The deadline for individual taxes is April 17, 2018. For a list of other tax deadlines, click here.
By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. And if you do not pay your taxes by the tax deadline, you normally face a failure-to-pay penalty of one-half of 1 percent of your unpaid taxes.
States may also assess penalties for late filing or unpaid taxes. For example, California charges a delinquent penalty on unpaid taxes, if a return is filed late. The penalty is 5 percent of the unpaid tax due for every month that the return is late, up to a maximum penalty of 25 percent of the unpaid tax. The minimum penalty is $135 for tax years beginning on or after January 1, 2011.
For more information on late filing/payment penalties, click here.
The IRS generally issues refunds within 21 days after receiving your tax return. The IRS provides a website for checking your federal tax refund status. Wait until at least 24 hours after your tax return has been e-filed before checking the status. For paper returns, wait until at least 4 weeks after you've mailed in your return before checking. For more information on checking federal refund status, see the IRS Where's my refund? web page.
To check your refund status, you need the following information:
When you have that information ready, go to the IRS Refund Status web page.
Tax refunds from the state of California are generally received within 7-10 days after e-filing your return, or 8-12 weeks from the date you mailed your return, if you submitted a paper return. For more information on checking California state refund status, see the FTB's Check Your Refund Status web page.
To check your California personal income tax refund status, you need the following information:
With that information at hand, go to www.ftb.ca.gov/online/refund/index.asp and click the Check Refund link.
You can set up an installment plan on the IRS website. Click this link to go to the IRS Online Payment Application page.
Late filing of information returns can cost you money.
The IRS requires businesses to provide information regarding certain payments made over the course of a tax year on one of a range of Forms 1099. Small businesses most frequently use Form 1099-MISC to report payments of over $600 to non-employees, such as contractors and advisers. Businesses that file more than 250 Form 1099s must file them electronically. The IRS may charge a penalty fee for late filing.
The deadline for filing a Form 1099-MISC is January 31st.
If you fail to file a 1099-MISC by the due date, the IRS may charge a penalty fee. If you submit the Form 1099 within 30 days from the due date, the penalty is $50 per form. If you file the form more than 30 days late but before Aug. 1, the penalty is $100 per form. The penalty increases to $250 for any form filed after Aug. 1, and if you do not file at all (Intentional Disregard), the penalty is $500 per form. The IRS sets the maximum penalty as $1.5 million for small businesses, which are defined as having average annual gross receipts of less than $5 million for the three preceding tax years.
Recommendation: File on time, even if you are doing a partial filing. You can correct them later to add additional people. This way, you won’t be late! Otherwise, you can request an extension.
You can obtain a copy either online or by mail. Click this link to the IRS Get Transcript web page for more information about what information you need in order to order a transcript, and how to go about it.
If it was a phone call, it was almost surely a scam. If it was an e-mail, it definitely was a scam. The IRS never initiates taxpayer contact with a phone call, and never e-mails. If the caller left voicemail with a number to call, do not call it. If you receive an e-mail purportedly from the IRS, do not respond to it or click any links; just delete it. For more information on these scams, and on identity theft, see our web page, Identity Theft and Tax Scams.
For the 2017 and 2018 tax years, the IRS allows you to deduct qualified medical expenses that exceed 7.5% of your adjusted gross income. Beginning Jan. 1, 2019, you may deduct only the amount of allowable medical care expenses that exceeds 10% of your adjusted gross income. For a list of items that you may deduct, see Deductible Medical Expenses.
A Solo 401(k), also known as a "one-person 401(k)", is a type of 401(k) that can be of benefit to the sole owner of a business who has no employees, or whose employees fall into any of the following categories:
A Solo 401(k) is usually a combination of a 401(k) plan AND a defined contribution profit sharing plan.
The business owner can maximize retirement contributions by combining the employee contribution (through 401(k) elective contributions) and the 25% maximum employer contribution (through defined contribution profit sharing contributions). In 2017, the combined employee and employer contributions can be $53,000, or 100% of compensation, whichever is less. If the owner or spouse is age 50 or over, an additional $6000 may be contributed.
Both sole proprietors and corporate owners can use a Solo 401(k). The plan must be set up prior to the end of the taxable year for which the contribution is being made.
Individuals with incomes above certain thresholds pay a higher Medicare premium surcharge and do not receive the benefit of the hold-harmless rule. The surcharge is based on "modified AGI," using a two-year-look-back. For example, the 2017 surcharge is based on your 2015 modified AGI.
You may be able to get the surcharge reduced if your income has dropped because of certain life-changing events, such as marriage, divorce, death of a spouse, or if you or your spouse stopped working or reduced your work hours. In that case, contact the Social Security Administration. You cannot contest the surcharge just because your income was unusually high in the look-back year for other reasons.
