Tax Treatment of Fringe Benefits

Fringe Benefits

The Tax E Man Blog, along with our website http://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 347 949-8293 or email: PatTaxHelp@gmail.com with any questions or concerns.

Tax Treatment of Fringe Benefits

The term “fringe benefit” refers to any benefit provided to an employee that is in addition to money. All benefits provided to an employee are taxable unless the law specifically excludes or defers tax on the benefit. Thus, a fringe benefit can either be taxable, tax-deferred, or excluded from taxation.

The personal use of an employer-provided vehicle is an example of a taxable fringe benefit. An employer contribution to a qualified retirement plan on behalf of the
employee is an example of a tax-deferred fringe benefit. Employer-provided health insurance for an employee is an example of a tax-free fringe benefit.

Business Owner

A small business owner in a corporate setting may be both the owner and an employee of his or her business. By taking advantage of excludable fringe benefits, the owner receives a double benefit. First, the cost of the benefit is deductible by the business. Second, the cost
of the benefit is tax free to the employee-owner.

Read 2016 Fringe Benefits Here

Nondiscrimination Rules for Fringe Benefits

Nondiscrimination rules are designed to prevent business owners from offering tax-favored fringe benefits to themselves but not their employees. In general,
if fringe benefits are offered to all employees, then all employees, including the top paid employees, receive tax-favored treatment on employee benefits. However, if a plan favors highly-compensated employees or key employees, the value of the benefit must be included in their taxable wages. The terms highly-compensated employees and key employees can mean different things depending on the applicable plan. Special restrictions apply for fringe benefits for sole proprietors, partners, certain LLC members, and S corporation shareholders.Consult your tax advisor if you are a business owner
considering providing fringe benefits to yourself and your employees.

Employer-Provided Vehicles

If an employer provides an employee with a company owned vehicle, and the employee uses the vehicle for personal purposes, the value of that personal use must be included as taxable income on the employee’s Form W-2. Under the general rule, the taxable amount equals the fair market value of the total use, minus the amount the employee pays for the use.

Employer-Provided Cell Phones

The value of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee’s income.

Non-compensatory Business Purposes

An employer needs substantial business reasons for providing the cell phone. Examples include:

Need to contact the employee at all times for work-related emergencies,
Requirement that the employee be available to speak with clients at times when the employee is away from the office, and
Need to speak with clients located in other time zones at times outside the employee’s normal workday.

Read 2016 Fringe Benefits Here

Any accounting business or tax advice contained in the Tax E Man Blog or http://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 please 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 347 949-8293 or email: PatTaxHelp@gmail.com with any questions or concerns.

← Back

Thank you for your response. ✨

Identity Theft and Your Taxes

identity-thest-photo

Identity Theft and Your Taxes

Your identity and money can be stolen in a tax-related scam via email (“phishing”), fax, phone, or letters. Some recent examples of identity theft scams are:

Refund scam. A bogus email, claiming to come from the IRS, tells you that you are eligible to receive a tax refund for a given amount if you just follow the instructions
in the email.
Inherited funds, lottery winnings, and cash consignment scams. A bogus email, claiming to come from the U.S. Department of the Treasury, notifies you that you will receive millions of dollars if you follow the instructions in the email. This may be a multi-step scheme that includes instructions for you to deposit taxes on the funds before they can be paid out or the issuance of a phony check on which you must pay 10% tax before the check can be deposited.
EFTPS scam. A bogus email, claiming to come from the IRS, contains a realistic-looking screenshot of the IRS website with a message about fraud attempts regarding your bank account. The email states that the bank account can be unblocked if you just click a link and provide information.
EIN scam. A bogus fax, claiming to be from the IRS, informs you that you have failed to submit required bank account details. You are asked to fax back a form that requests your EIN, bank information, and officer signatures.

Notify the IRS

If you receive a tax-related phishing email, do not click on the links or open any attachments. Forward the email to phishing@irs.gov or call the IRS at 800-829-1040.
How the IRS Contacts Taxpayers

The IRS will never initiate contact with you by email or any social media tools to request personal or financial information.
It is unusual for the IRS to initiate contact by fax or phone call. You can call the IRS at 800-829-1040 to verify that an unexpected fax or phone call is legitimate.

Read Identity Theft and Your Taxes 2017 Here

Fraudulent Tax Returns

An identity thief might use your Social Security number to fraudulently file a tax return and claim a refund. You could be completely unaware that your identity has been stolen until your return is rejected for e-filing or you get an IRS notice or letter.

Rejected e-File

Your electronically filed return is rejected because the Social Security number belonging to you, your spouse, or a dependent has already been used on a tax return.

This situation can occur because of a mistyped number or dispute about claiming a dependency exemption.Such cases do not necessarily indicate identity theft
If your return has been rejected because of a previously used Social Security number, it cannot be e-filed. You must file a paper return.

