Saying "I do" also means saying hello to some tax changes in your new wedded life. (Photo by Jakob Owens on Unsplash) The end of each year is a good time to reflect on what happened the previous 12 months. For most of us, that includes some good events, some sad ones, and some still shaking out as we’re about to enter a brand new year. Many of these changes also could affect our taxes. So, as a bit of year-end preplanning, here are six ways that the Internal Revenue Code shows up when we encounter personal and lifestyle changes.... Read more →
Payroll tax
Before law changes, the now inflation-indexed Alternative Minimum Tax, known as the AMT, seemed to work like an ATM for the U.S. Treasury. When the AMT was created in 1969 to ensure wealthy individuals paid at least some tax, it wasn't indexed for inflation. Until that changed with the 2017 tax reform law, the AMT adversely affected a lot of less-wealthy taxpayers. (Photo by Ali Mkumbwa on Unsplash) What's worse than figuring your tax bill? Having to figure a second, higher, parallel amount you might owe. That's a situation that taxpayers who owe the Alternative Minimum Tax, or AMT, end... Read more →
The coming wage base bump also means more FICA taxes for higher earners. Running the numbers is important for everyone, but critical for older folks who rely on Social Security benefits, and the annual cost-of-living increases, to cover much of their expenses. (Photo by Getty Images via Unsplash) There’s some good news for the more than 72.5 million recipients of Social Security payments. The Social Security Administration (SSA) today announced they’ll soon see an increase in their retirement and/or Supplemental Security Income (SSI) benefits. Nearly 68 million retirees who receive monthly Social Security deposits will see a 2.5 percent cost-of-living... Read more →
Keeping track of your finances when you're older can alert you to the possibility that you might owe tax on some of your Social Security benefits. Most of us look forward to retirement. Some of us also get a tax shock once we start collecting Social Security. Some of our federal retirement benefits, in some cases as much as 85 percent of our annual payout, could be subject to federal taxation. Not only is that tax an unwelcome surprise to older taxpayers, it also has become part of the current presidential campaign “Seniors should not pay tax on Social Security,”... Read more →
Unsplash+ in collaboration with Getty Images School’s out for the summer. That means many young people are working summer jobs. If it’s your first time in the workplace, congratulations on your earnings effort. And good luck with the tax lessons you’re about to learn. Here’s a quick CliffsNotes on paychecks and taxes. Income Tax Withholding: Getting your first paycheck is reason for celebration. That joy, however, tends to be offset a bit when you realize that Uncle Sam, and probably your state tax collector, too, took some off the top. That’s the income tax withholding that all wage-earning workers face.... Read more →
Before law changes, the now inflation-indexed Alternative Minimum Tax, known as the AMT, seemed to work like an ATM for the U.S. Treasury. The AMT was created 54 years ago to ensure the rich paid at least some tax, but since it originally wasn't indexed for inflation, it increasingly affected a lot of less-wealthy taxpayers. (Photo by Unsplash+ in collaboration with Getty Images) What's worse than figuring your tax bill? Having to figure a second, parallel amount you might owe. That's a situation that taxpayers who owe the Alternative Minimum Tax, or AMT, end up facing at filing time. The... Read more →
Unsplash+ in collaboration with Allison Saeng Ghost sightings are common this time of year. Some companies, however, find that ghost employees haunt their businesses year-round. Ghoulish tax tricks are also played on workers by some ghost employers. In both cases, the actions are not just criminal, but also are costly to all, including Uncle Sam, who are victims of these scary tax evasion tactics. Haunted by ghost workers: A ghost employee is a fictitious employee set up in a company's human resource and/or payroll system that receives paychecks. Basically, ghost workers are a form of embezzlement, as the nonexistent employees... Read more →
The coming wage base bump also means more FICA taxes for higher earners. It looks like this man got the good news that his Social Security benefit will be larger next year. However, the tax news for high earners who are still working isn't as welcome. (Unsplash+ in collaboration with Getty Images) The Social Security Administration (SSA) gave 71 million benefits recipients good news today. Next year, they'll get a 3.2 percent increase in their Social Security retirement benefits and Supplemental Security Income (SSI) payments. The cost-of-living (COLA) bump means that retirees will, on average in 2024, see more than... Read more →
Unsplash+ in collaboration with Getty Images One construction workers' union calls it the industry's "dirty little secret." Tax officials call it a crime. Both are talking about payroll tax evasion. Today, the Financial Crimes Enforcement Network (FinCEN), in coordination with IRS Criminal Investigation (IRS-CI), jointly issued a formal notice to financial institutions alerting them to increases in state and federal payroll tax evasion and workers' compensation insurance fraud in the both residential and commercial construction industries. Every year, state and federal tax authorities lose hundreds of millions of dollars to these schemes, which are perpetrated by illicit actors primarily through... Read more →
Even when companies try to comply with employment tax law, things can go awry. That's why many businesses hire third-party providers to handle those filings. The key here, detailed later in this post, is to hire the correct and reputable service. A Portland area construction company operator was sentenced to federal prison last week for his role in a multiyear scheme to evade the payment of payroll and income taxes on his workers' wages. The Aloha, Oregon, businessman was one of six men indicted last December by a Portland federal grand jury on charges of conspiring to defraud the United... Read more →
