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You May Owe “Nanny Tax” Even If You Don’t Have a Nanny

Have you heard of the “nanny tax?” Even if you don’t employ a nanny, it may apply to you. Hiring a house cleaner, gardener or other household employee (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations.

If you employ a household worker, you aren’t required to withhold federal income taxes from pay. But you can choose to withhold if the worker requests it. In that case, ask the worker to fill out a Form W-4. However, you may be required to withhold Social Security and Medicare (FICA) taxes and to pay federal unemployment (FUTA) tax.

2021 and 2022 thresholds

In 2021, you must withhold and pay FICA taxes if your household worker earns cash wages of $2,300 or more (excluding the value of food and lodging). The Social Security Administration recently announced that this amount would increase to $2,400 in 2022. If you reach the threshold, all […]

By Linkenheimer LLP|2021-10-22T21:59:07+00:00October 22nd, 2021|employer, tax, tax implications, tax planning|0 Comments

IRS Unveils New Tax Withholding Estimator

The IRS has unveiled its latest online tool, the “Tax Withholding Estimator.” The estimator, which replaces the “Withholding Calculator,” assists workers, retirees, self-employed individuals, and other taxpayers in determining how much income tax should be withheld from wages and pension payments. Among other things, the estimator features (1) plain language to improve user comprehension; (2) a mobile-friendly design; (3) enhanced tips and links on various tax credits and deductions; and (4) an automatic calculation of the taxable portion of any Social Security benefits. In addition, the tool makes it easier to enter wages and withholding for each job held by the taxpayer and his or her spouse. The IRS encourages all taxpayers to use the tool to do a “Paycheck Checkup” and review their withholding for 2019. The new estimator is available at www.irs.gov/individuals/irs-tax-withholding-estimator . If you have questions about withholdings and your tax estimates, please contact your Linkenheimer CPA.

By Linkenheimer LLP|2020-09-03T20:03:45+00:00August 9th, 2019|irs, withhold|0 Comments

Do You Need to Make an Estimated Tax Payment by September 17?

To avoid interest and penalties, you must make sufficient federal income tax payments long before your April filing deadline through withholding, estimated tax payments, or a combination of the two. The third 2018 estimated tax payment deadline for individuals is September 17.

If you don’t have an employer withholding tax from your pay, you likely need to make estimated tax payments. But even if you do have withholding, you might need to pay estimated tax. It can be necessary if you have more than a nominal amount of income from sources such as self-employment, interest, dividends, alimony, rent, prizes, awards or the sales of assets.

A two-prong test

Generally, you must pay estimated tax for 2018 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 2018 or 100% of the tax on your 2017 return — 110% if your 2017 adjusted gross income was more than $150,000 ($75,000 for married couples filing separately).

If you’re a sole proprietor, partner or S corporation shareholder, you generally have to make estimated tax […]

By Linkenheimer LLP|2020-09-03T20:04:29+00:00September 10th, 2018|New Tax Laws, tax planning, withhold|0 Comments