business is a sole proprietorship or partnership.

New employees have to submit to their employers a IRS Form W-4 to indicate their tax filing status (single, married, etc.), and any allowances and exemptions to determine the amount of wages an employer will have to withhold for federal income taxes.

Wages and Other Compensation

Wages paid to employees are subject to the federal income tax. This includes bonuses, salaries, vacation pay, allowances, tips, and other forms of supplementary payments that are not necessarily cash. These supplemental wages and other compensation to employees will need to be reported on Form 941.

Form 941

Form 941 is filed quarterly with the IRS to report wages and other types of compensation paid to employees along with reporting the amounts of tax withholding an employer makes towards federal income tax, FUTA, and other payroll taxes.

Payroll Period

This is the general period of time set for paying wages. Biweekly is the probably the most common example of a payroll period, but employers may have monthly, weekly, or even quarterly payroll periods. The kind of payroll period will also determine how withholdings are calculated. Taxes for employees are withheld for that period regardless if the employee worked the entire period or not. For employees who do not have a regular pay period, such as employees paid on sales commissions, withhold the tax as if wages were paid on a regular pay period by counting back the days (including weekends and holidays) back to their last wage payment in the same calendar year.

In the next part of this series, we will go over some of the finer details in calculating the amounts of tax withholding from employee’s gross pay.  Follow us on our social media pages to be up to date when we post the next article in this series, and for future tax tip articles!

Employee taxes can get complicated and time consuming for businesses to take care of on their own, so that is where we come in. MiklosCPA provides accounting and tax advising services for small business owners so we can take care of your accounting while you grow the business.

We’ve got it covered, so you can charge on ahead! If you’d like to learn more about our services, contact us!

 

 

How to Manage In Home Child Care Taxes

How to Manage In Home Child Care Taxes

by | Feb 26, 2017 | Individual Tax

What happens when you pay for an “in home person” to provide child care tax wise? MiklosCPA was recently approached by a family who had a person come in regularly to provide “in-home” child care for their son and daughter. They were confused by all the different rules and exemptions and wanted our CPA firm to help untie the knot for them regarding child care taxes.

When you really look at this kind of arrangement, you really are hiring what is known as a “Household Employee”. When you do so, you have the option of either withholding or not withholding the employee’s Social Security, Medicare taxes, and income taxes.

There are, however, a few pointers that you should be careful of:

When you hire a household employee: Find out if the person can legally work in the United States. Find out if you need to pay state taxes.
When you pay your household employee: Withhold social security and Medicare taxes. Withhold federal income tax. Decide how you will make tax payments. Keep records.
By January 31st of the following year: Get an employer identification number (EIN). Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.
By February 28th of the following year (March 31st, if you file Form W2 electronically): Send Copy A of Form W-2 to the Social Security Administration (SSA).
By April 15, of the following year: File Schedule H (Form 1040), Household Employment Taxes, with your 2016 federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041). If you do not have to file a return, file Schedule H by itself.

Example:

Let’s say you pay a household employee to care for your child and pay cash wages of $100 every Friday when she is at your Azusa home. You expect this employee to make $1800 or more for the year. You decide to pay the social security and Medicare taxes for that employee.

Then every paycheck, you would pay an additional $15.30 for the employee’s taxes. This is broken down into $7.65 for you, and $7.65 for your employee in terms of the total Social Security and Medicare tax due. For income tax purposes you would indicate that your employee’s wages were $107.65, or the regular wages plus the portion of the Social Security and the Medicare tax covered.

You are required to fill out a W-2 as well before the first month of the following tax year, and maintain your records for four years.

Does this sound too confusing? We agree that child care taxes and withholdings are in fact confusing. However, our accounting practice is here for the rescue and can manage your reporting requirements and perform the payroll functions for your household employee.

If you enjoyed this tax tip, please share it with your friends and family on Facebook and Twitter! We welcome any feedback you may have!

Things You Absolutely Need To Know For Personal Tax Return

Things You Absolutely Need To Know For Personal Tax Return

by | Feb 10, 2017 | Individual Tax

We know that a few months may be a long time but personal tax return filing and paying taxes are due on April 15th, so it’s important to start gathering documentation and getting yourself organized. After all, you know what you accomplished and this time of year lets you take a view of what you’ve done!

Here are some answers to some Frequently Asked Questions:

  • Can I file my taxes after April 15th? – Yes, but you need to let the IRS know that you will be late. The penalties and interest don’t go away, but you are given a small grace period to get everything done. If you have all of the information at your fingertips, why pay the penalties in the first place? You still have time to get all your information together and if you need some guidance, we can give you a hand. Give us a call at MiklosCPA and we’ll help file the extension for you.
  • I’m missing my W-2 forms. What now? – Talk to your HR department or our employer about obtaining a copy. If they are not able to give one to you, the IRS may already have it on their system. It may be just a quick phone call to get it replaced.
  • Can I still make IRA contributions? – Yes, you can still make Traditional and ROTH IRA contributions up until April 15th.
  • Is there an age limit on claiming my child as a dependent? – Generally, your child has be to be younger than 19 years old, or if your child attends a school, they should be younger than 24 years old.
  • I heard about the Flexible Spending Plan rollover, where my company is supposed to rollover $500 of my FSA plan to the next business year if I did not use it up.  – Did that happen in 2016? Possibly. The rollover may apply to your 2016 plan. We recommend contacting your human resources department in your company to discuss this in more detail.
  • I am currently going to school and want to claim my tuition. How do I proceed? – It depends on a few things. The IRS rules around this particular issue can be a bit complex. A lot of what you can and cannot claim relates to whether or not you are currently employed, and if the schooling goes towards it. If it doesn’t, there are one set of tax credits. If it does, you may be entitled to claiming more. We recommend looking at the IRS article Tax Benefits for Education.

At MiklosCPA, our California-based CPA firm can help you e-file your personal taxes earlier so you can get this done and off your list! Plus, if you have a refund, why wait to get your money? Contact us today and we can provide you with a free tax organizer to get you started!

Additionally, give MiklosCPA a call if you wish to discuss your particular circumstances!

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