Author: Leon Clinton

Tax

Tax Due Dates for January 2020

Tax Due Dates for January 2020

During January

All employers – Give your employees their copies of Form W-2 for 2019 by January 31, 2020. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee of the posting by January 31.

January 10

Employees – who work for tips. If you received $20 or more in tips during December 2019, report them to your employer. You can use Form 4070, Employee’s Report of Tips to Employer.

January 15

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in December 2019.

Individuals – Make a payment of your estimated tax for 2019 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2019 estimated tax. However, you do not have to make this payment if you file your 2019 return (Form 1040) and pay any tax due by January 31, 2020.

Employers – Nonpayroll Withholding. If the monthly deposit rule applies, deposit the tax for payments in December 2019.

Farmers and Fisherman – Pay your estimated tax for 2019 using Form 1040-ES. You have until April 15 to file your 2019 income tax return (Form 1040). If you do not pay your estimated tax by January 15, you must file your 2019 return and pay any tax due by March 2, 2020, to avoid an estimated tax penalty.

January 31

Employers – Federal unemployment tax. File Form 940 for 2019. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you already deposited the tax for the year in full and on time, you have until February 10 to file the return.

Farm Employers – File Form 943 to report social security and Medicare taxes and withheld income tax for 2019. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

Certain Small Employers – File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2019. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more from 2019 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2019. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.

Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2019 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

Payers of Gambling Winnings – If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W-2G.

Employers – Give your employees their copies of Form W-2 for 2019. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee.

Businesses – Give annual information statements to recipients of certain payments made during 2019. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. This due date only applies to certain types of payments.

Individuals – who must make estimated tax payments. If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040 or Form 1040-SR) for 2019 by January 31. Filing your return and paying any tax due by January 31, 2020, prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by January 31, file and pay your tax by April 15, 2020.

Accounting Quickbooks

Setting up Sales Tax in QuickBooks, Part 2

Setting up Sales Tax in QuickBooks, Part 2

Last month, the focus was on the process of setting up sales taxes in QuickBooks. As you may recall, the first step is to go to Edit | Preferences | Sales Tax and make sure the software is set up correctly for this use. Before you do this, however, you will need to know what your state and local sales tax rules are. You can find this information on your state’s Department of Revenue or Department of Taxation website.

State sales taxes are considered Items in QuickBooks; you create them like you would create product records, and when local sales taxes are also required, you can set up Sales Tax Groups. You’ll be assigning these Items as well as Tax Codes to customers.

Using Sales Taxes

Once you have sales taxes set up, you can start using them in transactions. You can create them on the fly from within transactions, but we recommend taking care of this important housekeeping task before you start.

Figure 1: QuickBooks applies the Sales Tax Item or Sales Tax Group that you assigned to the customer on your invoices. You can see the others that are available.

Start by creating an invoice. When you reach the Tax column for your first line item, you’ll see that QuickBooks has already assigned Tax or Non to it based on the information in the item’s record. You can mix taxable and non-taxable items on the same invoice. You can also add a new sales tax on the fly from the invoice itself. Click the down arrow in the Tax column and select .

Be sure you’re not required to pay sales tax on an item when Non is selected. You may not have to charge sales tax on. For example:

  • Nonprofit organizations
  • Out-of state sales
  • Items that your customers will resell

Tip: If you’d like, you can create more specific sales tax codes for these situations. You could use OOS for out-of-state sales, for example, LBR for labor, and NPO for nonprofit organization.

Figure 2: QuickBooks already includes Sales Tax Codes Tax and Non, but you can add additional ones that are more descriptive.

Be very careful with your sales tax classifications in QuickBooks. As was mentioned last month, such errors will be discovered in a sales tax audit, should you ever be subject to one.

Once you’ve entered all the line items in the invoice, look down toward the bottom of the screen, directly beneath the table containing invoiced items and above the Total. QuickBooks will have calculated the sales tax due using the Sales Tax Item or Group you assigned to that customer during setup, placing it in the Tax field.

Look to the left of those numbers, and you’ll see the actual rate that was applied. To the left of that is a drop-down list containing the correct Sales Tax Item or Sales Tax Group. Click the down arrow if you want to see the list of other options. And in the lower left of the screen, you’ll see the Customer Tax Code.

The Sales Tax Center

Figure 3: The Manage Sales Tax window.

When it’s time to pay sales taxes, you’ll open the Vendors menu and select Sales Tax | Manage Sales Tax. From the screen that opens, you’ll be able to:

  • Access Sales Tax Preferences.
  • Generate sales tax reports that help you fill out required forms.
  • Visit related screens.

There are two reports you’ll need to run: Sales Tax Liability (displays total sales, amounts that are taxable and at what rates, taxes collected, and how much sales tax is due to each taxing agency) and the Sales Tax Revenue Summary (breaks down total sales into taxable and non-taxable). These reports are, of course, customizable, so you can filter them, for example, by Sales Tax Code.

A Delicate Balance

Collecting the correct amount of sales tax on taxable items and submitting the right tax totals to the right agencies takes vigilance. You don’t want to charge customers for unnecessary taxes, but you also don’t want to end up paying taxes you should have invoiced out of your own pocket. It’s much easier to spend a few minutes up front setting up sales tax accurately in QuickBooks than it is to go back and untangle inaccurate records. If you need assistance with this, don’t hesitate to call and set up a consultation.

Tax

Retirement Contributions Limits Announced for 2020

Retirement Contributions Limits Announced for 2020

Cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for 2020 are as follows:

401(k), 403(b), 457 plans, and Thrift Savings Plan. Contribution limits for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increase from $19,000 to $19,500. The catch-up contribution limit for employees aged 50 and over increases from $6,000 to $6,500.

SIMPLE retirement accounts. Contribution limits for SIMPLE retirement accounts for self-employed persons increase in 2020 as well – from $13,000 to $13,500.

Traditional IRAs. The limit on annual contributions to an IRA remains at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions; however, if during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If a retirement plan at work covers neither the taxpayer nor their spouse, the phase-out amounts of the deduction do not apply.

The phase-out ranges for 2020 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For married couples filing jointly, where a workplace retirement plan covers the spouse making the IRA contribution, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000, up from $193,000 and $203,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Roth IRAs. The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up from $193,000 to $203,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver’s Credit. The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.

If you have any questions about retirement plan contributions, don’t hesitate to call.

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