Beginning in 2011, the same high income beneficiaries who pay the Part B premium surcharge pay a graduated surcharge on Part D premiums if they are enrolled in Part D. The income levels are the same for Part D surcharges as Part B. To view a table listing the Medicare premium surcharges, click here.
Apply online at the IRS Apply for an Employer Identification Number (EIN) Online webpage.
Child wages can be deducted as a business expense by the parent-employer if the following are true:
Children under age 18 who work for a parent's unincorporated business are not subject to Social Security tax withholding (savings of 15.3% of wages) or FUTA.
In 2017, the benefits are as follows:
In 2018, we presume (based on the H.R. 1 tax reform bill), that children can earn:
If you have have been operating your business as a sole proprietor and have decided that you need to change your status in order to protect your assets, you'll need to choose between organizating as an LLC (Limited Liability Corporation) or an S Corp (S Corporation). See Which to Choose: LLC or S Corp? for information about the differences between them.
Briefly, you'll need to file a Certificate of Dissolution (Form LLC–3) and Certificate of Cancellation (Form LLC–4/7). You can get the forms you'll need by either calling the Secretary of State at 916-657-5448, or by going online to the California Secretary of State website. The direct link to LLC-related forms is www.sos.ca.gov/business-programs/business-entities/forms/#llc.
The California Secretary of State website contains more information about ending an LLC, but it might be helpful to first read an article about the process that was published in Spidell's California Taxletter, which you can obtain by clicking the following link: Dissolve with the Secretary of State or pay another $800 tax.
The IRS has a three year statute of limitations (on auditing?????) and California has a four year statute. Here is what you should keep on hand:
Keep at least four years and preferably six if space if not critical. Once this period has elapsed, the documents can be discarded, but the returns themselves, which do not take much space, should be retained indefinitely.
All escrow statements (purchase and sale), refinancing closing statements, and receipts/checks for improvements should be kept for at least four years after property is sold.
These should also be kept for at least four years after the asset is sold. This would include records of stock dividends, splits and reinvested dividends.
For any rental real estate or depreciable business property you own, keep records of the property's cost, date acquired, and the schedule of depreciation claimed in previous years. These records should be kept until four years after the disposition of the property.
Records of nondeductible IRA deposits, employer-plan stock purchases, rollovers, conversions to Roth IRAs and Keogh plan deposits should be kept until four years after the plan assets have been withdrawn.
Important papers such as estate and gift tax returns, divorce and property settlement agreements, deeds, title insurance policies, and all trust documents should be kept in a permanent file (or a safe deposit box).
All other documents including bank statements, canceled checks, credit card statements, deposit slips, charitable contribution receipts and medical bills can be discarded after four years.
IF YOU ARE NOT SURE, CALL US BEFORE YOU THROW IT OUT!!!!!
Click here to view a table listing the substantiation required for various categories of charitable contributions.
You may need to consult with Marlena to determine whether or not you qualify as a real estate professional, but this flow chart may clarify the issues involved in determining that.
The California Employment Development Department (EDD) states the following about this issue:
The basic test for determining whether a worker is an independent contractor or an employee is whether the principal has the right to control the manner and means by which the work is performed. When the principal has the "right of control," the worker will be an employee even if the principal never actually exercises the control. If the principal does not have the right of control, the worker will generally be an independent contractor.
Often, it is not clear who possesses the "right of control." In that event, there are a number of secondary factors that are considered in order to make a determination. You can read more about this in the EDD Employment Determination Guide, which includes a checklist of factors to consider. For a thorough, but more succinct discussion of the same issues, take a look at this handout from Paychex©, a payroll services company.
Enrolled agents are tax specialists enrolled with the Federal Department of Treasury to be agents for taxpayers. There are three professionals who can represent taxpayers before all levels of the IRS: CPAs, attorneys, and enrolled agents. CPAs and attorneys are licensed by the state. Enrolled agents are licensed by the U.S. Department of the Treasury. Only part of the CPA and attorney exams cover tax law. The entire exam for enrolled agents is on tax law. Continuing education for enrolled agents is required by tax law.
EAs advise and represent taxpayers before the IRS who are being examined, taxpayers who are unable to pay, and taxpayers who wish to avoid or recover penalties. EAs prepare tax returns for individuals, partnerships, corporations, estates, trusts and any other entities with tax-reporting requirements. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation and are required by the federal government to maintain their professional skills with continuing professional education.
Learn more about enrolled agents at www.naea.org/taxpayers/what-enrolled-agent.