13 Sep 2020
0

More Parents May Owe “Nanny Tax” This Year

Roger Rossmeisl, CPA
Individual Tax Briefs
More People May Owe Nanny Tax This Year

In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This means that more parents may owe "nanny tax" this year. Keep in mind that the nanny tax may apply to all household workers, including housekeepers, babysitters, gardeners or others who aren’t independent contractors. If you employ someone who’s subject to the nanny tax, you aren’t required to withhold federal income taxes from the individual’s pay. You only must withhold if the worker asks you to and you agree. (In that case, ask the nanny to fill out a Form W-4.) However, you may have other withholding and payment obligations. Withholding FICA and FUTA You must withhold and pay Social Security and Medicare taxes (FICA) if your nanny earns...

13 Sep 2020
0

Tax Implications of Employer-Provided Life Insurance

Roger Rossmeisl, CPA
Individual Tax Briefs
Tax Implications of Employer-Provided Life Insurance

Does your employer provide you with group term life insurance? If so, and if the coverage is higher than $50,000, this employee benefit may create undesirable income tax consequences for you. “Phantom income” The first $50,000 of group term life insurance coverage that your employer provides is excluded from taxable income and doesn’t add anything to your income tax bill. But the employer-paid cost of group term coverage in excess of $50,000 is taxable income to you. It’s included in the taxable wages reported on your Form W-2 — even though you never actually receive it. In other words, it’s “phantom income.” What’s worse, the cost of group term insurance must be determined under a table prepared by IRS even if the employer’s actual cost is less than...

06 Sep 2020
0

What Happens When You Can’t Pay Your Taxes?

Roger Rossmeisl, CPA
Individual Tax Briefs
What Happens When You Cant Pay Your Taxes?

While you probably don’t have any problems paying your tax bills, you may wonder: What happens in the event you can’t pay your taxes on time? Here’s a look at the options. Most importantly, don’t let the inability to pay your tax liability in full keep you from filing a tax return properly and on time. In addition, taking certain steps can keep the IRS from instituting punitive collection processes. Common penalties The “failure to file” penalty accrues at 5% per month or part of a month (to a maximum of 25%) on the amount of tax your return shows you owe. The “failure to pay” penalty accrues at only 0.5% per month or part of a month (to 25% maximum) on the amount due on the...

06 Sep 2020
0

Stepped-Up Basis of Inherited Property

Roger Rossmeisl, CPA
Individual Tax Briefs
Stepped-Up Basis of Inherited Property

If you’re planning your estate, or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes.  Generaly, there is a stepped-up basis of inherited property. Fair market value rules Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. So, for example, if your grandfather bought ABC Corp. stock in 1935 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax forever. The fair market value basis rules apply to inherited property that’s includible in the deceased’s gross estate,...

06 Sep 2020
0

Are Scholarships Tax-Free or Taxable?

Roger Rossmeisl, CPA
Individual Tax Briefs
Are Scholarships Tax-Free or Taxable?

COVID-19 is changing the landscape for many schools this fall. But many children and young adults are going back, even if it’s just for online learning, and some parents will be facing tuition bills. If your child has been awarded a scholarship, you might be wondering . . . are scholarships tax-free or taxable? Scholarships (and fellowships) are generally tax-free for students at elementary, middle and high schools, as well as those attending college, graduate school or accredited vocational schools. It doesn’t matter if the scholarship makes a direct payment to the individual or reduces tuition. Tuition and related expenses However, for a scholarship to be tax-free, certain conditions must be satisfied. A scholarship is tax-free only to the extent it’s used to pay for: Tuition and fees...

06 Sep 2020
0

Back-to-School Tax Breaks

Roger Rossmeisl, CPA
Individual Tax Briefs
Back-to-School Tax Breaks

Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person or under a hybrid schedule. In any event, parents may be eligible for certain back-to-school tax breaks to help defray the cost of education. Here is a summary of some of the tax breaks available for education. (1) Higher Education Tax Credits Generally, you may be able to claim either one of two tax credits for higher education expenses — but not both. With the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 from your tax bill for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for...

23 Aug 2020
0

Make Sure Your Withholding is Adequate

Roger Rossmeisl, CPA
Individual Tax Briefs
Make Sure Your Withholding is Adequate

Did you recently file your federal tax return and were surprised to find you owed money? Make sure your withholding is adequate so that this doesn’t happen next year. You might even want to do that if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan. Withholding changes In 2018, the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks. In general, the amount withheld was reduced. This was done to reflect changes under the Tax Cuts and Jobs Act (TCJA) — including an increase in the standard deduction, suspension of personal exemptions and changes in tax rates. The tables may have provided the correct amount of tax withholding for some...

29 Jul 2020
0

Consider Taxes When Selling Your Home

Roger Rossmeisl, CPA
Individual Tax Briefs
Consider Taxes When Selling Your Home

Traditionally, spring and summer are popular times for selling a home. Unfortunately, the COVID-19 crisis has resulted in a slowdown in sales. The National Association of Realtors (NAR) reports that existing home sales in April decreased year-over-year, 17.2% from a year ago. One bit of good news is that home prices are up. The median existing-home price in April was $286,800, up 7.4% from April 2019, according to the NAR. If this is your year, consider taxes when selling your home.  It’s a good time to review the tax considerations. Some gain is excluded If you’re selling your principal residence, and you meet certain requirements, you can exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for the exclusion is also excluded from the...

16 Jul 2020
0

Can Seniors Deduct Medicare Premiums?

Roger Rossmeisl, CPA
Individual Tax Briefs
Can Seniors Deduct Medicare Premiums

If you’re age 65 and older, and you have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially if you’re married and both you and your spouse are paying them. You may be wondering, can Seniors deduct Medicare premiums? The silver lining is that you may qualify for a tax break for paying the premiums. Tax deductions for Medicare premiums You can combine premiums for Medicare health insurance with other qualifying health care expenses for purposes of claiming an itemized deduction for medical expenses on your tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all...

16 Jul 2020
0

Erroneous Economic Impact Payments Must Be Returned

Roger Rossmeisl, CPA
Individual Tax Briefs
Erroneous Economic Impact Payments Must Be Returned

The IRS and the U.S. Treasury had disbursed 160.4 million Economic Impact Payments (EIPs) as of May 31, 2020, according to a new report. These are the payments being sent to eligible individuals in response to the economic threats caused by COVID-19. The U.S. Government Accountability Office (GAO) reports that $269.3 billion of EIPs have already been sent through a combination of electronic transfers to bank accounts, paper checks and prepaid debit cards.  Eligible individuals receive $1,200 or $2,400 for a married couple filing a joint return. Individuals may also receive up to an additional $500 for each qualifying child. Those with adjusted gross income over a threshold receive a reduced amount.  However, the IRS says some payments were sent in error and such erroneous economic impact...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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