IRS Notice

You receive an IRS notice or letter stating that:

More than one return was filed in your name for the year,
You have a balance due, refund offset, or initiation of collection action for a year when you did not file a return, or
IRS indicates that you received wages from an employer you didn’t work for

You should respond immediately to the name and phone number printed on the IRS notice or letter. You will be asked to complete Form 14039, Identity Theft Affidavit, and provide identifying information.

Read Identity Theft and Your Taxes 2017 Here

Pat can be contacted at 347 949-8293 or email: PatTaxHelp@gmail.com with any questions or concerns.

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.

← Back

Thank you for your response. ✨

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.

← Back

Thank you for your response. ✨

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.

← Back

Thank you for your response. ✨

Filing Status

filing-status

Single

A taxpayer is unmarried in 2016 if:

The taxpayer has never married,

The taxpayer was legally separated, according to state law, under a decree of divorce or separate maintenance.
The taxpayer’s spouse died before January 1, 2016, and the taxpayer did not remarry in 2016.
If the taxpayer meets the definition of unmarried, file as Single unless the requirements for one of the following filing statuses are met.
Head of Household, or
Qualifying Widow(er) with Dependent Child.

Read 2016 Filing Status New Here

Married Filing Joint (MFJ)

A taxpayer can file a joint return in 2016 with a spouse if:

The taxpayer was married at the end of 2016, even if the taxpayer did not live with the spouse at the end of 2016.
The taxpayer’s spouse died in 2016, and the taxpayer did not remarry in 2016.
The taxpayer was married at the end of 2016, and the spouse died in 2017 before filing a 2016 return
The taxpayer lived with a person in a common-law marriage recognized in the state where they live or in the state where the common-law marriage began.

A taxpayer can file MFJ if both spouses agree, otherwise a married taxpayer may file:

Married Filing Separately (MFS), or
Head of Household (HOH) if the taxpayer meets the requirements to be “Considered Unmarried.” See Head of Household, later.

Read 2016 Filing Status New Here

Any accounting, business or tax advice contained in the Tax E Man Family 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.

The Tax E Man Family 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.

Your Rights as a Taxpayer-The Taxpayer Bill of Rights

As stated by the Internal Revenue Service, their mission is to

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all

It was toward this end that the Tax Payer Bill of Rights were created by the IRS and incorporated into IRS Publication 1. The Taxpayer Bill of Rights contains 10 provisions compiled by the Internal Revenue Service that “Take the multiple existing rights embedded in the tax code and groups them into 10 broad categories making them more visible and easier for taxpayers to find.”

Read Taxpayer Bill Of Rights Here

The 10 Taxpayer Rights are

The Right to be Informed
The Right to Quality Service
The Right to Pay No More than the Correct Amount of Tax
The Right to Challenge the IRS’s Position and be Heard
The Right to Appeal an IRS Decision in an Independent Forum
The Right to Finality
The Right to Privacy
The Right to Confidentiality
The Right to Retain Representation
The Right to a Fair and Just Tax System

As stated in Right 9, taxpayers have “The Right to Retain Representation”. Patrick White, Enrolled Agent President of Pat Tax Inc. is empowered to represent taxpayers before the Internal Revenue Service.

Read Taxpayer Bill of Rights 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.

← Back

Thank you for your response. ✨

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Individual Retirement Accounts Kinds of IRAs and Prohibited Transactions

Tax E Man — Tax Consultation, Preparation, Representation

IRA Pic2

Kinds of IRAs and Prohibited Transactions

You can open different kinds of IRAs with a variety of organizations. You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also open an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements, which are listed below for various arrangements.

Traditional IRAs

Your traditional IRA can be an individual retirement account or annuity. It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account.

Read 2016 Individual Retirement Accounts Kinds of IRAs and Prohibited Transactions

SIMPLE IRAs

A savings incentive match plan for employees (SIMPLE) plan is a tax-favored written agreement (salary reduction) between you and your employer that allows you to
choose to reduce your compensation (salary) by a certain percentage each pay period, and have your employer contribute the salary reductions to a SIMPLE IRA on your behalf.

All contributions under a SIMPLE IRA plan must be made to a SIMPLE IRA, not to any other type of IRA. The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described above.

If your employer maintains a SIMPLE IRA plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution.

Roth IRAs

A Roth IRA can be either an individual retirement account or individual retirement annuity, described above. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. A SEP IRA or SIMPLE IRA cannot be designated as a Roth IRA.

Designated Roth accounts. Designated Roth accounts are separate accounts under 401(k), 403(b), or 457(b) plans that accept elective deferrals that are referred to as Roth contributions. These elective deferrals are included in your income, but qualified distributions from these accounts are not included in your income. Designated
Roth accounts are not IRAs and should not be confused with Roth IRAs. Contributions, up to their respective limits, can be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. A contribution to one does not impact your eligibility to contribute to the other.

Read 2016 Individual Retirement Accounts Kinds of IRAs and Prohibited Transactions

Prohibited Transactions

Generally, a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary, or any disqualified person.

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant). The following are some examples of prohibited transactions with an IRA.
• Borrowing money from it.
• Selling property to it.
• Using it as security for a loan.
• Buying property for personal use (present or future) with IRA funds.