Back in the darkest days of the COVID-19 pandemic when companies and workers were struggling due to health-related shutdowns, they were given a bit of a tax reprieve. The Trump Administration on Aug. 8, 2020, issued executive memo that called for the deferral of the payroll tax portion of the Federal Insurance Contributions Act (FICA) tax that goes toward Social Security. The White House argued that the move would put more money into workers' hands, give employers some financial breathing room, and keep the economy moving during the initial coronavirus closures. There was a lot of political consternation about the... Read more →
Before law changes, the now inflation-indexed Alternative Minimum Tax, known as the AMT, seemed to work like an ATM for the Internal Revenue Service, allowing it to collect this parallel tax from more than the wealthy for whom it was created. (Photo by Erik Mclean) Calculating one tax bill is bad enough, but some people have to deal with a second one at tax filing time. The Alternative Minimum Tax, or AMT, is a separate tax system created to ensure that the wealthiest pay at least some tax. The parallel AMT was added to the Internal Revenue Code in 1969... Read more →
The Social Security Administration (SSA) gave retirees and other recipients of the program's payments good news this week. Next year, they'll get an 8.7 percent cost-of-living increase. That's the highest in more than 40 years, and comes on the heels of this year's bump that, at the time, was the largest retirement benefits bump in decades. Some higher earners, however, aren't so happy. Today's SSA announcement also noted that the amount of income subject to payroll taxes also is going up in 2023. This amount, known as the Social Security wage base, is the maximum earnings, by both salaried workers... Read more →
Photo by Andrea Piacquadio I'm later than usual posting today because the hubby and I finally cleaned a room that we've ignored for way too long. That meant it took longer than if we'd just dusted a bit more regularly. That's why I'm thinking of hiring a cleaning person. OK, I probably won't. I do think about it every time we do some major cleaning job, since I find housekeeping a total drag. Just ask the hubby. But I'm not really one for people I don't really know being in my house. Plus, if we do hire cleaning help, we... Read more →
I hope your 2022 welcoming plans are on track this New Year's Eve eve. But as the time tick tocks away, some folks need to think a few days further into the fast-approaching New Year. Specifically, their focus should be on Monday, Jan. 3, 2022. That's the day that some California residents whose lives and/or businesses were impacted by wildfires need to file certain 2020 returns. The first workday of the New Year also is the deadline for employers and self-employed individuals who deferred paying part of their 2020 Social Security taxes. California disaster delay: Mother Nature was not kind... Read more →
AMT law changes plus annual inflation adjustments mean that this parallel tax aimed at the wealthy is no longer such a broadly-based ATM for the tax collector. The political and legislative battle over how to collect from the wealthiest taxes, which was mentioned in yesterday's Part 6 tax inflation post on (among other things) estate taxes, is not new. It's been going on for decades. The Alternative Minimum Tax, or AMT, is one way that Washington, D.C., came up with to ensure that the rich pay at least some taxes. This post, Part 7 of the ol' blog's 10-part inflation... Read more →
Rep. John Larson speaking at a press conference announcing his latest Social Security bill. Joining Larson were his Democratic colleagues (in masks behind him left to right) Reps. Terri Sewell of Alabama, Steven Horsford of Nevada, and Alexandria Ocasio-Cortez of New York. (Photo courtesy Office of Rep. John Larson) If you're like me, closer to your retirement date than when you started your first full-time job, you keep a close eye on Social Security. For, well, it seems like forever, we've been hearing that Social Security is going broke. The federal retirement benefits doomsday date is a bit like those... Read more →
The Social Security Administration (SSA) gave retirees and other recipients of the program's payments good news this week. Next year, they'll bet the biggest benefits bump in decades. Some higher earners, however, aren't so happy. That government benefits announcement also noted that the amount of income subject to payroll taxes also is going up in 2022. This amount, known as the Social Security wage base, is the maximum earnings, by both salaried workers and the self-employed, that are subject to that retirement portion of the Federal Insurance Contributions Act (FICA) tax. In 2021, the wage base is $142,800. On Jan.... Read more →
One of the biggest challenges for any business, whether new or established, small or larger, is hiring. It's also a challenge for the Internal Revenue Service, especially when companies don't understand or intentionally avoid employment taxes. Money lost from unpaid payroll taxes, both unreported or underreported, is huge, notes a recent Kiplinger's Tax Newsletter, accounting for a large portion of the overall federal Tax Gap. This is the amount of money the IRS is owed, but hasn't been able to collect. Kiplinger cites IRS data from 2019 that found $77 billion of payroll taxes fell through the cracks yearly from... Read more →
With the financial situation of Uncle Sam's retirement benefits program getting more dire, a recurring suggestion — raise the Social Security payroll tax wage base — is getting some traction this year. Labor Day typically marks the end, at least unofficially, of summer. After the early September long weekend, most schools are back in session, albeit still in remote/real classroom combos due to the Delta COVID-19 variant. Workers, many also still in hybrid coronavirus cubicle/Zoom formats, tend to focus on their jobs. Those jobs are critical not just to the employees, but the economy as a whole and to two... Read more →