Tax

As hurricane season gets underway–and with it, the possibility of scam groups masquerading as charitable organizations–taxpayers should know about the new tax-exempt organization search tool. Located on the IRS website, the Tax Exempt Organization Search (TEOS) tool replaces the EO Select Check tool and enables taxpayers to search and access information about tax-exempt organizations quickly. TEOS is mobile friendly as well, accessible on tablets or smartphones.

When you use the new TEOS tool you will be able to:

• Access images of an organization’s forms 990, 990-EZ, 990-PF, and 990-T filed with the IRS. Initially, only 990 series forms filed in January and February 2018 will be available. New filings will be added monthly.
• Find out additional information about exempt organizations than was previously available using EO Select Check.
• Conduct a simplified search process.
• Access favorable determination letters issued by the IRS when an organization applied for and met the requirements for tax-exempt status. At first, a limited number of determination letters will be available. Determination letters issued since January 2014 will also be available in the future.

Taxpayers can use TEOS to find information previously available on EO Select Check including whether an organization:

• Is eligible to receive tax-deductible contributions.
• Has had its tax-exempt status revoked because it failed to file required forms or notices

for three consecutive years.

• Filed a Form 990-N annual electronic notice with the IRS; this applies to small organizations only.

Publicly available data from electronically-filed 990 forms are still available through Amazon Web Services. Please call or visit the IRS website for additional details. If you have any other questions about the new TEOS tool, don’t hesitate to contact the office.

• By Leon Clinton
• July 24, 2018

The short answer is that yes, tips are taxable. If you work at a hair salon, barber shop, casino, golf course, hotel, or restaurant, or drive a taxicab, then the tip income you receive as an employee from those services is considered taxable income. Here are a few other tips about tips:

• Taxable income. Tips are subject to federal income and Social Security and Medicare taxes, and they may be subject to state income tax as well. The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to federal income tax.
• Include tips on your tax return. In your gross income, you must include all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip-splitting arrangement with fellow employees.
• Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security, and Medicare taxes.
• Keep a daily log of your tip income. Be sure to keep track of your tip income throughout the year. If you’d like a copy of the IRS form that helps you record it, please call.

Tips can be tricky. Don’t hesitate to contact the office if you have questions.

• By Leon Clinton
• July 22, 2018

Federal law requires most employers to withhold federal taxes from their employees’ wages. Whether you’re a small business owner who’s just starting out or one who has been in business a while and is ready to hire an employee or two, here are five things you should know about withholding, reporting, and paying employment taxes.

1. Federal Income Tax. Small businesses first need to figure out how much tax to withhold. Small business employers can better understand the process by starting with an employee’s Form W-4 and the withholding tables described in Publication 15, Employer’s Tax Guide. Please call if you need help understanding withholding tables.

2. Social Security and Medicare Taxes. Most employers also withhold social security and Medicare taxes from employees’ wages and deposit them along with the employers’ matching share. In 2013, employers became responsible for withholding the Additional Medicare Tax on wages that exceed a threshold amount as well. There is no employer match for the Additional Medicare Tax, and certain types of wages and compensation are not subject to withholding.

3. Federal Unemployment (FUTA) Tax. Employers report and pay FUTA tax separately from other taxes. Employees do not pay this tax or have it withheld from their pay. Businesses pay FUTA taxes from their own funds.

4. Depositing Employment Taxes. Generally, employers pay employment taxes by making federal tax deposits through the Electronic Federal Tax Payment System (EFTPS). The amount of taxes withheld during a prior one-year period determines when to make the deposits. Publication 3151-A, The ABCs of FTDs: Resource Guide for Understanding Federal Tax Deposits and the IRS Tax Calendar for Businesses and Self-Employed are helpful tools.

Failure to make a timely deposit can mean being subject to a failure-to-deposit penalty of up to 15 percent. But the penalty can be waived if an employer has a history of filing required returns and making tax payments on time. Penalty relief is available, however. Please call the office for more information.

5. Reporting Employment Taxes. Generally, employers report wages and compensation paid to an employee by filing the required forms with the IRS. E-filing Forms 940, 941, 943, 944 and 945 is an easy, secure and accurate way to file employment tax forms. Employers filing quarterly tax returns with an estimated total of $1,000 or less for the calendar year may now request to file Form 944,Employer’s ANNUAL Federal Tax Return once a year instead. At the end of the year, the employer must provide employees with Form W-2, Wage and Tax Statement, to report wages, tips, and other compensation. Small businesses file Forms W-2 and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration and if required, state or local tax departments.

Questions about payroll taxes?

If you have any questions about payroll taxes, please contact the office.

• By Leon Clinton
• July 19, 2018