IRS Archives - Benenati Law Firm, P.C.

Pete’s Posts

Craig Backus — Tue, 28 Apr 2020 21:28:30 +0000

March 2012

The IRS allows you to make a gift of $13,000 per year without gift tax consequences (subject to certain limitations). However, any gift in excess of that amount must be reported on a Form 709 (Gift Tax Return).

Recently, the IRS has started an initiative to enforce the laws regarding unreported gifts, especially gifts of real estate. To ensure taxpayers are abiding by the law, the IRS is reviewing local real property records to evaluate transfers of real estate. Texas is one of several states that has disclosed their property records to the IRS.

Gift tax audits are becoming more common. It only makes sense to avoid the penalties that could result from not reporting a gift, as well as the stress, work, and potential fees to attorneys and CPAs, that are associated with an audit. If you make gifts, I strongly suggest that you consider the requirement to report those gifts in accordance with federal law.

_____________

March 2012

The IRS is aware that many businesses, in order to save payroll taxes, will classify a worker as an independent contractor. They have recently begun to look more closely at these classifications. Over the next three years, they will randomly select businesses to audit to determine if workers have been wrongly classified. The Department of Labor is also looking at these issues.

Do not make the mistake of enjoying a short term savings and end up with long term costs. If it is found that a worker should have been classified as an employee, as opposed to independent contractor, the costs can be significant in the form of back taxes, penalties and fines. If you need more information on whether a worker is an employee or independent contractor, the IRS provides guidance in the form of a 20 factor test. That test is accessible online at www.texasworkforce.org.

The government is looking for additional revenue, so do not take this issue lightly. Please call us if you need clarification of the rules or more information.

Disclaimer:

This information does not constitute the rendering of legal, accounting or other professional services by Pete Benenati or Benenati Law Firm, PC. This information is not intended to create or provide an attorney-client relationship. Although care is taken to present the material accurately, any implied or actual warranties as to any materials herein are hereby disclaimed along with any liability with respect thereto.

The post Pete’s Posts appeared first on Benenati Law Firm, P.C..

Is Severance Considered Compensation?

Craig Backus — Tue, 28 Apr 2020 21:26:24 +0000

There has been some discussion regarding the designation of severance pay for tax purposes. Is it considered compensation? The Supreme Court of the United States is hearing a case to determine if a severance payment made to an employee upon termination of employment should be considered compensation subject to FICA and Medicare taxes. If found not to be compensation, then such payments are not subject to FICA and Medicare taxes and an employer is not obligated to withhold such taxes or pay the employer’s share of those taxes.

Further, any such taxes paid by an employee or an employer on previous severance payments would be subject to a claim for refund, which must be filed within three years of filing the applicable income tax return. For instance, a refund claim for taxes paid on severance received in 2010 (and included with the April 15, 2011 tax return) would need to be filed by April 15, 2014. If no ruling has been issued by the Supreme Court by April 15, 2014, a protective claim for a refund can be filed. Failure to do so would mean forfeiture of the claim no matter how the Court ultimately rules. Please contact the Benenati Law Firm or your CPA if you need more information.

Disclaimer:

The post Is Severance Considered Compensation? appeared first on Benenati Law Firm, P.C..

IRS Changes for Automatic Gratuities

Craig Backus — Tue, 28 Apr 2020 21:25:27 +0000

“Gratuity included” may be a thing of the past for many restaurants. It is a common practice for a restaurant to add an 18% gratuity for parties over 6 people. Starting in January 2014, these automatic gratuities will be treated as wages paid by the restaurant to the server and subject to payroll taxes. According to the IRS, service charges added to a bill or fixed by the employer that the customer must pay, and are then paid to the employee, will not constitute a tip but rather non-tip wages. A tip is something given without compulsion and in an amount determined by the customer. So, if the restaurant tab was $200.00 and the restaurant automatically adds 18% (or $36.00), then the $36.00 will be treated as wages and the restaurant owner must collect and pay FICA and Medicare.

Disclaimer:

The post IRS Changes for Automatic Gratuities appeared first on Benenati Law Firm, P.C..