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Three Questions You May Have After You File Your Return

Once your 2018 tax return has been successfully filed with the IRS, you may still have some questions. Here are brief answers to three questions that we’re frequently asked at this time of year.

Question #1: What tax records can I throw away now?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2015 and earlier years. (If you filed an extension for your 2015 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You’ll need to hang on to […]

By Linkenheimer LLP|2020-09-03T20:04:06+00:00April 18th, 2019|irs, New Tax Laws, tax planning, tax time|0 Comments

When are LLC Members Subject to Self-Employment Tax?

Limited liability company (LLC) members commonly claim that their distributive shares of LLC income — after deducting compensation for services in the form of guaranteed payments — aren’t subject to self-employment (SE) tax. But the IRS has been cracking down on LLC members it claims have underreported SE income, with some success in court.

SE tax background

Self-employment income is subject to a 12.4% Social Security tax (up to the wage base) and a 2.9% Medicare tax. Generally, if you’re a member of a partnership — including an LLC taxed as a partnership — that conducts a trade or business, you’re considered self-employed.

General partners pay SE tax on all their business income from the partnership, whether it’s distributed or not. Limited partners, however, are subject to SE tax only on any guaranteed payments for services they provide to the partnership. The rationale is that limited partners, who have no management authority, are more akin to passive investors.

By Linkenheimer LLP|2020-09-03T20:04:17+00:00February 12th, 2019|business, irs, liability|0 Comments

IRS Reminds Employers, Other Businesses of Jan. 31 Filing Deadline

The Internal Revenue Service today reminds employers and other businesses of the Jan. 31 filing deadline that applies to filing wage statements and independent contractor forms with the government.

The Protecting Americans from Tax Hikes (PATH) Act requires employers to file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. The Jan. 31 deadline also applies to certain Forms 1099-MISC, Miscellaneous Income, filed with the IRS to report non-employee compensation to independent contractors. Such payments are reported in box 7 of this form.

This deadline makes it easier for the IRS to verify income that individuals report on their tax returns and helps prevent fraud. Failure to file these forms correctly and timely may result in penalties. As always, the IRS urges employers and other businesses to take advantage of the accuracy, speed and convenience of filing these forms electronically.

An extension of time to file Forms W-2 is no […]

By Linkenheimer LLP|2020-09-03T20:04:19+00:00January 29th, 2019|irs, w2|0 Comments

There’s Still Time to Get Substantiation for 2018 Donations

If you’re like many Americans, letters from your favorite charities have been appearing in your mailbox in recent weeks acknowledging your 2018 year-end donations. But what happens if you haven’t received such a letter — can you still claim an itemized deduction for the gift on your 2018 income tax return? It depends.

Basic requirements

To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.

“Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So if you made a donation in 2018 but haven’t yet received substantiation from the charity, it’s not too late — as long as you haven’t filed your 2018 return. Contact […]

By Linkenheimer LLP|2020-09-03T20:04:20+00:00January 25th, 2019|charity, deduction, deductions, irs|0 Comments

IRS Releases 2019 Form W-4

The IRS has released the 2019 version of Form W-4 (Employee’s Withholding Allowance Certificate) and instructions. Initial plans called for substantial revisions to the form to take into account provisions of the Tax Cuts and Jobs Act. However, after considering feedback from the payroll and tax communities, the IRS decided to postpone the form’s makeover until the 2020 tax year. Therefore, the 2019 form is similar to the 2018 version. However, the Form W-4 Deductions, Adjustments, and Additional Income Worksheet has been updated to reflect the increase in the annual withholding allowance from $4,150 to $4,200 in 2019. Also, the worksheet has been updated for the increase in the standard deduction for 2019 from (1) $24,000 to $24,400 for joint filers and surviving spouses; (2) $18,000 to $18,350 for heads of household; and (3) $12,000 to $12,200 for single filers and married individuals filing separately. The 2019 Form W-4 can be accessed at www.irs.gov/pub/irs-pdf/fw4.pdf .

By Linkenheimer LLP|2020-09-03T20:04:22+00:00December 26th, 2018|irs|0 Comments