May all you hard work be blessed and the fruits of your labor be in abundance. Merry Christmas to you all.
Imagine going home and telling the family, "I got a bonus!" Wow! The joy it would bring to many, especially those that really needed the financial boost. It happens to many of us every year. It's a great feeling and I commend the companies that share the profits with their employees.
Generally, it's a good feeling to get a bonus from work. It's a lump-sum amount that could help mitigate the financial burden, stress, and demands associated with the holidays. Fun-loving individuals will buy gifts, plan vacations, or simply absorb the cost of a huge family dinner. Receiving ‘extra money’ is a blessing. There are those that will tell you ‘extra money’ can be a curse, but I bet you – if you offered to relieve them of the ‘curse’ by telling them to give you the money, they would probably reject that offer. However, there is one 'catch' of getting a huge bonus: bonus tax!
Bonus - Supplemental Wages
Your bonus income is considered supplemental wages by the IRS. Here’s the scoop as outlined by our friends at the Service:
Supplemental Wages Identified Separately from Regular Wages.
If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods/options for the supplemental wages.
If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. If there are no concurrently paid regular wages, add the supplemental wages to, alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Subtract the tax withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax.
This method can be cumbersome and time-consuming. Needless to say, it’s the least favorite method amongst employers.
Withhold a flat 25%!
Easy, right? Sure it is! This is why most employers prefer this method.
Supplemental Wages Exceeding $1 Million During The Calendar Year – Special Rules Apply
If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39.6% (or the highest rate of income tax for the year). Withhold using the 39.6% rate without regard to the employee's Form W-4. In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control.
Note, however, “regardless of the method you use to withhold income tax on supplemental wages, they’re subject to social security, Medicare, and FUTA taxes.” (IRS).
If you're one of the many that will receive a bonus this year, spend/invest wisely. And remember, Tax Largie, Inc. is always available to help.
From our Tax Largie, Inc. family to yours, we wish you peace, love, happiness, prosperity and excellent health. Happy Thanksgiving!
Are you tired of going home and still doing work when you could be spending time with the kids at the movies; wife on a cruise; family on a nice caribbean vacation; or simply relaxing while catching up on your favorite Netflix programs? If you are, you're in luck! All you need to do is hire a CPA for all your accounting, tax, payroll, and related business needs. And, there's no need to hire Sherlock Holmes to find one. I am right here.
Hi! My name is Dale Largie, CPA. I am a registered tax professional with the IRS and a Certified Public Accountant for the state of Florida. It's a pleasure to meet you!
People are happy when they know their trusted CPA is taking excellent care of their financial affairs. By doing so, entrepreneurs are able to focus more on building their businesses; building relationships; and spending more time being happy than stressing over financial statement preparation, delinquent tax returns; outstanding tax debts; and a host of other issues that their prudent CPA can resolve independently. So, go ahead! Retain a CPA and head to the beach.
Many sole proprietors, single-member LLCs, and several entrepreneurs of personal service corporations – including small businesses of any kind – falsely assume all CPAs are too expensive, so they become their own accountant, tax professional, legal counsel, and wear several ‘hats’ in an effort to save. Ironically, many entrepreneurs lose out on valuable tax savings which are usually more than the cost of retaining their own CPA. I have saved clients more money on one tax return for a single year that exceeded my fees for the next ten years. What is the cost? How much is a CPA worth? Is it better to retain a CPA hourly or have he or she on a fixed monthly rate? The short answer is - It depends. Affordable fixed rates vary and could be as low as:
$50 weekly / $200 monthly
$100 weekly / $400 monthly
$175 weekly / $700 monthly
$350 weekly / $1,400 monthly
In some cases, those rates could be hourly.
The balance between what your CPA is worth versus what you can afford is a tricky deal to seal. Plus, it generally does not reduce the work that needs to be done: accurate accounting, properly filed tax returns, payroll, among other things such as tax planning strategies, having an invaluable business partner, and advice that could keep entrepreneurs on the cutting edge of compliance and profitability.
