Featured

Tax Tip – Extension of Time to File

Individuals can request an automatic six-month extension of time to file their income tax returns. For a calendar-year taxpayer, this would extend the due date for filing from April 15 to October 15 (Reg. Sec. 1.6081-4(a)).

Caution: The automatic extension only extends the due date for filing the return – it does not extend the due date for paying any tax due by the regular due date (Reg. Sec. 1.6081-4(c)).

Don Fitch CPA Practice Pointer:

An individual can request the automatic extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return either electronically or by mail by the due date of the return. An individual also can get the extension by paying part or all of his or her estimate of tax due by using a credit or debit card by phone or over the Internet. The individual does not file Form 4868 in this case.

The extension request must show the full amount properly estimated as tax for the tax year (Reg. Sec. 1.6081-4(b); Rev. Rul. 79-113). The Second Circuit has held that a taxpayer should be treated as having properly estimated his tax liability when he or she makes a bona fide and reasonable estimate of his or her tax liability based on the information available to the taxpayer at the time he or she requests the extension (Berlin v. Comm’r, 59 F.2d 996 (2d Cir. 1932)). This requires the taxpayer to judge or determine his or her tax liability generally, but carefully. Thus, if a taxpayer, in a Form 4868 request for automatic extension, estimated his or her tax liability to be zero, even though at the time the taxpayer submitted the request, he or she had ample evidence discrediting the estimate, the Form 4868 would be invalid. Further, to be treated as having properly estimated his or her tax liability, the taxpayer must make a bona fide and reasonable attempt to locate, gather, and consult information that will enable the taxpayer to make a proper estimate of his or her tax liability (Crocker v. Comm’r, 92 T.C. 899 (1989)).

Observation:

The taxpayer does not have to pay the properly estimated tax with the Form 4868 in order to obtain a filing extension. However, as noted earlier, a filing extension does not extend the due date for paying any tax due.

The IRS can terminate an automatic extension at any time by mailing the individual a notice of termination at least 10 days before the termination date designated in the notice. The IRS must mail the notice of termination to the address shown on the Form 4868 or to the individual’s last known address (Reg. Sec. 1.6081-4(d)).

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/16/2021 15:22)

Featured

Tax Tip – Filing Requirements for Taxpayers Receiving Only Social Security

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/16/2021 15:03)

Featured

Tax Tip – Gross Income Filing Requirements for U.S. Citizens and Residents

For tax years before 2020, whether a taxpayer who is a U.S. citizen or resident must file a return depends on three factors:

(1) the taxpayer’s gross income;

(2) the taxpayer’s filing status; and

(3) the taxpayer’s age.

A taxpayer’s filing status is determined on the last day of the tax year. If the taxpayer is 65 or older at the end of the year, the taxpayer can have a higher amount of gross income before being required to file a tax return. A taxpayer is considered 65 on the day before the taxpayer’s 65th birthday. Thus, a taxpayer who turns 65 on January 1, 2021, is considered 65 at December 31, 2020.

For tax years after 2017 and before 2026, the Tax Cuts and Jobs Act of 2017 (TCJA) modified the filing requirements for those who are required to file a tax return. In the case of:

  1. An individual who is not married, such individual is required to file a tax return if the taxpayer’s gross income for the tax year exceeds the applicable standard deduction (Code Sec. 6012(f)(1)).
  2. Married individuals are required to file a return if that individual’s gross income, when combined with the individual’s spouse’s gross income for the tax year, is more than the standard deduction applicable to a joint return, provided that: (1) such individual and his spouse, at the close of the tax year, had the same household as their home; (2) the individual’s spouse does not make a separate return; and (3) neither the individual nor his spouse is a dependent of another taxpayer who has income (other than earned income) in excess of $500 (indexed for inflation) (Code Sec. 6012(f)(2)).

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/14/2021 09:16)

Featured

Tax Tip – February 1 is the deadline for employers to issue and file W-2 & 1099-Misc & 1099-Nec

Employers must file Form W-2 and other wage statements by Monday, February 1, 2021. This is also the date Form W-2s are due to employees.

By law, employers are required to file copies of their Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. However, since January 31 falls on a Sunday in 2021, the deadline is the next business day, Monday, February 1.

Form 1099-MISC, Miscellaneous Income and Form 1099-NEC, Nonemployee Compensation, are also due to recipients on February 1, 2021, with some exceptions. Other due dates related to Form 1099 are listed in the instructions for these forms.

Timely filing helps prevent fraud. Filing wage statements on time and without errors is beneficial to employers and the IRS. The employer avoids penalties, and the IRS has time to verify income taxpayers report on their tax returns, which helps prevent fraud.

E-file is the quickest, most accurate and convenient way to file these forms. The law requires certain filers who file 250 or more information returns for any calendar year to file electronically.

