Tips for #teenage_taxpayers starting a #summer_job

Now that school’s out, many students will be starting summer jobs…from working at a summer camp to being an office intern. The IRS reminds students that not all the money they earn may make it to their pocket. That’s because employers must withhold taxes from the employee’s paycheck. Here are a few things these workers need to know when starting a summer job:

New employees. Students and teenage employees normally have taxes withheld from their paychecks by the employer. When a taxpayer gets a new job, they need to fill out a Form W-4. Employers use this form to calculate how much federal income tax to withhold from the employee’s pay. The Withholding Calculator on IRS.gov can help a taxpayer fill out this form.
Self-employment. Students who do odd jobs over the summer to make extra cash – like baby-sitting or lawn care – are considered self-employed. They should remember that money earned from self-employment is taxable. Workers who are self-employed may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year. Taxpayers who do this should keep good records of all money they receive.
Tip income. Someone working as a waiter or a camp counselor who receives tips as part of their summer income should know that tip income is taxable income and subject to federal income tax. They should keep a daily log to accurately report them, as they will report tips of $20 or more received in cash in any single month.
Payroll taxes. This tax pays for benefits under the Social Security system. While taxpayers may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer.
Reserve Officers’ Training Corps pay. If a taxpayer is in an ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive – like food and lodging allowances paid to ROTC students participating in advanced training – may not be taxable. The Armed Forces’ Tax Guide on IRS.gov has more details.

More Information:
Tax rules for students.
Is My Tip Income Taxable?
Do I Have Income Subject to Self-Employment Tax?

IRS YouTube Videos:
Part-Time and Summer Jobs

Share this tip on social media — #IRSTaxTip: Tips for teenage taxpayers starting a summer job. https://go.usa.gov/xQVeb

May 29, 2018 0

TCJA

Along with tax rate reductions and a new deduction for pass-through qualified business income, the new tax law brings the reduction or elimination of tax deductions for certain business expenses. Two areas where the Tax Cuts and Jobs Act (TCJA) changes the rules are expenses for meals/entertainment and transportation.

Meals and Entertainment

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee.
Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed.
Meal expenses incurred while traveling on business are still 50% deductible, but the 50% limit now also applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will no longer be deductible.

Transportation

The TCJA disallows employer deductions for the cost of providing commuting transportation to an employee (such as hiring a car service) unless the transportation is necessary for the employee’s safety.
The new law also eliminates employer deductions for the cost of providing qualified employee transportation fringe benefits. Examples include parking allowances, mass transit passes and vanpooling. These benefits are, however, still tax-free to recipient employees.
Transportation expenses for employee work-related travel away from home are still deductible (and tax-free to the employee), as long as they otherwise qualify for such tax treatment. (Note that, for 2018 through 2025, employees can’t deduct unreimbursed employee business expenses, such as travel expenses, as a miscellaneous itemized deduction.)

Assessing the Impact

The TCJA’s changes to deductions for meals, entertainment and transportation expenses may affect your business’s budget. Depending on how much you typically spend on such expenses, you may want to consider changing some of your policies and/or benefits offerings in these areas.

May 17, 2018 0

#IRS Issues Additional Guidance on #Transition_Tax on #Foreign_Earnings

IR-2018-79, April 2, 2018 WASHINGTON−The Treasury Department and the Internal Revenue Service today provided additional guidance (Notice 2018-26) for computing the “transition tax” on the untaxed foreign earnings of foreign subsidiaries of U.S. companies under the Tax Cuts and Jobs Act enacted on Dec. 22, 2017. The Treasury Department and the IRS provided prior guidance on the transition tax in Notice 2018-07, Notice 2018-13, and Revenue Procedure 2018-17.

Today’s notice describes regulations that the Treasury Department and the IRS intend to issue, including rules intended to prevent the avoidance of section 965, rules and procedures relating to certain special elections under section 965, and guidance on the reporting and payment of the transition tax. The notice also provides relief to taxpayers from certain estimated tax requirements and penalties arising from the enactment of the transition tax and the change to existing stock attribution rules in the Tax Cuts and Jobs Act.

