TMTW # 450 – Tax Benefits of Employing Your Child

Tax and Money Tip of the Week:
Tax Benefits of Employing Your Child
September 11, 2019 | No. 450

Tax Reform Increases the Tax Benefits of Employing Your Child

The recent tax reform eliminated personal exemptions for taxable years after December 31, 2017, and before January 1, 2026. This makes your child worthless to you on your Form 1040. But there is a way to get even or, perhaps, much more than even.

Let’s set the stage first. For taxable years after December 31, 2017, and before January 1, 2026, the standard deduction for a single taxpayer begins at $12,000 in 2018 and increases every year for inflation. The new standard deduction means that a single taxpayer such as your child can earn up to $12,000 in W-2 wages and pay not a penny in federal taxes.

As the owner of a business, you have the advantage of being able to hire your child to work in your business, and that creates tax-saving opportunities for both you and your child. The big dollar benefits of hiring your child go to the Form 1040, Schedule C taxpayer and the husband-and-wife partnership because such businesses are exempt from FICA when they employ their children who are under age 18.

S and C corporations and non-spouse partnerships do not qualify for this benefit. They have to pay the payroll taxes on all employees—period. There is no parental benefit
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Advertisements
Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW # 449 – Protect Yourself (And Get Paid) By Equifax

Tax and Money Tip of the Week:
Protect Yourself (And Get Paid) By Equifax
September 4, 2019 | No. 449

Click Here to read an article by Robert Rapier from Investing Daily regarding the Equifax data breach and the settlement reached by the FTC and Equifax.
Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW # 448 – Don’t Miss the September 16th Deadline

Tax and Money Tip of the Week:
Don’t Miss the September 16th Deadline
August 28, 2019 | No. 448

Final Filing Deadline Reminder

If you need to file a Form 1065 (partnership return) or Form 1120S (S corporation return), the deadline to file your 2018 return is September 16, 2019.  This assumes you had filed for an extension prior to March 15, 2019.

If you put your personal tax return on extension (Form 1040), you still have until October 15, 2019 to timely file your 2018 return.

As a reminder, putting your tax returns on extension can be a good thing—but penalties to miss the extension deadline can be steep.

Give us a call if you need help meeting your deadlines.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , , , , | Leave a comment

TMTW # 447 – Pocketing Cash by Renting a Bedroom in Your Home

Tax and Money Tip of the Week:
Pocketing Cash by Renting a Bedroom in Your Home
August 21, 2019 | No. 447

When you rent a bedroom or two or 20, you first examine Section 280A of the tax code to determine whether your bedroom rental is:

  • tax-free because your rentals were for fewer than 15 days during the tax year.
  • subject to section 280a vacation home rules.
  • exempt from Section 280A.

When exempt from Section 280A, your bedroom rental faces four tax code sections:

  1. Section 183, which requires a profit motive for you to claim any rental business tax deductions. Failing Section 183 requires the IRS to tax your bedroom income and give you no bedroom deductions other than mortgage interest and property taxes.
  2. Section 469, which requires that you (or you and your spouse) materially participate in the property to claim any tax losses on the bedroom rental activity.
  3. Section 1402, which requires you to report the activity on Schedule C and pay self-employment taxes on the net income when you provide services as part of the bedroom rentals.
  4. Section 199A, which includes a tax deduction that you could claim if the bedroom rental is a business that qualifies.

Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW #446 – Get Ready to Launch a Solo 401K Retirement Plan

Tax and Money Tip of the Week:
Get Ready to Launch a Solo 401K Retirement Plan
August 14, 2019 | No. 446


Click Here to read an article about solo 401K plans.

Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW #445 – September 16, 2019 Tax Deadline: Individual Estimated Taxes and Tax Planning Checkups

Tax and Money Tip of the Week:
September 16, 2019 Tax Deadline:  Individual Estimated Taxes and Tax Planning Checkups
August 7, 2019 | No. 445

This is the time of year in our CPA practice that I work with small business owners and individuals to perform tax checkups to help them project their tax liabilities for 2019 and make tax saving recommendations of moves they can make between now and year-end. Frequently, just defining the amount of taxes they owe via these planning services helps manage their cash flow so the businesses and individuals don’t have a big amount due and/or surprise each Spring when they prepare their tax returns.

Coming up September 16, 2019 is the date in which the 3rd installment for individuals that have income that is not taxed and withheld (like W-2 income) is due.

Self employed businesses, e.g. Proprietor Schedule C filers, folks that own S Corporations, Partnerships, LLCs, or other flow-through entities must estimate their unpaid income and/or self-employment taxes for the period January 1-August 31, 2019 and pay ½ of this amount to IRS and/or NC Dept of Revenue on September 16, 2019 and the other ½ of this amount on or before January 15, 2020.  (April 15th and June 17th of 2019 are also Quarterly Estimated Tax Payment dates that have also passed by if you weren’t aware)

The rules for estimated tax payments depend on your modified adjusted gross income for 2019. “Safety” estimates can be designed to avoid penalties and interest, optimize cash flow, and save taxes

Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week

Posted in Tax and Money Tip of the Week | Tagged , , , , | Leave a comment

TMTW #444 – Spotlight 5 personal tax changes

Tax and Money Tip of the Week:
Spotlight 5 personal tax changes
July 31, 2019 | No. 444

Click Here to read about 5 tax changes that affect individual taxpayers.

Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next time

Posted in Tax and Money Tip of the Week | Tagged , , , | Leave a comment