Tax Tips Archives - Robert J. Kratz & Co.

Business owners should visit IRS.gov for help with tax actions when closing a business

January 13 2021 RgKAdmin14 Tax Tips, Closing a Business 0 comments Tags: IRS Closing a business

Closing a business is always a difficult decision regardless of the circumstances. With this in mind, the IRS redesigned the closing a business page of IRS.gov to help business owners navigate the federal tax steps when closing a business.
Small businesses and self-employed taxpayers will find a variety of information on the page including:

What forms to file
How to report revenue received in the final year of business
How to report expenses incurred before closure

The page also details steps all business owners should take when closing.

File a final tax return and related forms. The type of return to file and related forms depends on the type of business.
Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits, and report employment taxes.
Pay taxes owed. Even if the business closes now, tax payments may be due next filing season.
Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments.
Cancel EIN and close IRS business account. Business owners should notify the IRS so they can close the IRS business account.
Keep business records. How long a business needs to keep records depends on what’s recorded in each document.

This blog provides summary information regarding the subject matter at the time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten, or redistributed without permission, except as noted here. This blog includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this blog. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does ROBERT J KRATZ & CO have any control over, or responsibility for, the content of any such Websites. All rights reserved.

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Is a Tax Trap Lurking in Your Paycheck?

November 12 2020 RgKAdmin14 Tax Tips 0 comments Tags: Paycheck tax trap, tax traps, paycheck

Does your paycheck look a little higher than normal? If so, it could be a tax trap.

The Problem

A payroll tax holiday effective September 1 was recently signed via presidential executive order. Payroll tax holidays typically provide forgiveness of Social Security and Medicare taxes that are normally withheld from your paycheck.

This year’s tax holiday, however, is NOT necessarily forgiveness of Social Security and Medicare taxes because the order is not yet supported by an underlying legislative action. So even if your employer removes your Social Security and Medicare tax from recent paychecks, there is a possibility you will need to pay it back at a later date. That could mean a pretty large tax bill for you in early 2021!

What you need to do

Compare paychecks. Get your last paycheck from August and your first paycheck from September. Compare the amount of Social Security and Medicare taxes withheld from your August paycheck to your September paycheck. If the amounts are the same, then your Social Security and Medicare taxes are still being withheld.If you notice that the amounts are different, or that no Social Security or Medicare taxes are withheld from your September paycheck, then that’s a signal you may have a tax repayment bill in early 2021.
Remember to keep checking each paycheck. Companies are struggling to figure out if they are required to comply with the presidential executive order, payroll providers are trying to figure out how to comply, and everyone is wondering whether the tax obligation will be permanently forgiven.
Be prepared to pay it back. If no Social Security or Medicare taxes have been withheld from your paycheck through the end of 2020, be prepared to write Uncle Sam a check to pay these taxes in early 2021. If possible, open a savings account to set aside the Social Security and Medicare taxes that were not withheld from your paychecks. When it comes time to pay your taxes, the money will be ready to go.
Check back here for updates. There’s a chance Congress passes a law that forgives the Social Security and Medicare taxes not withheld from your paychecks. If this happens, you will have a nice start on an emergency savings fund should you need it.

If you have any questions about how this payroll tax executive order affects you, please call.

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A tax checklist for newly married couples

October 29 2020 RgKAdmin14 Tax Tips 0 comments Tags: tax tips for the newly married, tax tips

Marriage changes a lot of things and taxes are on that list. Newlyweds should know how saying “I do” can affect their tax situation.

Here’s a checklist of items for newly married couples to review:

Name and address changes
– Name. When a name changes through marriage, it is important to report that change to the Social Security Administration. The name on a person’s tax return must match what is on file at the SSA. If it doesn’t, it could delay any tax refund. To update information, taxpayers should file Form SS-5, Application for a Social Security Card. It is available on gov, by calling 800-772-1213or at a local SSA office.
– Address. If marriage means a change of address, the IRS and U.S. Postal Service need to know. To do that, people should send the IRS Form 8822, Change of Address. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office.
Withholding
– After getting married, couples should consider changing their withholding. Newly married couples must give their employers a new Form W-4, Employee’s Withholding Allowancewithin 10 days. If both spouses work, they may move into a higher tax bracket or be affected by the Additional Medicare Tax. They can use the IRS Withholding Estimator on IRS.gov to help complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax for more information.
Filing status
– Married people can choose to file their federal income taxes jointly or separately each year. While filing jointly is usually more beneficial, it’s best to figure the tax both ways to find out which works best. Remember, if a couple is married as of Dec. 31, the law says they’re married for the whole year for tax purposes.
Scams
– All taxpayers should be aware of and avoid tax scams. The IRS will never initiate contact using email, phone calls, social media or text messages. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax accountinformation on IRS.gov to find out.

This blog provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, re-written or redistributed without permission, except as noted here. This blog includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this blog. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does ROBERT J KRATZ & CO have any control over, or responsibility for, the content of any such Websites. All rights reserved.

