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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

Conduct A “Paycheck Checkup” To Make Sure Your Withholding Is Adequate

Did you recently file your federal tax return and were surprised to find you owed money? You might want to change your withholding 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 — 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 individuals, but they might have caused other taxpayers to not have enough money withheld to pay their ultimate tax liabilities.

Review and possibly adjust

The IRS is advising taxpayers to review their tax situations for this year and adjust withholding, if appropriate.

The tax agency has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized […]

By Linkenheimer LLP|2020-09-03T20:02:15+00:00July 15th, 2020|child, deduction, deductions, individuals, irs, tax planning|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

IRS Releases Updated 2018 Withholding Tables

The IRS has released updated withholding tables for 2018. The tables reflect major changes made by the Tax Cuts and Jobs Act (TCJA), including an increase in the standard deduction, elimination of personal exemptions, and modification of tax rates and brackets. Employers should begin using the updated tables as soon as possible, but no later than 2/15/18. Employees are not required to do anything at this time. In addition, the IRS is revising the withholding tax calculator on IRS.gov . Taxpayers are encouraged to use the calculator to adjust their withholding once it is released by the end of February. The IRS also is working on revising Form W-4, which will reflect additional changes in the TCJA. The IRS may implement further changes involving withholding in 2019 as it works with the business and payroll community to encourage employees to file new Form W-4 next year.

By Linkenheimer LLP|2020-09-03T20:04:44+00:00January 25th, 2018|New Tax Laws|0 Comments