Employers should plan and prepare early. Good preparation now can help employers avoid problems later. For instance, employers can start by verifying or updating employee information, such as:
• Names
• Addresses
• Social Security numbers
• Individual Taxpayer Identification Numbers

Employers should be sure their account information is current and active with the Social Security Administration as soon as possible. Lastly, employers should order paper Form W-2s, if needed.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon ongoing referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Tax Tip - February 1 is the deadline for employers to issue and file W-2 & 1099-Misc & 1099-Nec
Tax Tip – February 1 is the deadline for employers to issue and file W-2 & 1099-Misc & 1099-Nec

This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

Tax Tip – Health Savings Accounts

If you are an “eligible individual,” you can, within limits, deduct the amount you contribute to a health savings account (HSA) in computing adjusted gross income. You can even deduct contributions that family members or other persons make to an HSA on your behalf. Your employer also may make contributions to your HSA. You get no deduction for those employer contributions; however, the employer contributions are generally excluded from your gross income.

An HSA is a U.S. trust or custodial account set up with a qualified trustee or custodian for the exclusive purpose of paying the account beneficiary’s qualified medical expenses. Only “eligible individuals” can set up a health savings account (HSA). Your eligibility to establish or make deductible contributions to an HSA is determined on a month-by-month basis. Generally, you are an eligible individual for a month if you:

(1) are covered under a high-deductible health plan (HDHP) on the first day of that month;

(2) are not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain limited types of coverage);

(3) are not entitled to benefits under Medicare (generally, you have not yet reached age 65); and

(4) cannot be claimed as a dependent on another person’s tax return.

The maximum amount you can contribute to an HSA for the tax year is equal to the sum of the monthly limits for those months during the tax year that you are – or are considered to be – an eligible individual. The monthly limit is 1/12 of the applicable annual limit, which is subject to annual adjustments for inflation. For 2016, the annual limits are $3,350 if you have self-only coverage and $6,700 if you have family coverage. For 2017, the annual limits are $3,350 if you have self-only coverage and $6,750 if you have family coverage. If you are age 55 or older at the end of the year, you can make an additional “catch-up contribution” of up to $1,000 a year.

Distributions from your HSA are tax free to the extent you use them to pay for qualified medical expenses. Qualified medical expenses for this purpose are expenses you pay for your own medical care or for the medical care of your spouse or dependents, to the extent those expenses are not covered by insurance or otherwise. For this purpose, a child of divorced parents is treated as a dependent of both parents. The qualified medical expenses must be incurred only after the HSA has been established.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 03/03/2021 07:52)

Tax Tip – Miscellaneous Itemized Deductions (Form 1040 Schedule A)

You can elect each year to itemize deductions rather than claim the standard deduction. Itemized deductions are those that you claim on Schedule A of Form 1040, Itemized deductions are as follows:

(1) a part of your medical and dental expenses;
(2) certain taxes;
(3) interest;
(4) gifts to charity;
(5) personal casualty and theft losses attributable to a federally declared disaster; and
(6) certain other expenses.

For years 2018 through 2025, all miscellaneous itemized deductions, which were previously allowed only to the extent that they exceed 2 percent of your adjusted gross income (AGI), are NOT deductible. These expenses include unreimbursed employee business expenses such as:

(1) business bad debts of an employee;
(2) business gifts, up to a limit of $25 for gifts made to any one individual during the year;
(3) business liability insurance premiums a taxpayer pays for protection against personal liability for wrongful acts on the job;
(4) damages paid to a former employer for breach of an employment contract;
(5) depreciation on a computer or cell phone the employer requires the employee to use on the job;
(6) dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps the taxpayer carry out the duties of his or her job;
(7) expenses of a home office or part of the employee’s home used regularly and exclusively for work;
(8) job search expenses in the employee’s present occupation;
(9) legal fees related to doing or keeping the employee’s job;
(10) licenses and regulatory fees a taxpayer pays each year to state or local governments for the taxpayer’s trade, business, or profession;
(11) malpractice insurance premiums;
(12) medical examinations required by an employer;
(13) occupational taxes;
(14) passport for a business trip;
(15) subscriptions to professional journals and trade magazines related to the employee’s work;
(16) tools and supplies used in the employee’s work, if they wear out and are thrown away within one year from the date of purchase;
(17) travel, transportation, meals, entertainment, and local lodging related to the employee’s work;
(18) union dues and expenses;
(19) work clothes and uniforms if required and not suitable for everyday use; and
(20) work-related education.

The temporary repeal of miscellaneous itemized deductions for years 2018 through 2025 also applies to certain other expenses paid or incurred for the production of income and which previously were deductible subject to the 2 percent of AGI limitation. These production-of-income expenses include expenses paid or incurred in the tax year:

(1) to produce or collect income that is included in gross income;
(2) to manage, conserve, or maintain property held for producing such income; or
(3) to determine, contest, pay, or claim a refund of any tax.

Examples of these types of expenses include:

(1) appraisal fees for a casualty loss or charitable contribution;
(2) casualty and theft losses from property used in performing services as an employee;
(3) clerical help and office rent in caring for investments;
(4) convenience fees charged for paying income tax by credit or debit card;
(5) depreciation on home computers used for investments;
(6) excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust;
(7) hobby expenses, but generally not more than hobby income;
(8) indirect miscellaneous deductions of pass-through entities (partnerships, S corporations, and mutual funds that are not publicly offered);
(9) investment fees, custodial fees, trust administration fees, and other expenses paid for managing investments that produce taxable income;
(10) legal fees related to producing or collecting taxable income or getting tax advice;
(11) loss on deposits in an insolvent or bankrupt financial institution (if not treated as a casualty loss);
(12) loss on traditional IRAs or Roth IRAs, when all amounts have been distributed;
(13) repayments of income;
(14) repayments of social security benefits;
(15) safe deposit box rental on a box used to store taxable income-producing stocks, bonds, or investment-related papers and documents;
(16) service charges on dividend reinvestment plans; (17) tax advice and preparation fees; and (18) trustee’s fees for an IRA, if separately billed and paid.

Certain other expenses are deductible as miscellaneous itemized deductions on Schedule A (Form 1040), but are not subject to the 2 percent of AGI floor continue to be deductible for years 2018 through 2025. These items include:

(1) amortizable premium on taxable bonds;
(2) casualty and theft losses from income-producing property;
(3) federal estate tax on income in respect of a decedent;
(4) gambling losses up to the amount of gambling winnings;
(5) impairment-related work expenses of persons with disabilities;
(6) losses from other activities from Schedule K-1 (Form 1065-B), box 2;
(7) losses from Ponzi-type investment schemes;
(8) repayments of more than $3,000 under a claim of right; and (9) unrecovered investment in an annuity.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 03/02/2021 15:41)

Tax Tip – Reporting and Paying Employment Taxes for Household Employees

A taxpayer who has one or more household employees during the calendar year may have to file Schedule H (Form 1040), Household Employment Taxes, for that year to report FICA tax or FUTA tax for the household employees.

Who Must File Schedule H: Employers who must pay FICA tax or FUTA tax for household employees generally must report the total household employment taxes on Schedule H (Form 1040), Household Employment Taxes, and then add those taxes to their income tax on Form 1040 (Code Section 3510). Generally, an employer must withhold and pay FICA taxes for a household employee if the employer has paid the employee cash wages during the calendar year at least equal to the “domestic employee coverage threshold” in effect for that year – i.e., $1,900 for 2014 and 2015 (Notice 2013-72; 79 Federal Regulation 64455 (10/29/14)), and $2,000 for 2016 (IRS Publication 926, Household Employer’s Tax Guide). An employer must pay FUTA taxes for household employees if it has paid cash wages totaling $1,000 or more to household employees in any calendar quarter in either the current or preceding calendar year. Household employers generally are not required to withhold federal income tax from their household employees’ wages, but may agree to do so if the employee requests withholding on a completed Form W-4, Employee’s Withholding Allowance Certificate (Notice 95-18). A household employer that withholds federal income tax also must file Schedule H.

Observation: A household employer who agrees to withhold federal income tax is responsible for paying it to the IRS.

A taxpayer who is not required to file an income tax return for the tax year has the following two options for reporting FICA tax or FUTA tax for household employees:

(1) The taxpayer can file Schedule H by itself.

(2) If, besides the household employee, the taxpayer has other employees for whom the taxpayer report employment taxes on Form 941, Form 944, or Form 943 and on Form 940, the taxpayer can include the taxes for his or her household employee on those forms.

Observation: Employers that have the options listed above include certain tax-exempt organizations that do not have to file a tax return, such as churches that pay a household worker to take care of a minister’s home.

A household employer who has business employees for whom the employer reports FICA taxes on Form 941, Form 944, or Form 943, and FUTA tax on Form 940 can include the FICA and FUTA taxes for its household employees on those forms instead of filing Schedule H, and include the taxes with the federal employment tax deposits they make for their business employees. A household employer should not use Schedule H if the employer chooses to pay the employment taxes for his or her household employee with business or farm employment taxes.

Observation: An employer who reports the employment taxes for his or her household employee on Form 941, Form 944, or Form 943 should file the Form W-2 for that employee with the Forms W-2 and Form W-3 the employer files for his or her business or farm employees.

A taxpayer has a household employee if the taxpayer hired someone to do household work and that worker is the taxpayer’s employee. The worker is the taxpayer’s employee if the taxpayer can control not only what work is done, but how it is done. If the worker is the taxpayer’s employee, it does not matter whether the work is full time or part time or that the employer hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether the taxpayer pays the worker on an hourly, daily, or weekly basis, or by the job.

Example:

Roger pays Jennifer to babysit his child and do light housework four days a week in his home. Jennifer follows Roger’s specific instructions about household and child care duties. Roger provides the household equipment and supplies that Jennifer needs to do her work. Jennifer is Roger’s household employee.

Household work is work done in or around the employer’s home. Some examples of workers who do household work are:

Babysitters

Caretakers

Cleaning people

Domestic workers

Drivers

Health aides

Housekeepers

Maids

Nannies

Private nurses

Yard workers

Companion sitters

If only the worker can control how the work is done, the worker is not the taxpayer’s employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

A worker who performs child care services for a taxpayer in the worker’s own home generally is not an employee of the taxpayer.

If an agency provides the worker and controls what work is done and how it is done, the worker is not the taxpayer’s employee.

Example:

Becky made an agreement with Brian to care for her lawn. Brian runs a lawn care business and offers his services to the general public. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are Becky’s household employees.

The IRS addressed the tax treatment of companion sitters. Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. The IRS advised that a person engaged in the trade or business of putting companion sitters in touch with individuals who wish to employ them (i.e., a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. However, the IRS noted, a sitter not affiliated with a companion sitting placement service may be considered to be an employee (i.e., a household employee) of the individual for whom the sitting is performed, depending on whether the individual for whom the sitting is performed has the right to direct and control the sitter. The common law factors used to determine whether the relationship of employer-employee exists would be applied. If such a relationship exists, then the companion sitter would not be considered self-employed and employment tax withholdings would be the responsibility of the person receiving the companion sitting services.

A household employer must include his or her employer identification number (EIN) on the forms the employer files for his or her household employee. An EIN is a nine-digit number issued by the IRS; it is not the same as a social security number. A taxpayer ordinarily will have an EIN if he or she previously paid taxes for employees, either as a household employer or as a sole proprietor of a business. A household employer who already has an EIN should use that number. A household employer who does not have an EIN, get Form SS-4, Application for Employer Identification Number. The instructions for Form SS-4 explain how to get an EIN immediately by telephone or in about four weeks if the employer applies by mail. A taxpayer can also get an EIN over the internet.

When to File Schedule H: A household employer generally must file Schedule H with his or her federal income tax return by April 15 of the year following the year for which the schedule is being filed. If the household employer gets an extension to file his or her return, the extension also will apply to the employer’s Schedule H.

How to Make Tax Payments: When file his or her federal income tax return, the employer generally must attach Schedule H (Form 1040), Household Employment Taxes, to his or her Form 1040, 1040NR, 1040-SS, or Form 1041. The employer uses Schedule H to figure the total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes). The employer must then add those household employment taxes to his or her income tax and pay the amount due by the due date of the return.

Observation: A household employer can avoid owing tax with his or her return if the employer pays enough tax during the year to cover the employer’s household employment taxes and income tax. An can pay the additional tax by asking his or her employer to withhold more federal income tax from his or her wages during the year, asking the payer of his or her pension or annuity to withhold more federal income tax from his or her benefits, or making estimated tax payments for the year (or increasing such payments if he or she already makes estimated tax payments).

A household employer may be subject to the estimated tax underpayment penalty if he or she does not pay enough income and household employment taxes during the year (Code Section 3510(b)(1)). However, the employer will not be subject to the penalty if:

(1) the employer will not have federal income tax withheld from wages, pensions, or any other payments he or she receives; and

(2) the employer’s income taxes, excluding household employment taxes, would not be enough to require payment of estimated taxes (Code Section 3510(b)(2)).

A household employer who owns a business as a sole proprietor or whose home is on a farm operated for profit can choose either of two ways to pay his or her household employment taxes:

(1) pay them with his or her federal income tax; or

(2) include them with his or her federal employment tax deposits or other payments for his or her business or farm employees.

If an employer pays his or her household employment taxes with the employer’s business or farm employment taxes, the employer must report the household employment taxes with those other employment taxes on Form 941, Employer’s QUARTERLY Federal Tax Return, Form 944, Employer’s ANNUAL Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, and on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

Caution:

The deduction that can be taken on Schedules C and F (Form 1040) for wages and employment taxes applies only to wages and taxes paid for business and farm employees. A household employer cannot deduct the wages and employment taxes he or she pays for his or her household employees on Schedule C or F.

Correcting Schedule H: If a household employer discovers that he or she made an error on a Schedule H, the forms used to correct the error depend on whether the Schedule H was attached to another form or whether it was filed by itself.

Schedule H attached to another form: If a household employer discovers an error on a Schedule H that the employer previously filed with Form 1040, 1040NR, or Form 1040-SS, the employer must file Form 1040X and attach a corrected Schedule H. If the employer discovers an error on a Schedule H that the employer previously filed with Form 1041, the employer must file an amended Form 1041 and attach a corrected Schedule H.

An error is considered to be discovered when the employer had enough information to be able to correct the error.

The employer must write “CORRECTED” and the date he or she discovered the error in the top margin of the corrected Schedule H, in dark, bold letters. The employer also must explain the reason for the correction and the date the error was discovered in Part C of Form 1040X or in a statement attached to the amended Form 1041.

Schedule H filed by itself: If a household employer discovers an error on a Schedule H that he or she filed as a stand-alone return, the employer must file another stand-alone Schedule H with the corrected information.

The employer must write “CORRECTED” and the date he or she discovered the error in the top margin of the corrected Schedule H in dark, bold letters. The employer also must explain the reason for the correction and the date the error was discovered in Part II of Form 1040X or in a statement attached to the corrected Schedule H. If the employer has an overpayment, he or she also must write “ADJUSTED” or “REFUND” in the top margin, depending on whether he or she wants to adjust the overpayment or claim a refund.

A household employer must file a corrected Schedule H when he or she discovers an error on a previously filed Schedule H. If correcting an underpayment, the employer must file a corrected Schedule H no later than the due date of his or her next tax return (generally, April 15 of the following calendar year) after discovering the error. If correcting an overpayment, the employer must file a corrected Schedule H within the refund period of limitations (generally three years from the date the original form was filed or within two years from the date the employer paid the tax, whichever is later).

Underpayment: A household employer must pay any underpayment of social security and Medicare taxes by the time he or she files the corrected Schedule H. Generally, by filing on time and paying by the time the employer files his or her the return, the employer will not be charged interest (and will not be subject to failure-to-pay or estimated tax penalties) on the balance due. However, underreported FUTA taxes will be subject to interest.

Overpayment: A household employer may either adjust or claim a refund of an overpayment of social security and Medicare taxes on a previously filed Schedule H. However, if the employer is correcting an overpayment and is filing the corrected Schedule H within 90 days of the expiration of the period of limitations, he or she can only claim a refund of the overpayment.

Under the adjustment procedure, if the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, the employer adjusts the return by indicating on the appropriate line of the Form 1040X or the Form 1041 that he or she would like the overpayment applied to his or her estimated taxes on Form 1040, Form 1040NR, Form 1040-PR, Form 1040-SS, or Form 1041 for the year in which the employer is filing the corrected Schedule H. If the corrected Schedule H is filed as a stand-alone return, the employer adjusts the return by writing “ADJUSTED” in the top margin in dark, bold letters. If the employer adjusts the return, he or she will not receive interest on the overpayment. If the corrected Schedule H will be filed within 90 days of the expiration of the refund period of limitations, the employer cannot adjust the return and must claim a refund for the overpayment. The employer cannot adjust his or her return to correct overpayments of FUTA tax.

Under the claim for refund process, if the corrected Schedule H is filed with a Form 1040X or an amended Form 1041, the employer claims a refund by indicating on the appropriate line the Form 1040X the Form 1041that he or she would like the overpayment refunded. If the corrected Schedule H is filed as a stand-alone return, the employer claims a refund by writing “REFUND” in the top margin in dark, bold letters. The employer will receive interest on any overpayment refunded, unless the overpayment is for FUTA tax because the employer was entitled to increased credits for state contributions.

If the household employer previously overreported social security and Medicare taxes, the employer may adjust the overpayment only after he or she has repaid or reimbursed the household employees in the amount of the overcollection of employee tax. An employer reimburses his or her employees by applying the overwithheld amount against taxes to be withheld on future wages. The employer may claim a refund for the overpayment only after he or she has repaid or reimbursed his or her employees in the amount of the overcollection or has obtained consents from the employees to file the claim for refund for the employee tax. The employer must include a statement that he or she has repaid or reimbursed the employees, or obtained their written consents in the case of a claim for refund, in Part C of Form 1040X or in a statement attached to the amended Form 1041 or the stand-alone corrected Schedule H.

Example:

Wendy has a household employee and timely filed her 2020 Form 1040 with an attached Schedule H (Form 1040) on April 8, 2021, and timely paid all income and employment taxes reported on the return. On April 18, 2022, Wendy discovers that she overwithheld and overpaid FICA tax on wages paid to her household employee on her 2020 return. Wendy can choose between the adjustment and refund claim processes to correct the overpayment on her 2020 return because the error was discovered more than 90 days before the expiration of the period of limitations on credit or refund. Regardless of the process chosen, Wendy must make the correction by filing Form 1040X and attaching a corrected Schedule H (Form 1040). If Wendy chooses the refund claim process, the Form 1040X with the corrected Schedule H (Form 1040) must be filed by April 15, 2024. However, if she chooses the adjustment process, the Form 1040X with the corrected Schedule H must be filed by January 15, 2024, under the 90 day rule. If Wendy chooses the adjustment process, she must repay or reimburse her employee in the amount of the overcollection before filing the Form 1040X with the attached corrected Schedule H (Form 1040). She can then adjust his return by indicating on the appropriate line of the Form 1040X that she wants the overpayment applied as a payment of estimated taxes on Form 1040, for the year in which the corrected Schedule H (Form 1040) is filed. If Wendy chooses the refund claim process, she must either repay or reimburse her employee in the amount of the overcollection or obtain the employee’s consent to file the claim for refund for the employee tax. She can then claim a refund by indicating on the appropriate line of the Form 1040X that she wants the overpayment refunded. The overpayment will be refunded, plus any interest that applies, unless Wendy owes other taxes, penalties, or interest (Revenue Ruling 2009-39).

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 03/02/2021 06:58)

Tax Tip – Solo 401(k) Plans

A so-called solo 401(k) plan (also known as a solo 401k, solo-k, uni-k, or one participant k) is simply a 401(k) plan that has either a single participant, who is a self-employed individual, or that individual and his or her spouse. A solo 401(k) plan is subject to the same rules and requirements as any other 401(k) plan.

Observation:

The solo 401(k) plan is not a new or even a different type of 401(k) plan. However, interest in such plans increased as a result of a tax law change that became effective in 2002. The Economic Growth and Tax Relief Reconciliation Act of 2001 changed the way salary deferral contributions are treated when calculating the maximum deduction limits for contributions to a 401(k) plan. Under pre-Economic Growth and Tax Relief Reconciliation Act law, the employer profit-sharing and matching contributions were combined with the employee deferral when determining the maximum deduction limit of 25 percent of employees’ compensation. Since Economic Growth and Tax Relief Reconciliation Act, however, the employee deferrals are removed from the deduction limit calculation. This created an opportunity for some people to put away additional amounts toward their retirement. The marketing for solo 401(k)s is aimed at business owners who do not have any employees, other than themselves and perhaps their spouse.

As with any other 401(k) plan, the employee deferral for a 401(k) plan is limited to the lesser of earned income or $19,500 for 2021 and 2020; $19,000 for 2019; or $18,500 for 2018 (Notice 2017-64; Notice 2018-83; Notice 2019-59; Notice 2020-79). This is called the Code Section 402(g) limit. If the employee is age 50 or older, an extra $6,500 (for 2020 and 2021) or $6,000 (for 2018 and 2019) may be deferred (Notice 2017-64; Notice 2018-83; Notice 2019-59; Notice 2020-79).

This extra amount is called a catch-up contribution. These deferrals can be either pre-tax or, if the plan allows, after-tax Roth 401(k) contributions. There is one limit per person for all types of elective deferrals. Thus, for 2020, a participant cannot defer $19,500 in pre-tax deferrals and an additional $19,500 in Roth contributions. However, the $19,500 can be split in any ratio between the Roth and the pre-tax elective deferrals. Deferrals must also be tested as an annual addition for purposes of the Code Section 415 limits. If the test fails, then the excess amounts deferred must be corrected.

Caution: Many of the advantages stressed by marketers of solo 401(k) plans vanish if the employer expands the business and hires more employees. If employees are hired and they meet the eligibility requirements of the plan and the Code, they must be included.

One issue regarding salary deferrals is how such deferrals are made when an individual is self-employed or involved in a partnership. The individual doesn’t usually know for certain what their income will be until the end of the year, or later. The 401(k) regulations address this issue and provide that a partner’s or self-employed person’s income is deemed available to them on the last day of their tax year. And since an employee must have a deferral election in place before compensation is available, a self-employed person may not make a cash or deferred election with respect to compensation for a partnership or sole proprietorship tax year after the last day of that year.

If a partnership provides for cash advance payments paid to the partner during the tax year that is based on the value of the partner’s services before the date of payment (and which do not exceed a reasonable estimate of the partner’s earned income for the tax year), the individual can defer a portion of these advances even though their final compensation has not yet been determined.

Additional Tax Tip:

If a self-employed individual wants to maximize his or her contribution, that individual cannot do so until his or her final compensation has been determined; however, the deferral election still must be in place as of the last day of the tax year.

Additional Tax Tip:

Employer contributions are not required to be made until the due date of the employer’s tax return, plus extensions. So, in the case of a sole proprietor, this is when the Form 1040 is due – October 15, if an extension was filed.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 03/02/2021 06:19)

Tax Tip – 14 States with No Income Tax on Pensions (Acronyms “WWF TANS” & “I TAN MPH”)

The 7 States with No State Income Tax in 2020 include (Remember the Acronym “WWF TANS”):

Washington –> No State Income Tax or Tax on Retirement Income

Wyoming –> No State Income Tax or Tax on Retirement Income

Florida –> No State Income Tax or Tax on Retirement Income

Texas –> No State Income Tax or Tax on Retirement Income

Alaska –> No State Income Tax or Tax on Retirement Income

Nevada –> No State Income Tax or Tax on Retirement Income

South Dakota –> No State Income Tax or Tax on Retirement Income

Tax Tip - 14 States with No Income Tax (WWF TANS) on Pensions (I TAN MPH)
7 States with NO Income Tax

PLUS: The 7 States with No State Income Taxes on Pensions include (Remember the Acronym “I TAN MPH”):

Illinois –> Does not tax distributions from 401(k) plans, IRAs or pensions.

Tennessee –> Taxes unearned income less each year by 1% until the tax is eliminated at the start of 2021. Does not tax distributions from 401(k) plans, IRAs or pensions.

Alabama –> Taxes distributions from 401(k) plans and IRAs but not pensions.

New Hampshire –> Taxes dividends and interest but does not tax distributions from 401(k) plans, IRAs or pensions.

Mississippi –> Does not tax distributions from 401(k) plans, IRAs or pensions.

Pennsylvania –> Does not tax distributions from 401(k) plans, IRAs or pensions.

Hawaii –> Taxes distributions from 401(k) plans and IRAs but not pensions.

Tax Tip - 14 States with No Income Tax (WWF TANS) on Pensions (I TAN MPH)
14 States with No Tax on Pensions

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/27/2021 15:59)

Tax Tip – The 9 Community Property States (Acronym WIN WAN TLC)

Married taxpayers have two choices with respect to their filing status on federal income tax returns. They can file their taxes jointly or they can file separate returns. The rules are the same for taxpayers filing jointly in community property states and common law property states. However, the treatment of spouses electing to file separately varies depending on whether the couple lives in a common law property state or in a community property state.

Community Property States Chain with the Exception of Wisconsin
Community Property States Chain with the Exception of Wisconsin

In a common law property state, spouses who elect to file separately are responsible only for reporting and paying the taxes on their individual income. In a community property state, where spouses file separately, the income of both spouses must be combined and split between the spouses for tax reporting and payment purposes.

The following states are community property states:

(1) Washington,

(2) Idaho,

(3) Nevada,

(4) Wisconsin,

(5) Arizona,

(6) New Mexico,

(7) Texas,

(8) Louisiana, and

(9) California.

Additional Tax Tip:

Chain of states starts in Washington to Louisiana.  The only exception is Wisconsin.

The tax consequences flowing from state community property laws were not determined statutorily but were determined many decades ago by the Supreme Court of the United States, as well as the various circuit courts (Poe v. Seaborn, 282 U.S. 101 (1930) (Washington); Goodell v. Koch, 282 U.S. 118 (1930) (Arizona); Hopkins v. Bacon, 282 U.S. 122 (1930) (Texas); Bender v. Pfaff, 282 U.S. 127 (1930) (Louisiana); U.S. v. Malcolm, 282 U.S. 792 (1931) (California)).

Based on the determination that married taxpayers domiciled in these community property states have an undivided one-half interest in the entire community, it has long been the law that such taxpayers must file either joint tax returns, or married filing separately tax returns that reflect one-half of total community income and expenses (U.S. v. Mitchell, 403 U.S. 190 (1971); Mischel v. Comm’r, T.C. Memo. 1997-350; Shea v. Commissioner, 112 T.C. 183 (1999)). The Supreme Court stated that this is not only a right, but an obligation, regardless of which spouse earned the community income (U.S. v. Malcolm, 282 U.S. 792 (1931)).

Additional Tax Tip:

In Alaska, spouses can opt in to the community property system by signing an agreement designating specific assets as community property.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: https://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/28/2021 08:19)

Tax Tip – Tax Treatments of Community Property & Income

Generally, community property is property:

(1) that the taxpayer, the taxpayer’s spouse, or both acquire during marriage while the both are domiciled in a community property state;

(2) that the taxpayer and the taxpayer’s spouse agreed to convert from separate to community property;

(3) that cannot be identified as separate property; and

(4) real estate that is treated as community property under the laws of the state where the property is located.

Generally, community income is income from:

(1) community property; and

(2) salaries, wages, and other pay received for the services performed by the taxpayer, the taxpayer’s spouse, or both during the marriage.

Generally, married individuals that live in a community property state and do not file a joint return must report half of the total community income earned by the spouses during the tax year (Reg. Sec. 1.66-1(a)). However, there is an exception when one of the following applies:

(1) The spouses live apart and meet the qualifications.

(2) The IRS denies a spouse the federal income tax benefits resulting from community property law because that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income before the due date for the filing of his or her spouse’s return.

(3) A requesting spouse qualifies for traditional relief from the federal income tax liability resulting from the operation of community property law.

(4) A requesting spouse qualifies for equitable relief from the federal income tax liability resulting from the operation of community property law (Reg. Sec. 1.66-1(a)).

Additional Tax Tip:

These rules do not apply to income from property that was formerly community property but, in accordance with state law, has stopped being community property (e.g., it became separate property or property held by joint tenancy or tenancy in common) (Reg. Sec. 1.66-1(b)).

The community property rules under Code Sec. 66 do not negate liability that arises under the operation of other laws. Therefore, a spouse who is not subject to federal income tax on community income may nevertheless remain liable for the unpaid tax (including additions to tax, penalties, and interest) to the extent provided by federal or state transferee liability or property laws (other than community property laws) (Reg. Sec. 1.66-1(c)).

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog, podcast, and/or email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, podcast, and/or email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/25/2021 05:54)

Tax Tip – Identity Theft Central – IRS’s Identity Protection Personal Identification Number (PIN’s & IP PIN)

Eligible individuals are encouraged to enroll in the IRS’s Identity Protection Personal Identification Number (IP PIN) program. Designed to prevent identity thieves from filing fraudulent tax returns with stolen SSN info, the IP PIN program verifies the taxpayer’s identity before accepting electronic or paper tax returns for processing.

IP PINs are automatically issued to confirmed identity theft victims, but other taxpayers may “opt in” to the IP PIN program, if eligible. As of the 2020 filing season, a taxpayer may opt into the IP PIN program if he or she files a federal return and resides in Arizona, California, Colorado, Connecticut, Delaware,
Washington, D.C., Georgia, Florida, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas, and Washington. The IRS intends to increase availability of the IP PIN program in future filing seasons.

Any questions with your IP Pin, please call Don Fitch Accountancy at (760)567-3110 or Email us at Don.Fitch@CPA.com.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/25/2021 05:54)

Tax Tip – 7 States with No Income Tax (Acronym WWF TANS)

The 7 States with No State Income Tax in 2020 include (Remember the acronym WWF TANS):

Washington –> No State Income Tax

Wyoming –> No State Income Tax

Florida –> No State Income Tax

Texas –> No State Income Tax

Alaska –> No State Income Tax

Nevada –> No State Income Tax

South Dakota –> No State Income Tax

Tax Tip - 7 States with No Income Tax in 2020 (WWF TANS)
7 States with NO Income Tax

Please note:

Tennessee Taxes unearned income less each year by 1% until the tax is eliminated at the start of 2021.

New Hampshire Taxes dividends and interest.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/27/2021 08:19)

Tax Tip – Identity Theft Central Updates

The IRS strengthened awareness of identity theft and data security protection for taxpayers, tax professionals, and businesses by launching “Identity Theft Central,” a 24/7 resource on how to identify theft and protective measures to guard against these actions.

Information for Individual Taxpayers: Taxpayers have access to the “Taxpayer Guide to Identity Theft,” including information about steps to take if one falls victim to identity theft. The Identity Theft Central preemptively alerts taxpayers to possible tax-related identity theft schemes. They warn that you may be involved in an identity theft scheme if:

• You get a letter from the IRS inquiring about a suspicious tax return that you did not file;
• You can’t e-file your tax return because of a duplicate Social Security number;
• You get a tax transcript in the mail that you did not request;
• You get an IRS notice that an online account has been created in your name;
• You get an IRS notice that your existing online account has been accessed or disabled when you took no action;
• You get an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year you did not file a tax return; or
• IRS records indicate you received wages or other income from an employer for which you didn’t work.

The Identity Theft Central lists several ways that taxpayers can protect themselves from becoming victims of identity theft. Some suggested tips for protecting data and identity on cell phones and computers include:

• Use security software and make sure it updates automatically; essential tools include virus/malware protection and a firewall.
• Use encryption programs to protect sensitive digital data.
• Treat your personal information like cash; don’t leave it lying around.
• Use multi-factor authentication when it’s offered.
• Give personal and financial information only over encrypted websites; look for “https” addresses.
• Back up your files.
• Create strong, unique passwords:
o Use long phrases that you can remember, combined with characters and
numbers.
o Use a different password for each account and use a password manager.
o When possible, don’t use your email address as your login ID.
o Use two-factor authentication whenever it’s offered. This is particularly important for protecting your email, financial, and social media accounts.

Sometimes identity theft will present itself in the form of a phishing email or scam. The IRS estimates that 91 percent of all data breaches and cyber-attacks begin with a phishing email. These emails may appear to come from a trusted source, such as a bank, or contain an urgent message that prompts one to follow a link to update information. Taxpayers should always verify the source of these emails and report
suspicious activity to the IRS.

The Identity Theft Central reminds taxpayers that the IRS will never contact taxpayers via email, social media, or text to request personal information or taxpayer Identity Protection PINs. The IRS will never threaten taxpayers with lawsuits or arrest. If a taxpayer is ever unsure of suspicious activity, it is better to
be safe than sorry, and call the IRS to verify activity.

In the event that a taxpayer’s Social Security number is stolen or compromised, the IRS recommends following these steps:
• Respond immediately to any IRS notice: Call the number provided.
• If your e-filed return is rejected because of a duplicate filing under your Social Security number, or if the IRS instructs you to do so, complete IRS Form 14039, Identity Theft Affidavit (PDF). Attach the completed form to your return and mail your return according to instructions.

In the event a taxpayer believes that a fraudulent return has been filed using his or her name, he or she may request a copy by completing Form 4506-F, Request for a Copy of a Fraudulent Tax Return. In the event a taxpayer e-files his or her tax return and receives a message that a dependent on his or her return has been claimed on another tax return, or if he or she receives an IRS Notice CP87A, he or she may be a victim of identity theft. Form 886-H-DEP lists acceptable documents that the taxpayer can use to prove that he or she was entitled to claim the dependent.

Individuals must undergo a thorough identity verification process, but once approved, the IP PIN is valid for an entire calendar year. If you need professional help with a Pin, contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com.

DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968

Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com

Allow us to Help you complete your Tax Returns from 1913 to present (100+ Years) and for any of the 50 States.
This blog post is intended to serve solely as an aid in continuing tax education for Don Fitch Accountancy blog and email members. Due to the constantly changing nature of the subject of the materials, this product is not appropriate to serve as the sole resource for any federal tax, accounting opinion, tax return position, and must be supplemented for such purposes with other current authoritative materials. The information in this blog post has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. In addition, Don Fitch Accountancy is not engaged in rendering legal or other professional services and will not be held liable for any actions or suits based on this blog post, email, or comments made during the above presentation. If legal advice or other expert assistance is required, seek the services of a competent professional.

(Updated 02/26/2021 05:54)