Tag: Federal Income Tax

Extension of ability to do tax-free Individual Retirement Account rollovers to charity

IRA

 

The American Taxpayer Relief Act of 2012 (ATRA) extended the qualified charitable distribution (QCD) provisions for 2012 and 2013. Several special transition rules were included in ATRA to enable taxpayers to have a donation made before February 1, 2013, treated as a 2012 QCD.

A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. An IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year. Also, the amount of a QCD excluded from gross income is not taken into account in determining any deduction for charitable contributions.

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Partial list of taxes and fees in health overhaul

healthcareStarting in 2014, President Barack Obama’s health care law will expand coverage to some 30 million uninsured people. At the same time, insurers no longer will be allowed to turn away those in poor health, and virtually every American will be required to have health insurance — through an employer or a government program or by buying it on their own.

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The First Middle Class Tax Increase

The temporary decrease in the employee portion of the Social Security Tax is set to expire December 31, 2012.  Neither party seems inclined to extend it.  Since the Social Security Tax wage base is $110,00, employees earning over $110,000 do not pay this tax.  This indicates that this rise in tax rates will only affect the lower and middle class.

Toppling Off the Fiscal Cliff: Whose Taxes Rise and How Much?.

Submerged Government Assistance

http://nyti.ms/UAJh57

Suzanne Mettler and John Sides write in their NY Times article that 96% of Americans have relied on government assistance. This  includes the deduction for mortgage interest and tax free employer paid health insurance. They call these submerged government social policies. In my opinion, these are the two most likely tax benefits that we will lose in order to balance the federal budget.  They also note that ideology determines whether we label government policies as used by producers or moochers.

Good for the goose? Deferred Comp for Private Equity Fund Managers

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.”

Alfred Eisenstaedt/Time & Life Pictures, via Getty Images

Learned Hand, the federal appeals court judge.

— Judge Learned Hand, 1934

Private Equity fund managers use waived management fees to make required contributions to fund a new acquisition of their funds. This is similar to receiving a partnership interest for services which is clearly taxable. Ultimately, the managers pay the cap gain rate on this investment rather than the ordinary income rate.  Why doesn’t the IRS challenge this?

A Private Equity Tax Tactic May Not Be Legal – High & – Low Finance – NYTimes.com.

Per Diem Trivia

Thanks and a hat tip to the US State Department:

The General Services Administration establishes Per Diem Rates for the 48 continental United States and the District of Columbia.  The rates, known as CONUS rates, are normally established in October of each year.  GSA also establishes maximum rates of reimbursement for use of personally owned vehicles (POV).

The Per Diem rates for non-foreign, non-contiguous U.S. areas are established by the Department of Defense Per Diem, Travel and Transportation Allowance Committee (PDTATAC). PDTATAC establishes Per Diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island and other non-foreign areas outside the continental United States.   Updated information on non-foreign area per diems are published periodically in Civilian Personnel Per Diem Bulletins.  The Per Diem Committee also establishes maximum per diem rates for U.S. military bases.
For Per Diem rates for foreign locations, click on Foreign Per Diem Rates by Location.

 

The Nanny Tax

In January 1993, Clinton’s nomination of corporate lawyer Zoë Baird for the position of attorney general came under attack after it became known that she and her husband had broken the law by employing two illegal aliens from Peru as a nanny and chauffeur for their young child. They had also failed to pay Social Securitytaxes for the workers until shortly before the disclosures. While the Clinton administration thought the matter was relatively unimportant, the news elicited a firestorm of public opinion, most of it against Baird. Within eight days, her nomination lost political support in the U.S. Congress and was withdrawn. (Nannygate)

Do you have a Nannygate problem?  Employing undocumented workers is not the critical issue here, it is the non payment of employment taxes for services provided in your home by an employee.

From IRS Publication 926:  It is unlawful for you to knowingly  hire or continue to employ a person who cannot legally work in the United States.  You must complete a Form I-9  on each person that regularly works for you.

If you will pay cash wages of $1800 or more to any one household employee, then you need to withhold and pay social security and medicare taxes and give that employee a Form W-2.  State and federal unemployment taxes may be due, also.

Household Employer’s Checklist

You may need to do the following things when you have a household employee.
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 31, 2013: □ Get an employer identification number (EIN).
□ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax Statement.
By February 28, 2013 (April 1, 2013, if you file Form W-2 electronically): □ Send Copy A of Form W-2 to the Social Security Administration (SSA).
By April 15, 2013: □ File Schedule H (Form 1040), Household Employment Taxes, with your 2012 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.

 

Form 944 – Am I Eligible?

To file Form 944, Employer’s Annual Federal Tax Return,  you must be notified by the IRS that you are eligible to file Form 944.    If you estimate that your annual payroll tax liability for 2012 will be $1,000 or less and would like to file Form 944 instead of quarterly Forms 941, now is the time to contact the IRS to request to file Form 944.

To File Form 944 for calendar year 2012, you must call the IRS at 1-800-829-4933 by April 2, 2012, or send a written request postmarked by March 15, 2012.  The IRS will send you a written notice that your filing requirement has been changed to Form 944.  If you do not receive this notice, you must file quarterly Forms 941 for calendar year 2012.

 New employers are also eligible to file Form 944 if they will meet the eligibility requirements. New employers filing Form SS-4, Application for Employer Identification Number, must complete line 13 of Form SS-4 indicating the highest number of employees expected in the next 12 months and must check the box on line 14 to indicate whether they expect to have $1,000 or less in employment tax liability for the calendar year and would like to file Form 944.

Generally, if you pay $4,000 or less in wages subject to social security and Medicare taxes and federal income tax withholding, you are likely to pay $1,000 or less in employment taxes. New employers are advised of their employment tax filing requirement when they are issued their EIN.

Written requests to file Form 944 should be sent to: Department of Treasury, Internal Revenue Service, Ogden, UT 84201-0038 or Department of Treasury, Internal Revenue Service, Cincinnati, OH 45999-0038.