Additionally, Treasury and the IRS request comments on the rules described in the notice and requests comments on what additional guidance should be issued to assist taxpayers in computing the transition tax. The Treasury Department and the IRS expect to issue additional guidance in the future.

Notice 2018-26 will be published in IRB 2018-16 on April 16, 2018. The Treasury media contact for this matter is Marisol Garibay, Deputy Assistant Secretary for Public Affairs, 202-622-6490. More information regarding the Tax Cuts and Jobs Act can be found at the Tax Reform page on IRS.gov.

April 2, 2018 0

NEW IRS TAX RATES

Federal Individual Income Tax Tates

2018-2025 Tax Brackets for Single Filing Individuals
If taxable income is:	Then the income tax equals:
Not over $9,525	10% of taxable income
Over $9,525 but not over $82,500	$952.50 plus 12% of the excess over $9,525
Over $38,700 but not over $157,500	$4,453.50 plus 22% of the excess over $82,500
Over $157,500 but not over $200,000	$32,089.50 plus 32% of the excess over $157,500
Over $200,000 but not over $500,000	$45,689.50 plus 35% of the excess over $200,000
Over $500,000	$150,689.50 plus 37% of the excess over $500,000

2018-2025 tax brackets for Married Filing Joint and Surviving Spouses
If taxable income is:	Then Income Tax Equals:
Not over $19,050	10% of taxable income
Over $19,050 but not over $77,400	$1,905 plus 12% of the excess over $19,050
Over $77,400 but not over $165,000	$8,907 plus 22% of the excess over $77,400
Over $165,000 but not over $315,000	$28,179 plus 24% of the excess over $315,000
Over $315,000 but not over $400,000	$64,179 plus 32% of the excess over $315,000
Over $400,000 but not over $600,000	$91,379 plus 35% of the excess over $400,000
Over $600,000	$161,379 plus 37% of the excess over $600,000

2018-2025 tax brackets for Married Filing Separate Returns
If Taxable Income Is:	Then Income Tax Equals:
Not over $9,525	10% of taxable income
Over $9,525 but not over $38,700	$952.50 plus 12% of the excess over $38,700
Over $38,700 but not over $82,500	$4,453.50 plus 22% of the excess over $82,500
Over $82,500 but not over $157,500	$14,089.50 plus 34% of the excess over $157,500
Over $157,500 but not over $200,000	$32,089.50 plus 32% of the excess over $200,000
Over $200,000 but not over $300,000	$45,689.50 plus 35% of the excess over $200,000
Over $300,000	$80,689.50 plus 37% of the excess over $300,000

2018-2025 tax brackets for Heads of Households
If Taxable Income is:	Then Income Tax Equals:
Not over $13,600	10% of the taxable income
Over $13,600 but not over $51,800	$1,360 plus 12% of the excess over $13,600
Over $51,800 but not over $82,500	$5,944 plus 22% of the excess over $51,800
Over $82,500 but not over $157,500	$12,698 plus 24% of the excess over $82,500
)ver $157,500 but not over $200,000	$30,698 plus 32% of the excess over $157,500
Over $200,000 but not over $500,000	$44,298 plus 35% of the excess over $200,000
Over $500,000	$149,298 plus 37% of the excess over $500,000

2018 Pass-through, sole proprietor and parternship tax rates

Tax rates for pass-through entities (S-corps), sole proprietors, and parternships are the tax rates from the personal tax tables above.

IMPORTANT NOTE: The Quallfied Business Income deduction may apply and could save you a tremendous amount on your taxes.

2018 Corporate Tax Rates

Tax Reform eliminated the numerous tax brackets for corproation and imposed isntead of 21% tax rate on C-corp income.

Important notes:

These tables do not include employment taxes such as Medicare and Social Security taxes. These table do not include dividend or long term capital gains rates. Dividends and long term taxable gains can be taxed up to 23.8% (top rate of 20% plus a 3.8% ObamaCare surcharge).

March 28, 2018 0

IRS encourages ‘#Paycheck #Checkup’ for taxpayers to check their #withholding; special week focuses on changes

IRS YouTube Videos:

Paycheck Checkup — English
IRS Withholding Calculator Tips — English
Do I Need to Fill Out a New W-4? — English

WASHINGTON – Launching a special week of activities, the Internal Revenue Service today continued its effort to encourage taxpayers to do a “paycheck checkup” to make sure they have the right amount of tax taken out of their paychecks for their personal situation.

