Category: Bookkeeping

If you “write off” any employee business expenses for yourself or your employee’s, this article may be for you.

Tax reform brings changes to fringe benefits that can affect an employer’s bottom line and what employee’s can actually deduct on their personal returns. 

 

Source: Tax Reform Tax Tip 2018-162: Tax reform brings changes to fringe benefits that can affect an employer’s bottom line

 

As most of you are aware we have a new tax plan in place for tax year’s 2018 – 2026 (as of now).  Among the many changes previously deductible employee business expenses (including fringe benefits) may be excluded or the process has changed.

Continue reading….

 

The IRS reminds employers that several programs have been affected as a result of the Tax Cuts and Jobs Act passed last year. This includes changes to fringe benefits, which can affect an employer’s bottom line and its employees’ deductions.

Here’s information about some of these changes that will affect employers:

Entertainment Expenses & Deduction for Meals
The new law generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present, and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are purchased or consumed during entertainment events will not be considered entertainment if either of these apply:

  • they are purchased separately from the entertainment
  • the cost is stated separately from the entertainment on one or more bills, invoices or receipts

Qualified Transportation
The new law also disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting. There is an exception when the transportation expenses are necessary for employee safety.

Bicycle Commuting Reimbursements
Under the new law, employers can deduct qualified bicycle commuting reimbursements as a business expense. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income. This means that employers must now include these reimbursements in the employee’s wages.

Qualified Moving Expenses Reimbursements
Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

There is one exception as members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.

Employee Achievement Award
Special rules allow an employee to exclude achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.

 

Like or share this article if it pertains to you or someone you know.

-Thanks, Stephanie

http://www.paulinestaxservices.com

http://www.sctaxlady.com

http://www.irs.gov

http://www.Colorado.gov/revenueonline

 

 

DIY: Do you have a nanny or babysitter? They might be considered a household employee for tax purposes and you might be responsible for paying employment taxes.

 

https://www.irs.gov/publications/p926

DSC03471.2.jpg

 

A client of mine recently had a baby.  Yay, Baby!!  With that bundle of joy comes additional tax responsibilities and implications… and sometimes credits and deductions.

 

She had two questions.  What is the nanny tax? And Is it simple to do it yourself or should you pay a professional payroll company? (Ultimately, my client decided to try it out herself before she hires a payroll service.  As with any business there are initial startup costs and then monthly bookkeeping and filings. Sometimes certain forms can be filed on a quarterly or annual basis. Record keeping and organization is imperative for “keeping the books” long term.)

 

 

Many years ago, nanny’s and day care providers were simply considered self employed and filed their income and expenses on the Schedule C (attached to the 1040). The family would pay cash or check and the nanny or sitter would account for it on their own returns.   However, now, the tax law states that if nanny’s are paid more than $2,000 a year they are considered employees and are subject to all of the regular employment taxes, unemployment insurance and workman’s comp. Thus creating additional paperwork and costs.

 

What is the nanny tax? And is it easy to DIY

This weird sounding tax is actually just basic employment and payroll taxes.  All employees and/or employers are required to pay social security taxes, Medicare taxes, and sometimes unemployment insurance.  The “employers” may or may not withhold and pay federal /state too.  You’ll save quite a bit of money doing it yourself and its not that difficult.  Although, it is work in a sense and it takes a bit of time.

Requirements:

  1. Be able to read and follow directions. Have some patience.
  2. Be organized: calculate hours worked, gross income and net income.
  3. Be tech savvy. Most of this stuff can be done online. It’s also handy to have a scanner/copier/ printer handy but it’s not required necessarily.
  4. Be able to follow due dates and pay on time (or you’ll be subject to fees and penalties).  Ex: for unemployment insurance,  you usually calculate January thru March and the money is due in April.

 

 

Startup

Go to irs.gov and search for form SS-4 (fss4), Employers federal ID number.  Fill it in and apply online, or download the pdf to a computer and fill it out by hand then mail it in. Im sure the agencies hate it, but I still do alot by hand and use my stamps.com account to mail it in.

Go to Colorado.gov/revenueonline and apply for a state wage withholding license (only if withholding state tax for your employee).

 

IRS’s publication 926  instructs household employers of their duties.  I’m going to use a combination of that publication and my own insight and experience to describe the process to do your own bookkeeping and payroll when you have certain employees.

 

The Numbers for Social Security and Medicare tax  Employer W-2 Filing Instructions & Information

The social security tax rate is 6.2% each for the employee and employer, unchanged from 2016. The social security wage base limit is $127,200.  The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2016. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household employees you pay $2,000 or more in cash in 2017.

