Taxable Social Security Benefits

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax, Inc. . Please feel free to contact us with any questions or concerns.

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

Taxable Social Security Benefits

Some taxpayers have to pay federal income taxes on their Social Security benefits. This usually happens only if they have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to Social Security benefits.

Taxable Benefits

To determine the amount of Social Security or Railroad Retirement benefits that may be taxable, taxpayers must compare the base amount with the total of:

One-half of the benefits received, plus
All other income, including tax-exempt interest.

Other income is not reduced by any exclusions for:

Interest from qualified U.S. Savings Bonds,
Employer-provided adoption benefits,
Foreign earned income or foreign housing, or
Income earned by bona fide residents of American Samoa or Puerto Rico.

Taxable Social Security Base Amounts
Filing Status	Base Amount
Single, Head of Household, or Qualifying Widower	$25,000
Married Filing Separately and lived apart from spouse all year	$25,000
Married Filing Jointly	$32,000
Married Filing Separately	$0

Read 2016 Taxable Social Security Benefits Here

Any accounting, business or tax advice contained in the Tax E Man Blog or www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax, Inc. would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

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Employee or Independent Contractor?

Employee or Independent Contractor

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

Employee or Independent Contractor?

Employee or Independent Contractor?

In order for a business owner to know how to treat payments made to workers for services, he or she must first know the business relationship that exists between the business and the person performing the services. A worker’s status determines what taxes are paid and who is responsible for reporting and paying those taxes. A worker performing services for a business is generally an employee or an independent contractor. If a worker is classified incorrectly, the IRS may assess penalties on the employer for nonpayment of certain taxes.

Penalties and Interest
When the IRS determines that a worker is actually an employee rather than an independent contractor, the employer is subject to penalties for failure to withhold
and remit income, FICA (Social Security and Medicare) and FUTA (federal unemployment tax) taxes, interest on the underpaid amounts, and penalties for failure to file information returns. The state will also seek to collect workers’ compensation and unemployment compensation premiums for unreported wages.

Read 2016 Employee or Independent Contractor Here

Independent Contractor
An independent contractor is self-employed and is generally responsible for paying his or her own taxes through estimated tax payments. A business issues Form 1099-MISC, Miscellaneous Income, to any one independent contractor, subcontractor, freelancer, etc.,
to whom the business made $600 or more in payments over the course of the tax year. The business is not generally responsible for withholding income tax or FICA.

Employee
A worker treated as an employee will be issued Form W-2 for wages paid. The business hiring the worker is responsible for withholding income tax and FICA. The employer is also liable for FUTA and various state employment taxes. Also, the employee may be eligible for certain fringe benefits offered by the employer, such as health care.

Read 2016 Employee or Independent Contractor Here

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

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Saving for College

saving-fur-college-picture

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax Inc. . Please feel free to contact us with any questions or concerns.

Enrolled Agent and National Tax Practice Institute Fellow Pat White can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

Saving for College

Custodial Accounts (UTMA/UGMA)

Assets in a custodial account belong to the minor. A custodian, usually an adult relative, controls the assets until the minor reaches the age set by state law (21 in most states).
Assets in a custodial account can be used to pay for education expenses for the minor.

Read 2016 Saving for College Here

Savings Bond Interest Exclusion

Exclusion Rules
Interest from qualified savings bonds redeemed by the taxpayer can be excluded from income if:

The taxpayer paid qualified education expenses during the year for the taxpayer, spouse, or a dependent claimed on the taxpayer’s return.
Filing status is not Married Filing Separate. If proceeds from the redemption (interest and principal) are more than adjusted qualified education expenses, only a percentage of the interest is excludable.

Example: Marty redeemed qualified bonds for $10,000, including accrued interest of $5,500. He paid $8,000 of qualified education expenses during the year. His excludable interest is:

$ 5,500 interest × $ 8,000 qualified expenses/$10,000 redemption proceeds = $ 4,400 tax-free interest

Income Limit
The exclusion is limited by adjusted gross income. Check with your tax preparer for income limitations.

Qualified Savings Bonds

Series EE bonds issued after 1989 and Series I bonds. • Issued to a person who was age 24 before the bond’s issue date. The issue date is the first day of the month in which the bond was purchased (for example, a bond purchased on May 25 has a May 1 issue date). The issue date is printed on the front of the bond.
Issued in the name of the taxpayer and/or spouse. There can be no other co-owners, including the taxpayer’s child. The bond can have a pay‑on-death (POD) beneficiary, including a child.

Qualified Education Expenses

Tuition and fees required for enrollment or attendance at an eligible educational institution. Qualified expenses do not include courses involving sports, games, or hobbies, unless part of the student’s degree program.
Contributions to a qualified tuition program.
Contributions to a Coverdell education savings account.

Qualified Tuition Plans (529 Plans) & Educational Savings Accounts (ESAs)

QTP and ESA Tax Benefits
Contributions to a QTP or ESA are not deductible. Earnings accumulate tax free. Distributions are not taxable if less than the beneficiary’s adjusted qualified education
expenses in the year of distribution. Contributors can contribute to both a QTP and an ESA in the same year for the same designated beneficiary.

Read 2016 Saving for College Here

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns regarding tax consultation, preparation or representation.

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