It’s a challenge – I agree. However, we’re affordable. Retain your personal CPA today!
Sometimes a debt can feel like an elephant is on our backs. One such debt is an outstanding tax debt, which is about to feel more burdensome due to the new program the IRS initiated to collect outstanding tax debts.
Starting this April 2017, the Internal Revenue Service will begin sending letters to taxpayers whose overdue federal tax accounts are being assigned to private-sector collection agencies. Those PCAs are:
How the Program Works
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA). First, the IRS will send a letter to the taxpayer and their tax representative informing them that their account is being assigned to a PCA and giving the name and contact information for the PCA. This mailing will include a copy of Publication 4518: What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.
Only four private groups are participating in this program:
Once the IRS letter is sent, the designated private firm will send its own letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the collection firm’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.
Watch Out – Scammers Are Still Scamming!
The IRS reminds taxpayers to be on the lookout for scammers posing as private collection firms. The IRS will be watching for these schemes as the collection program begins, and this effort will include working with partners in the tax community and law enforcement about emerging scams.
People should remember that these private collection firms will only be calling about a tax debt the person has had – and has been aware of – for years and had been contacted about previously in the past by the IRS.
If you’re unsure if you have a tax debt outstanding, check it here: www.irs.gov/balancedue. Simply click the 'View Your Account' link and follow the instructions. If the account balance says zero, that means nothing is due and you typically wouldn’t be getting a contact from the IRS or the private firm.
Call for Help!
If you need a CPA or a tax/accounting professional to assist you with any tax debt, accounting, bookkeeping, tax preparation, payroll management, or a just simply being your 'One-Stop-Shop' CPA, Tax Largie, Inc. is available to assist. Contact Us; We Can Help!
In a Bloomberg article credited to Jan-Henrik Foerster and Joost Akkermans “Credit Suisse Taken by Surprise in Five-Nation Tax Probe”, reminds us that it is a really good idea to report your Foreign Accounts. Here are some of the highlights of the article.
Credit Suisse Group AG and its home country of Switzerland were surprised by a tax evasion and money laundering investigation that spans five countries from Australia to the U.K. and potentially involves thousands of account holders.
Criminal investigations are also underway in France, Germany, the U.K. and Australia, and the roles of bank employees are part of the inquiries.
Credit Suisse fell 1.2 percent to 14.90 francs in Swiss trading, the second-worst performance in the Bloomberg Europe Banks Index. (Ouch!)
In a statement Friday from Zurich, Credit Suisse said it has “implemented Dutch and French voluntary tax disclosure programs and exited non-compliant clients,” and has applied a withholding tax agreement with the U.K. since 2013. (Wow!)
Credit Suisse was fined $2.6 billion in 2014 after admitting it helped Americans cheat on their tax obligations, and conducting what then-U.S. Attorney-General Eric Holder called a “shamefully inadequate internal inquiry” into the wrongdoing. In Europe, Credit Suisse agreed in October to pay about 109.5 million euros ($117 million) to Italian authorities to resolve a probe into the bank’s use of insurance policies allegedly designed to help clients evade taxes, five years after paying 150 million euros to settle a tax evasion dispute with the German government.
The bank also agreed in December to pay a $2.48 billion civil penalty to resolve a U.S. investigation into its mortgage-backed business.
Credit Suisse isn’t alone. Eighty Swiss banks have entered into non-prosecution agreements with the Department of Justice in return for disclosing details on how tax evasion by their banking clients worked. UBS Group AG, Switzerland’s largest bank, turned over client names and paid $780 million in 2009 to settle its own dispute over tax evasion with the U.S. government.
“Taskforce agencies are working through their intelligence to determine the taxpayers in this group who have done the right thing, and those who have been concealing the true nature of their tax affairs,” Australia’s Minister for Revenue and Financial Services Kelly O’Dwyer said in a statement.
“The message from these investigations makes it clear that governments worldwide are shining a light on offshore tax evasion, and it’s only a matter of time before you’re in the spotlight.”
In other words, you’ve been warned.
Folks, Tax Day is quickly approaching. Have you filed your income tax return, yet? No? No worries! You still have time.