To help taxpayers understand the implications of the Tax Cuts and Jobs Act, the IRS unveiled several new features to help people navigate the issues affecting withholding in their paychecks. The effort includes a new series of plain language Tax Tips, a YouTube video series and other special efforts to help people understand the importance of checking their withholding as soon as possible.

“The IRS is taking special steps to help taxpayers understand these tax law changes,” said Acting IRS Commissioner David Kautter. “We encourage people to do a paycheck checkup to help make sure they’re having the right amount of tax withheld for their unique personal situation. To help with this, the IRS has added and updated a variety of tools and information to help taxpayers.”

The new tax law could affect how much tax someone should have their employer withhold from their paycheck. To help with this, the IRS urged taxpayers to visit the Withholding Calculator on IRS.gov. The Withholding Calculator can help prevent employees from having too little or too much tax withheld from their paycheck. Having too little tax withheld can mean an unexpected tax bill or potentially a penalty at tax time in 2019. And with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.

Taxpayers can use the Withholding Calculator to estimate their 2018 income tax. The Withholding Calculator compares that estimate to the taxpayer’s current tax withholding and can help them decide if they need to change their withholding with their employer. When using the calculator, it’s helpful to have a completed 2017 tax return available.

Taxpayers who need to adjust their withholding will need to submit a new Form W-4, Employee’s Withholding Allowance Certificate, to their employer. If an employee needs to adjust their withholding, doing so as quickly as possible means there’s more time for tax withholding to take place evenly during the rest of the year. But waiting until later in the year means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.

Information on “Paycheck Checkup” Available in Several Ways

The IRS is launching a sweeping effort to advise taxpayers about the importance of doing a “paycheck checkup” as soon as possible. In addition to updating the Withholding Calculator and issuing a new Form W-4, the agency is collaborating with tax professionals, partner organizations, employers, community groups and the tax and payroll industries to educate employers and employees about the importance of checking their withholding.

The IRS is also taking additional steps this week:

Launching a series of Tax Reform Tax Tips, an addition to the IRS’s Tax Tips email-subscription program. These tips will begin this week and continue through 2018. Written in plain language, they can help taxpayers learn about major tax reform topics in understandable terms. The special series begins this week with daily tips covering withholding topics. The series will highlight other law changes in the weeks and months ahead, and taxpayers can subscribe on IRS.gov.
Issuing a special news release series. During the series, the IRS will focus on some of those groups most likely to be affected by the withholding changes and how the new law may affect their tax situation.
Sharing new YouTube videos to walk taxpayers through what they need to know about withholding, the Withholding Calculator and filling out a new Form W-4, if needed.
Using social media to spread the word about #PaycheckCheckup.

Who Needs a Paycheck Checkup

The IRS always recommends employees check their withholding at the beginning of each year or when their personal circumstances change to make sure they’re having the right amount of tax withheld from their paychecks. With the new tax law changes, it’s especially important for certain people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.

Among the groups who should check their withholding are:

Two-income families.
People working two or more jobs or who only work for part of the year.
People with children who claim credits such as the Child Tax Credit.
People with older dependents, including children age 17 or older.
People who itemized deductions in 2017.
People with high incomes and more complex tax returns.
People with large tax refunds or large tax bills for 2017.

The law increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions and changed the tax rates and brackets.

When personal circumstances change that reduce withholding allowances they are entitled to claim, including divorce, starting a second job, or a child no longer being a dependent, an employee has 10 days to submit a new Form W-4 to their employer claiming the proper number of withholding allowances.

After Using the Withholding Calculator, Change Withholding by Submitting New Form W-4

Taxpayers can use the results from the Withholding Calculator to determine if they should complete a new Form W-4, Employee’s Withholding Allowance Certificate, and, if so, what information to put on it.

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4. Employees will submit the completed Form W-4 to their employer.

For more details on withholding issues, taxpayers are encouraged to visit IRS.gov.

More information:

March 26, 2018 0