Although the tax return filing deadline has come and gone, it’s never too early to start planning for next year’s tax return. With that in mind, let’s take a look at some common summertime situations that could affect your taxes:
Many businesses hire part-time or full-time workers, especially in the summer. The IRS classifies these employees as seasonal workers, defined as an employee who performs labor or services on a seasonal basis (i.e., six months or less). Examples of this seasonal work include retail workers employed exclusively during the holidays, sports events, or during the harvest or commercial fishing season. Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees.
This year’s tax deadline may have come and gone, but it’s never too early to start planning for next year. With that in mind, here are five things you can do now to make next April 15 easier for everyone.
Backup withholding is a federal tax on income that otherwise typically doesn’t require tax withholding, such as 1099 and W2-G income. Taxpayers who receive this type of income may have backup withholding deducted from their payments. Here is what you should know about backup withholding:
Surprise! Will you be one of the taxpayers who gets this unwelcome one: You owe money to the IRS!
To ensure this doesn’t happen to you, take note of these 5 myths…
Form W-4, Employee’s Withholding Certificate has been redesigned for 2020. Previously, income tax withholding was based on an employee’s marital status and withholding allowances or tied to the value of the personal exemption. With the revised Form W-4, however, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. Furthermore, workers can also choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.
Small business owners are reminded that tax reform legislation lowered the backup withholding tax rate to 24 percent. In addition, the withholding rate that usually applies to bonuses and other supplemental wages was also lowered to 22 percent.
The estimated tax penalty has been waived for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year; however, there is a catch: the penalty is only waived for taxpayers who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. Typically, a taxpayer must pay 90 percent to avoid a penalty.