"The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation." (IRS)
If you are unable to file your tax return by the deadline of April 18, 2017, you should ask your Tax Professional to file an extension for you, which will allow you more time to file. However, remember that an extension of time to file your tax return is not an extension of time to pay. Pay and as much as you can by the due date: April 18, 2017.
As always, Tax Largie, Inc. is available to assist.
“Where’s My Refund?”
That’s the question many of us are wondering, as the expected tax refund is needed sooner than later. Luckily the IRS notified us of the delay and gave us the approximate dates on when to expect our refunds.
“The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely won’t arrive in bank accounts or debit cards until the week of February 27 -- if there are no processing issues with the tax return and the taxpayer chose direct deposit. This additional period is due to several factors, including banking and financial systems needing time to process deposits.
Where's My Refund? on IRS.gov and the IRS2Go mobile app will be updated with projected deposit dates for early EITC /ACTC refund filers a few days after Feb. 15. Taxpayers will not see a refund date on Where's My Refund? or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so Where’s My Refund? remains the best way to check the status of a refund.
Why Is My Refund Being Held?
Beginning in 2017, if you claim the EITC or ACTC on your tax return, the IRS must hold your refund until Feb. 15. This new law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC. Like previous years, some tax refunds may be held if there are questions about the tax return or the IRS needs more information.
Will I Get My Refund on February 15, 2017?
While the IRS will begin to issue EITC/ACTC refunds starting Feb. 15, you should not count on actually seeing your refund until the week of Feb. 27 -- if you chose direct deposit or a debit card and there are no processing issues with your tax return.
Why Does It Take So Long for The Funds to Show Up in My Account?
It takes additional time for refunds to be processed after leaving the IRS, and for financial institutions to accept and deposit them to bank accounts and products like debit cards. Also many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day affects their refund timing.
How Do I Check The Status of My Refund?
Where's My Refund on IRS.gov and the IRS2Go mobile app remains the best way to check the status of a refund. Where’s My Refund will be updated with projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15. Taxpayers will not see a refund date on Where's My Refund or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so taxpayers should not contact or call them about refunds before the end of February.”
Tax Largie, Inc. remains available to assist businesses and individuals to prepare their income tax returns.
Now Accepting 2017 Income Tax Returns
The widely anticipated day has arrived: Tax Season 2017! The IRS began accepting income tax returns today. Remember, most returns will experience delays, especially those with Earned Income Credit and Child Tax Credit. Overall, taxpayers have until April 18th, 2017 to be considered filed on time and escape penalties and interests.
Earned Income Credit
The tax year 2017 maximum Earned Income Credit amount is $6,318 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,269 for tax year 2016. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
For calendar year 2017, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.
For tax year 2017, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $112,000, up from $111,000 for tax year 2016.
For tax year 2017, the foreign earned income exclusion is $102,100, up from $101,300 for tax year 2016.
Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.
Several changes have occurred between 2015 and 2016 tax year. With a new president; new administration; and promised changes to the tax code, we can expect more changes to occur. Strategic tax planning with your tax professional is an excellent way to help you optimize your tax filing experience each year.
TIP: What You Need to Know About Extension to File Tax Returns
Counting today, we have 8 days before the IRS starts accepting tax returns. With that, I would like to clear up a few misconceptions for taxpayers who are planning on filing an extension.
An extension gives you extra time to File your tax return. Yes! However, an extension does NOT give you extra time to pay any taxes due. Any taxes owed – even when you file an extension – will still be due by the due date. An extension can help reduce penalties, but any outstanding balance will still be charged a late payment penalty and interest.
Not everyone qualifies for an extension. For example, taxpayers who were approved for an Offer in Compromise are still required to file by the due date during their five-year probationary period. If you don't file by the due date, the IRS can revoke your offer-in-compromise and re-instate the original amount you owed. Likewise, contributions to a Traditional IRA and/or Roth IRA are due by the original April deadline.
“All CPA are certified accountants, but not all accountants are CPAs.” (unknown)