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Be Prepared for Pandemic Tax Surprises

June 18 2020 RgKAdmin14 Tax Tips, Economic Incentive Payment 0 comments

Numerous new laws provide economic relief to individuals and businesses hardest hit by this year’s pandemic. This much-needed financial assistance, however, comes with a few strings attached.
Here are three potential surprises if you use the available economic relief packages:

Getting a tax bill for unemployment benefits. While the $1,200 economic impact payments most Americans received does not have to be reported as taxable income on your 2020 tax return, there is currently no such luck with unemployment benefits. In addition to paying federal taxes on your unemployment compensation, more than half of states also impose a tax on unemployment benefits.What you need to do: See if your unemployment compensation check withholds a portion of your pay for taxes. Even if your check does have withholding for income tax purposes, the withholding amount may not be enough. If possible, talk to your state unemployment office and try to get withholding amounts revised.

Paying estimated tax payments. If you normally receive a paycheck from your employer, you may have never needed to write a check to the IRS to pay estimated future taxes. Your employer withholds your taxes from your paychecks and sends it to the IRS for you. If you’re collecting unemployment benefits, however, you may be required to pay tax on the unemployment benefits received during the first six months of 2020 by July 15, 2020.What you need to do: Estimate the amount of tax you owe for all sources of income, then compare that number with the amount of money withheld from your income to pay these taxes. If necessary, send in quarterly estimated tax payments to the U.S. Treasury and, in some cases, state revenue departments. This must be done each quarter with the next payment due July 15. You may need to send money in on September 15, 2020 and January 15, 2021 as well.

Reporting emergency distributions from retirement accounts: You may withdraw up to $100,000 in 2020 from various retirement accounts to help cover pandemic-related emergency expenses without incurring penalties. While you will not be required to pay an early withdrawal penalty, you will still be subject to income tax when filing your 2020 tax return.What you need to do: If you plan to withdraw funds from your retirement account, reserve enough of the money to pay the tax! The amount you reserve depends on your potential tax situation so call for a tax review before taking money out of the account.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

This blog provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, re-written or redistributed without permission, except as noted here. This blog includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this blog. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does ROBERT J KRATZ & CO have any control over, or responsibility for, the content of any such Websites. All rights reserved.

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IRS People First Initiative provides relief to taxpayers facing COVID-19 issues

June 17 2020 RgKAdmin14 Families First Coronavirus Response Act, Tax Tips, Economic Impact Taxes 0 comments

Due to COVID-19, the IRS’ People First Initiative provides relief to taxpayers on a variety of issues from easing payment guidelines to delaying compliance actions. This relief is effective through the filing and payment deadline, Wednesday, July 15, 2020.

Existing Installment Agreements– Under an existing Installment Agreement, payments due between April 1 and July 15, 2020, are delayed. Those currently unable to meet the terms of an Installment Payment Agreement or Direct Deposit Installment Agreement may cancel payments during this period with no default. By law, interest will continue to accumulate on any unpaid balances.
New Installment Agreements– People who cannot pay all their federal taxes can establish a monthly payment agreement.
Pending Offer in Compromise applications– Taxpayers have until July 15, 2020, to provide additional information for a pending OIC. The agency generally will not close any pending OIC request before July 15 without the taxpayer’s consent.
OIC payments– Taxpayers can delay all payments on accepted OICs until July 15, 2020. Interest may accrue, and missed payments are due when the suspension period ends. Taxpayers can call the number on their acceptance letter to address their needs.
Delinquent return filings– The IRS will not default an OIC for taxpayers who are delinquent in filing their tax return for 2018. However, they should file any delinquent 2018 return and their 2019 return by July 15, 2020.
Non-filers– More than 1 million households who have not filed tax returns in the last three years are owed refunds. The deadline to get refunds on 2016 tax returns is July 15, 2020. Those who owe taxes on delinquent returns may visit IRS.gov for payment options. The longer the debt is owed, the more penalties and interest accrue.
Field collection activities– IRS stopped field revenue officer enforcement actions, such as liens and levies. Revenue officers will continue to pursue high-income non-filers and perform other similar activities where necessary.
Automated liens and levies– IRS delayed issuing new automated and systemic liens and levies. Taxpayers experiencing a hardship due to a levy should reach out to their assigned IRS contact or fax their information to (855) 796-4524.
Certifications to the State Department– IRS has delayed new certifications of taxpayers who are considered seriously delinquent. This affects a person’s ability to receive a new or renewed passport. Existing certifications will remain in place unless their tax situation changes.
Private debt collection– IRS will not forward new delinquent accounts to private collection agencies during this period.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

This blog provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, re-written or redistributed without permission, except as noted here. This blog includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this blog. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does ROBERT J KRATZ & CO have any control over, or responsibility for, the content of any such Websites. All rights reserved.

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Category Archives: Tax Tips

Business owners should visit IRS.gov for help with tax actions when closing a business

Is a Tax Trap Lurking in Your Paycheck?

A tax checklist for newly married couples

Be Prepared for Pandemic Tax Surprises

IRS People First Initiative provides relief to taxpayers facing COVID-19 issues

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