 

The process *not including responsibilities for withholding federal and state taxes for the employee*

Example. On February 13, 2017, Mary Brown hired Jane A. Oak (who is an unrelated individual over age 18) to care for her child and agreed to pay cash wages of $50 every Friday. Jane worked for the remainder of the year (a total of 46 weeks). Jane didn’t give Mary a Form W-4 to request income tax withholding. The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. See the completed examples of Form W-2 and Form W-3 for 2017 at the end of this publication

 

Total cash wages paid to Jane                                      $2,300.00

($50 x 46 weeks)

 

Jane’s share of: Social security tax is $142.60             EE share

($2,300 x 6.2% (0.062))

 

Medicare tax is $33.35                                                     EE share

($2,300 x 1.45% (0.0145))

 

Mary’s share of:Social security tax is $142.60             ER share

($2,300 x 6.2% (0.062))

 

Medicare tax $33.35                                                         ER share

($2,300 x 1.45% (0.0145))

 

Amounts reported on Form W-2 and Form W-3:Annual reconciliation at tax time.  Additionally, the schedule K will be added to the individual 1040 and reconciled that way.  You may or may not be required to pay estimated quarterly tax payments to ensure you don’t owe more than $1000 at the end of the year.  Talk to your tax professional.

Box 1: Wages, tips                          $2,300.00

Box 3: Social security wages        $2,300.00

Box 4: Social security tax withheld $142.60

Box 5: Medicare wages and tips  $2,300.00

Box 6: Medicare tax withheld is     $33.35

 

The  social  security  tax  pays  for  old-age,  survivors,  and disability benefits for workers and their families. The Medicare tax pays for hospital insurance. Both you and your household employee may owe social  security  and  Medicare  taxes.  Your  share  is  7.65% (6.2% for social security tax and 1.45% for Medicare tax) of  the  employee’s  social  security  and  Medicare  wages. Your employee’s share is also 7.65% (6.2% for social security tax and 1.45% for Medicare tax). Continue reading “DIY: Do you have a nanny or babysitter? They might be considered a household employee for tax purposes and you might be responsible for paying employment taxes.” →

“Tax time” is creepin. If you stay ready, you don’t have to get ready. Pauline’s Tax Service will be making some changes going forward for next year – Stay informed.

As the next couple of months cruise by there will be more information inserted on to my website to help prepare you for the upcoming tax due date of  April <15-18>, 2018. 

*There are going to be many changes this year, it seems, due to a new tax plan, although its not confirmed.  I’ll try to keep you updated with that too.

 

Pauline’s Tax Service, Ltd – By Stephanie

 

Over the last 2 or 3 years I have worked tirelessly to ensure the best possible service for this type of duty and for my clients, many of whom I inherited more than 11 years ago from my grandma, Pauline Parris.   This work was important to her, and it is to me too.  With that being said, there will most likely be many changes over the next 2 years as I’m trying to reconstruct and reorganize my business plan. Expansion is in our future.

In-office appointments are going to be limited.  The office address is going to remain the same for mail in’s, drop off’s, pick up’s and meeting’s.  The conference room will be available for those tough situations, but this means that some additional time & planning might be in order.  Documents can be submitted via mail, drop off, e-mail, fax, or uploaded to the client portal.  Limited in-office appointments will be available for 2018. Thanks in advance for any inconvenience. 

 

*Before you would like your returns started – make sure you have all of your documents AND other information included before you send it to Pauline’s Tax Service for preparation.  Some returns that include the earned income credit or 

 

Address:  12365 Huron St., Suite 1800 Westminster Co 80234

Phone:     720-893-3712 ext.105

Fax:          303-252-4664

Email for Stephanie

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Why you, the taxpayer, should have a clue.

 

Every year, during tax season and throughout the rest of the year, I encounter many common misconceptions and misunderstandings about what a taxpayer’s and tax advisor’s ‘job’ is, what is expected, and what is required.

 

The relationship between the two (taxpayer/tax preparer) should be viewed as a professional partnership much like that with your doctor or lawyer.  The information or data that you know and understand and can provide will enable the professional to do their job efficiently, which is an extension of what the tax payer (you) already knows.

 

Every day we make decisions that have a cause and effect on the various aspects of our lives.  A majority of those decisions have a financial impact and are economic in nature.  Many of the stats and information included in my blogs are taken from the text “Concepts in Federal Taxation” and what I want stress is that most economic transactions have an income tax effect and tax consequences ~ the income tax law influences personal decisions and enables a person to reduce other costs.

 

Although a competent tax advisor will know about tax planning techniques and current tax developments you will be more familiar than an advisor is with your financial affairs and objectives, but the two of you must work together to achieve your long term goals.

 

Ultimately, it is your money (responsibilities) and you should have a clue about how much tax you pay, where that money goes, and how to reduce certain costs.  Save, invest, purchase, sell, VOTE…. if you and your tax preparer stay educated and informed, together you will make the most of your income and expenses.