income tax - Linkenheimer LLP CPAs & Advisors

California Tax Updates for 10/2

Post 1:

California expands its professional exemption. Effective Sept. 9, 2020, this exemption is expanded to include employees who provide instruction for a course or laboratory at colleges and universities in CA. To qualify, an individual must satisfy the duties test and salaries test. Employees must earn the monthly equivalent to no less than twice the state minimum wage in which the employee is employed for at least 40 hours per week, or a minimum salary in 2020 of $117 per classroom hour. In 2021, this hourly rate rises to $126 and in 2022 to $135. Beginning in 2023 the rate will be adjusted based on the state minimum wage. Contact your Linkenheimer CPA with questions.

Post 2:

The California Franchise Tax Board (FTB) is hoping to increase the number of Californians who receive the CA earned income tax credit. The FTB is required to analyze and develop a plan to increase the number of claims of the CA earned income tax credit, […]

By Linkenheimer LLP|2020-10-02T17:27:26+00:00October 2nd, 2020|ca, CA tax, california, credit, ftb, income tax, state income|0 Comments

More Parents May Owe “Nanny Tax” This Year, Due To COVID-19

In the COVID-19 era, many parents are hiring nannies and babysitters because their daycare centers and summer camps have closed. This may result in federal “nanny tax” obligations.

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 cash wages of $2,200 or more (excluding food and lodging) during 2020. If you reach the threshold, all of the wages (not just the excess) are subject to FICA.

However, if your nanny is under 18 and childcare isn’t his or her principal occupation, you don’t have […]

By Linkenheimer LLP|2020-09-03T20:02:06+00:00August 11th, 2020|income tax, individuals, planning, tax implications, tax planning|0 Comments

Steer Clear Of The Trust Fund Recovery Penalty

If you own or manage a business with employees, you may be at risk for a severe tax penalty. It’s called the “Trust Fund Recovery Penalty” because it applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages.

Because the taxes are considered property of the government, the employer holds them in “trust” on the government’s behalf until they’re paid over. The penalty is also sometimes called the “100% penalty” because the person liable and responsible for the taxes will be penalized 100% of the taxes due. Accordingly, the amounts IRS seeks when the penalty is applied are usually substantial, and IRS is very aggressive in enforcing the penalty.

Far-reaching penalty

The Trust Fund Recovery Penalty is among the more dangerous tax penalties because it applies to a broad range of actions and to a wide range of people involved in a business.

Here […]

By Linkenheimer LLP|2020-09-03T20:02:20+00:00July 7th, 2020|business, income tax, irs, social security, tax planning|0 Comments

Selling Securities by Year End? Avoid the Wash Sale Rule

If you’re planning to sell assets at a loss to offset gains that have been realized during the year, it’s important to be aware of the “wash sale” rule.

How the rule works

Under this rule, if you sell stock or securities for a loss and buy substantially identical stock or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes. The rule is designed to prevent taxpayers from using the tax benefit of a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, the wash sale rules may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)

Keep in […]

By Linkenheimer LLP|2020-09-03T20:03:33+00:00October 22nd, 2019|income tax, individuals, investment, retirement, roth ira|0 Comments

The Next Estimated Tax Deadline is September 16: Do You Have to Make a Payment?

If you’re self-employed and don’t have withholding from paychecks, you probably have to make estimated tax payments. These payments must be sent to the IRS on a quarterly basis. The third 2019 estimated tax payment deadline for individuals is Monday, September 16. Even if you do have some withholding from paychecks or payments you receive, you may still have to make estimated payments if you receive other types of income such as Social Security, prizes, rent, interest, and dividends.

Pay-as-you-go system

You must make sufficient federal income tax payments long before the April filing deadline through withholding, estimated tax payments, or a combination of the two. If you fail to make the required payments, you may be subject to an underpayment penalty, as well as interest.

In general, you must make estimated tax payments for 2019 if both of these statements apply:

You expect to owe at least $1,000 in tax after subtracting tax withholding and credits, and
You expect withholding and credits to be less than the smaller of 90% of your tax for 2019 or 100% of the tax on your 2018 return — 110% if your 2018 adjusted gross income was more than […]

By Linkenheimer LLP|2020-09-03T20:03:41+00:00September 5th, 2019|income tax, individuals, tax deadlines|0 Comments