Read 2016 Individual Retirement Accounts Kinds of IRAs and Prohibited Transactions

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Individual Retirement Accounts-Roth IRAs

IRA Senior

Roth IRAs

Roth IRA Contribution Limits—2016
Lesser of: Taxable compensation for the year, or:
Under age 50………………………………………………………………………. $ 5,500
Age 50 or older……………………………………………………………………. $ 6,500

What is a Roth IRA?
A Roth IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An account must be designated as a Roth IRA when opened. Roth IRA tax advantages and rules compared to a traditional IRA:

Contributions are not deductible. Active participation in an employer plan is irrelevant.
If certain requirements are satisfied for qualified distributions, distributions are tax free.
Can withdraw contributions any time for any reason without owing taxes or penalties.
Contributions can be made after the participant reaches age 70½.
The required minimum distribution (RMD) rules do not apply. Distributions are not required until death of the participant.
Contributions are not allowed when modified adjusted gross income (MAGI) is above certain limits
Neither a SEP IRA nor a SIMPLE IRA can be set up as a Roth IRA

Click and Read 2016 Individual Retirement Accounts Roth IRAs Here

Who Can Contribute to a Roth IRA?
Generally, you can contribute to a Roth IRA if you have taxable compensation and income less than the top of the phase-out range for your filing status, see Roth IRA
Phase-outs chart, in link below..

Click and Read 2016 Individual Retirement Accounts Roth IRAs Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Individual Retirement Accounts-Traditional IRAs

AfricanAmericanCouple

Traditional IRAs

IRA Contribution Limits—2016
Lesser of: Taxable compensation for the year, or:
Under age 50………………………………………………………………………. $ 5,500
Age 50 or older……………………………………………………………………. $ 6,500

What is an IRA?
An IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An IRA is referred to as a traditional IRA if it is not a Roth IRA or a SIMPLE IRA. Traditional IRAs include SEP IRAs.
Traditional IRA tax advantages and rules:

Contributions to an IRA may be fully or partially deductible.
Amounts in your IRA (including earnings and gains) are not taxed until distributed.
There is no limit on how much you can earn and still contribute (however, contributions are not deductible above certain amounts).
Contributions are not allowed past age 70½ and required minimum distributions begin after age 70½.
Early distributions (before you are age 59½) are subject to a 10% additional tax. Exceptions apply.
Distributions are taxed as ordinary income.

Who Can Contribute to an IRA?
Any individual can set up a traditional IRA if he or she receives taxable compensation during the year and is not age 70½ by the end of the year. An individual can have a traditional IRA even if covered by an employer-sponsored retirement plan. However, the deductible amount of contributions to a traditional IRA may be phased out. See Reduced IRA Deduction, later.

Contribution limit. Contributions to IRAs are limited to the lesser of the individual’s compensation (or spouse’s compensation under a spousal IRA), or $5,500 ($6,500 for age 50 or older).

Click and Read 2016 Individual Retirement Accounts Traditional IRAs Here

Total contributions are combined with Roth IRA contributions to determine limits. For example, a $1,000 contribution to a Roth IRA will reduce total contributions allowable to a traditional IRA by $1,000.

Spousal IRA. If both spouses have compensation, each can set up a separate IRA. Spouses cannot participate in the same IRA. If filing status is Married Filing Jointly and one spouse’s compensation is less than the contribution limit, the lower-income spouse can use the compensation of the other spouse to qualify. However, the spousal IRA is limited to total compensation reduced by any IRA contributions.

This means that the total combined contributions that can be made for the year to your IRA and your spouse’s IRA can be as much as $11,000 ($12,000 if only one of you is age
50 or older or $13,000 if both of you are age 50 or older).70½ rule. Contributions cannot be made in a year the participant has reached age 70½ or for any later year.

Click and Read 2016 Individual Retirement Accounts Traditional IRAs Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Tax Treatment of Fringe Benefits

Business Owner

Read 2016 Fringe Benefits Here

Nondiscrimination Rules for Fringe Benefits

Employer-Provided Vehicles

Employer-Provided Cell Phones

Non-compensatory Business Purposes

Read 2016 Fringe Benefits Here

Thank you for your response. ✨

Share this:

Identity Theft and Your Taxes

Notify the IRS

Fraudulent Tax Returns

Rejected e-File

IRS Notice

Share this:

Taxable Social Security Benefits

Taxable Benefits

Read 2016 Taxable Social Security Benefits Here

Thank you for your response. ✨

Share this:

Employee or Independent Contractor?

Read 2016 Employee or Independent Contractor Here

Read 2016 Employee or Independent Contractor Here

Thank you for your response. ✨

Share this:

Saving for College

Read 2016 Saving for College Here

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

Read 2016 Saving for College Here

Thank you for your response. ✨

Share this:

Share this:

Read Taxpayer Bill Of Rights Here

Thank you for your response. ✨

Share this:

Share this:

Roth IRAs

Share this:

Traditional IRAs

Share this: