Month: July 2014

Congress Introduces Bill to Provide Tax Relief for Student Loan Borrowers

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Congress Introduces Bill to Provide Tax Relief for Student Loan Borrowers

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WASHINGTON, D.C. (JULY 30, 2014)

A pair of Democratic lawmakers have introduced a bill that would provide tax relief to student loan borrowers who have been granted debt relief after consistently repaying their student loan debt for at least 20 years, giving them an exemption from being taxed on the amount forgiven on the loans.

Rep. Mark Pocan, D-Wis., and Frederica Wilson, D-Fla. introduced the Relief for Underwater Student Borrowers Act on Tuesday. “Student loan debt is weighing down our economy and holding back a generation of Americans as total student loan debt has grown to more than $1.2 trillion—more than total U.S. credit card debt,” Pocan said in a statement. “This legislation closes a major gap in our tax code which penalizes some borrowers who have been granted debt relief after at least 20 years of consistent repayment towards their student loan debt.”

Under current law, the student loan balance forgiven as part of the Income Based Repayment or Pay as You Earn programs is treated as taxable income for the borrower, creating a tax liability that most qualifying borrowers are unable to afford. Student loans forgiven under other programs, including Public Service Loan Forgiveness and TEACH Grants, are not treated as taxable income. There are 1.4 million people enrolled in the Income Based Repayment program and 190,000 people enrolled in the Pay as You Earn program.

Mark Pocan

PARTNER INSIGHTS

Earlier this year, President Obama formally widened the pool of eligible participants in the Pay As You Earn Program to help an estimated additional 5 million people manage their debt. Borrowers who have demonstrated a good faith effort at repaying their loans and are currently underwater would qualify.

Today, the average student graduates with around $29,400 in loans, according to the lawmakers. At private nonprofit colleges, average student debt is around $32,300. Nationally, student debt tops $1.2 trillion.  Given the extent of the student debt crisis, the bill aims to give borrowers who have been crushed by student debt for at least two decades the opportunity to get out from under the loans and further contribute productively to the U.S. economy.

Frederica Wilson

“As a member of the Subcommittee on Higher Education and Workforce Training, college affordability is one of my top priorities,” said Wilson. “Today, student debt is at a record high, with individual debt forcing many people to put off major purchases such as buying a home or automobile. This bill prevents student loan borrowers from being hit with an additional tax burden for debt that has been forgiven after 20 years of consistent repayment, and in the event of suffering a total permanent disability or death, this bill prevents the debt forgiven from being considered taxable income. The Relief for Underwater Student Borrowers Act helps individual borrowers and their families, as well as strengthens the economy.”

Of the $1.2 trillion in student debt, over $1 trillion is owned by the federal government, according to the lawmakers. Fifty-eight percent of all student debt is held by families in the bottom 25 percent of household incomes.

Paying Taxes on Household Helpers

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If you employ someone to work for you around your house, it is important to consider the tax implications of this arrangement. While many people disregard the need to pay taxes on household employees, they do so at the risk of paying stiff tax penalties down the road.

As you will see, the rules for hiring household help are quite complex, even for a relatively minor employee, and a mistake can bring on a tax headache that most of us would prefer to avoid.

Commonly referred to as the “nanny tax”, these rules apply to you only if (1) you pay someone for household work and (2) that worker is your employee.

  1. Household work is work that is performed in or around your home by baby-sitters, nannies, health aides, private nurses, maids, caretakers, yard workers, and similar domestic workers.

    A household worker is your employee if you control not only what work is done, but how it is done.

Who Is a Household Employee?

If a worker is your employee, it does not matter whether the work is full-time or part-time, or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.

If the worker controls how the work is done, the worker is not your 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.

Also, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

Example: You pay Betty to babysit your child and do light housework four days a week in your home. Betty follows your specific instructions about household and child care duties. You provide the household equipment and supplies that Betty needs to do her work. Betty is your household employee.

Example: You pay John to care for your lawn. John also offers lawn care services to other homeowners in your neighborhood. He provides his own tools and supplies, and he hires and pays any helpers he needs. Neither John nor his helpers are your household employees.

Can Your Employee Legally Work in the United States?

When you hire a household employee to work for you on a regular basis, he or she must complete USCIS Form I-9 Employment Eligibility Verification. It is your responsibility to verify that the employee is either a U.S. citizen or an alien who can legally work and then complete the employer part of the form. It is unlawful for you to knowingly hire or continue to employ a person who cannot legally work in the United States.

Keep the completed form for your records. Do not return the form to the U.S. Citizenship and Immigration Services (USCIS).

Tip: Two copies of Form I-9 are contained in the UCIS Employer Handbook. Visit the USCIS website or call 800-767-1833 to order the handbook, additional copies of the form, or to get more information, or give us a call.

Do You Need to Pay Employment Taxes?

If you have a household employee, you may need to withhold and pay Social Security and Medicare taxes, or you may need to pay federal unemployment tax, or both. Refer to this table for details:

If you…

Then you need to…

Will pay cash wages of $1,900 or more in 2014 to any one household employee.Do not count wages you pay to:

  • your spouse,
  • your child under age 21,
  • your parent, or
  • any employee under age 18 during 2014.
Withhold and pay Social Security and Medicare taxes.

  • The combined taxes are generally 15.3% of cash wages.
  • Your employee’s share is 7.65%.

(You can choose to pay the employee’s share yourself and not withhold it.)

  • Your share is 7.65%.
Have paid or will pay total cash wages of $1,000 or more in any calendar quarter of 2013 or 2014 to household employees.Do not count wages you pay to:

  • your spouse,
  • your child under age 21, or
  • your parent.
Pay federal unemployment tax.

  • The tax is 0.6% of cash wages.
  • Wages over $7,000 a year per employee are not taxed.
  • You also may owe state unemployment tax.

If neither of these two contingencies applies, you do not need to pay any federal unemployment taxes. But you may still need to pay state unemployment taxes (see below).

You do not need to withhold federal income tax from your household employee’s wages. But if your employee asks you to withhold it, you can choose to do so.

Tip: If your household employee cares for your dependent that is under the age of 13 or your spouse or dependent that is not capable of self care, so that you can work, you may be able to take an income tax credit of up to 35 percent (or $1,050) of your expenses for each qualifying dependent. If you can take the credit, then you can include your share of the federal and state employment taxes you pay, as well as the employee’s wages, in your qualifying expenses.

State Unemployment Taxes

Please contact us if you’re not sure whether you need to pay state unemployment tax for your household employee. We’ll also help you figure out whether you need to pay or collect other state employment taxes or carry workers’ compensation insurance.

Note: If you do not need to pay Social Security, Medicare, or federal unemployment tax and do not choose to withhold federal income tax, the rest of this article does not apply to you.

Social Security and Medicare Taxes

Social Security taxes pays for old-age, survivor, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.

Both you and your household employee may owe Social Security and Medicare taxes. Your share is 7.65 percent (6.2 percent for Social Security tax and 1.45 percent for Medicare tax) of the employee’s Social Security and Medicare wages. Your employee’s share is 6.2 percent for Social Security tax and 1.45 percent for Medicare tax.

You are responsible for payment of your employee’s share of the taxes as well as your own. You can either withhold your employee’s share from the employee’s wages or pay it from your own funds. Note the limits in the table above.

Wages Not Counted

Do not count wages you pay to any of the following individuals as Social Security and Medicare wages:

    1. Your spouse.
    2. Your child who is under age 21.
    3. Your parent.

Note: However, you should count wages to your parent if both of the following apply: (a) your child lives with you and is either under age 18 or has a physical or mental condition that requires the personal care of an adult for at least four continuous weeks in a calendar quarter, and (b) you are divorced and have not remarried, or you are a widow or widower, or you are married to and living with a person whose physical or mental condition prevents him or her from caring for your child for at least four continuous weeks in a calendar quarter.

    1. An employee who is under age 18 at any time during the year.

Note: However, you should count these wages to an employee under 18 if providing household services is the employee’s principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

Also, if your employee’s Social Security and Medicare wages reach $117,00 in 2014 ($113,700 in 2013), then do not count any wages you pay that employee during the rest of the year as Social Security wages to figure Social Security tax. You should however, continue to count the employee’s cash wages as Medicare wages to figure Medicare tax. You figure federal income tax withholding on both cash and non-cash wages (based on their value), but do not count as wages any of the following items:

  • Meals provided at your home for your convenience.
  • Lodging provided at your home for your convenience and as a condition of employment.
  • Up to $130 a month in 2014 for transit passes that you give your employee or, in some cases, for cash reimbursement you make for the amount your employee pays to commute to your home by public transit. A transit pass includes any pass, token, fare card, voucher, or similar item entitling a person to ride on mass transit, such as a bus or train.
  • Up to $250 a month in 2014 to reimburse your employee for the cost of parking at or near your home or at or near a location from which your employee commutes to your home.

As you can see, tax considerations for household employees are complex. Therefore, we highly recommend professional tax guidance in these complicated matters. This is definitely an area where it’s better to be safe than sorry, so if you have any questions at all, please contact us. We’re happy to assist you.

 

 

Is a Home-Based Business Right for You?

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More than 52 percent of businesses today are home-based. Every day, people are striking out and achieving economic and creative independence by turning their skills into dollars. Garages, basements and attics are being transformed into the corporate headquarters of the newest entrepreneurs–home-based businesspeople.

And, with technological advances in smartphones, tablets, and iPads as well as a rising demand for “service-oriented” businesses, the opportunities seem to be endless.

Is a Home-Based Business Right for You?

Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take time to learn as much about the market for any product or service as you can. Before you invest any time, effort, or money take a few moments to answer the following questions:

  • Can you describe in detail the business you plan on establishing?
  • What will be your product or service?
  • Is there a demand for your product or service?
  • Can you identify the target market for your product or service?
  • Do you have the talent and expertise needed to compete successfully?

Before you dive head first into a home-based business, it’s essential that you know why you are doing it and how you will do it. To succeed, your business must be based on something greater than a desire to be your own boss, and involves an honest assessment of your own personality, an understanding of what’s involved, and a lot of hard work. You have to be willing to plan ahead and make improvements and adjustments along the way.

While there are no “best” or “right” reasons for starting a home-based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

  • Are you a self-starter?
  • Can you stick to business if you’re working at home?
  • Do you have the necessary self-discipline to maintain schedules?
  • Can you deal with the isolation of working from home?

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment. If at all possible, you should set up a separate office in your home. You must consider whether your home has the space for a business, and whether you can successfully run the business from your home.

Compliance with Laws and Regulations

A home-based business is subject to many of the same laws and regulations affecting other businesses and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.

Zoning

Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.

Restrictions on Certain Goods

Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.

Registration and Accounting Requirements

You may need the following:

  • Work certificate or a license from the state (your business’s name may also need to be registered with the state)
  • Sales tax number
  • Separate business telephone
  • Separate business bank account

If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.

Planning Techniques

Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Estimating Start-Up Costs

To estimate your start-up costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

In addition, business experts say you should not expect a profit for the first eight to 10 months, so be sure to give yourself enough of a cushion if you need it.

Projecting Operating Expenses

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

Projecting Income

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points and cash-flow statements. Use your marketing research to estimate initial sales volume.

Determining Cash Flow

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

Don’t hesitate to give us a call if you think a home-based business is in your future. We’ll set up your business and make sure you have the proper documentation system in place to satisfy the IRS.

 

Disability Insurance Program Running Low on Funds

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Disability Insurance Program Running Low on Funds

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JULY 28, 2014

The scheduled depletion date for Social Security’s Disability Insurance Trust Fund is only two years away, in late 2016, according to a new government report.

Jacob Lew

The report, from the Social Security and Medicare Boards of Trustees, found that, taken in combination, Social Security’s retirement and disability programs have dedicated resources sufficient to cover benefits for the next 19 years, until 2033.  However, the projected depletion date for the separate Social Security’s Disability Insurance Trust Fund is in late 2016.

The Treasury Department noted that the Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its obligations until 2030, four years later than was projected last year, and 13 years later than was projected in the last report issued prior to passage of the Affordable Care Act.

PARTNER INSIGHTS

Taken in combination, Social Security’s retirement and disability trust fund reserves are projected to be exhausted in 2033, the same year projected in last year’s Trustees Report.  After trust fund exhaustion, annual revenues from the dedicated payroll tax will be sufficient to fund three-quarters of scheduled benefits through 2088.

Social Security’s Disability Insurance program faces the most immediate financing shortfall of any of the separate trust funds. The DI Trust Fund reserves are projected to be depleted in late 2016, which is also unchanged from last year’s estimate, after which time dedicated revenues are projected to cover about 80 percent of scheduled benefit payments. The Treasury warned that legislation will be needed from Congress to address this financial imbalance.

“The Trustees Reports underscore the importance of making reforms to Social Security and Medicare,” said Treasury Secretary Jacob Lew. “As the largest generation in American history enters retirement, the pressure on our social insurance programs is growing, and we must make manageable changes now so we do not have to make drastic changes later. The President is committed to putting Social Security and Medicare on a stronger footing, and he has put forward achievable plans to fix their finances. As he has consistently demonstrated, the President is ready to work with Congress to usher in responsible reforms, and he is prepared to make tough choices.  But the President will not support any proposal that would hurt Americans who depend on these programs today, and he will not support any effort that slashes benefits for future retirees.”

Lew urged policy makers of both parties to focus on creating “serious solutions” to the problem.

Strategic Business Planning Service to Run and Grow Your Business

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book keeping professionalsDo you want to run plan and manage your business successfully? Is it getting increasingly difficult to maintain your accounts and track your business performance quickly? We offer well planned strategies after thorough research and deep analysis of appropriate business data so that you can drive your organization to the peak of success more easily. Our strategic business planning solutions give your business the power to perform better, tide over many unexpected issues and earn high returns. You can hire our team of accounting and book keeping professionals to make sure you meet the financial and tax needs of your business effectively. We are a qualified business planning firm in Brooklyn offering strategic solutions required for making important business management decisions. Our strategic business planning services can be used to manage the financial aspects of your organization in a systematic manner. Whether you need casual book keeping services to save your precious time or strategic business planning and guidance to run your business profitably, we are ready to assist you at anytime.

You can’t imagine success of your business without tactical business plan. It is always essential to know what can be an achievable goal for your business and which financial components to target for making it possible. Our strategic business planning is about formulating a right business strategy after analyzing your market behavior, competition and other special data. With it, you can avoid using a generalized approach for sales conversion and achieve your desired goal that is unique in your business sector.

Growth of your business depends on implementing unique ideas and doing perfect planning. It can become quick and easy with our strategic business planning service which addresses your technical, social and financial components all the time. To handle your market competition, improve your sales performance and manage your financial records professionally, you can deploy our team of experts.

Top 5 Highest Banking Crowdfunding Campaigns LeVar Burton’s ‘Reading Rainbow’ and Veronica Mars projects make list

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Actor LeVar Burton’s Kickstarter campaign to bring the nostalgic children’s learning show “Reading Rainbow” to more platforms and to thousands of classrooms for free closed last week, surpassing its goal of $5 million with total funding of over $5.4 million from more than 100,000 backers. That putReading Rainbow’s crowdfunding campaign in the top five most successful Kickstarter projects of all time.

The project received a big boost from “Family Guy” creator Seth MacFarlane who committed to donating $1 million. Burton also received additional support from several unexpected sources—the top four highest earning campaigns ever on the site: “Pebble,” “OUYA,” “Pono” and “Veronica Mars.” Each of the Kickstarter “All Stars” contributed a limited edition reward created specifically for the Reading Rainbowcampaign. “This has been quite a journey for me. First, securing the rights to the brand and being in a position to determine the destiny of the brand is something I have wanted to do for a long time,” Burton toldBlackEnterprise.com.

Related: LeVar Burton Talks Return of Reading Rainbow and Future Plans for the Brand

Originally, Burton had only announced plans to bring Reading Rainbow to the web, setting a fundraising goal of $1 million. Having hit the ambitious $5 million stretch mark, Burton’s company is now bringing Reading Rainbowto Android as well as the Xbox, PlayStation, Apple TV, and Roku. Some of the additional funding is also going toward giving schools free access to Reading Rainbow‘s website and apps. Burton plans to provide free access for a year to at least 7,500 classrooms in 2015.

Here are five of the most successful Crowdfunding campaigns to date:

Tax Due Dates

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July 10 Employees – who work for tips. If you received $20 or more in tips during June, report them to your employer. You can use Form 4070.
July 31 Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2014. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 11 to file the return.
Employers – Federal unemployment tax. Deposit the tax owed through June if more than $500.
Employers – If you maintain an employee benefit plan, such as a pension, profit sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2013. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2014 but less than $2,500 for the second quarter.
 August 2014
August 11 Employees – who work for tips. If you received $20 or more in tips during July, report them to your employer. You can use Form 4070.
Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2014. This due date only applies if you deposited the tax for the quarter timely, properly, and in full.
 September 2014
September 10 Employees – who work for tips. If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.
September 15 Individuals – Make a payment of your 2014 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2014.
Corporations – File a 2013 calendar year income tax return (Form 1120) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see March 17.
S Corporations – File a 2013 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see March 17. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.
Partnerships – File a 2013 calendar year return (Form 1065). This due date applies only if you were given an additional 5-month extension. Otherwise see April 15. Provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1.
Corporations – Deposit the third installment of estimated income tax for 2014. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.