finance

US Pass-Throughs Set Out Tax Reform Wish List

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Tax-News

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The Parity for Main Street Employers business coalition has issued a new letter that calls on the US Congress to enact tax reform “that is comprehensive, restores tax rate parity for all businesses, and reduces or eliminates the double tax on corporate income by integrating the corporate and individual tax codes.”

The March 17 letter, signed by more than 110 business associations and addressed to the Chairmen and Ranking Members of the House of Representatives Ways and Means Committee and the Senate Finance Committee, noted that tax reform needs to be comprehensive, so as to encompass both C corporations and pass-through entities, including partnerships, sole proprietorships, and S corporations.

Pointing out that, with nearly 70m workers employed at pass-through entities, whose profits are passed directly to their owners and are taxed on their individual tax returns, tax reform should “ensure that we avoid harming these critical employers, [and therefore] needs to be comprehensive and improve the tax code for corporations and pass-through businesses alike.”

The letter also urged that Congress should “restore rate parity by reducing the tax rates paid by pass-through businesses and corporations to similar, low levels. The 2012 fiscal cliff negotiations resulted in pass-through businesses paying, for the first time in a decade, a significantly higher top marginal tax rate than C corporations.”

“Taxing business income at different rates penalizes pass-through businesses and encourages planning to circumvent the higher rates,” it added, “ultimately resulting in wasted resources and lower growth.”

Finally, it recommended that “Congress should eliminate the double tax on corporate income [at both the corporate and the shareholder levels] by integrating the corporate and individual tax codes. … A key goal of tax reform should be to continue to reduce or eliminate the incidence of the double tax and move towards taxing all business income once.”

US Senate Finance Committee Chairman Orrin Hatch (R – Utah) has recently confirmed that he is working on a proposal for corporate tax integration. However, this year’s tax reform efforts in the House of Representatives are being concentrated on international tax reform, with indications that it could include a corporate rate cut (which would increase the disparity with individual tax rates).

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Federal Income Tax Withholding Adjustment & Tax Calendar

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Do you need to adjust your federal income tax withholding amount?

With over half the year already gone, now is a good time to check to see if you are on track to have about the right amount of federal income tax withheld from your paychecks for 2014. The problem with not having the correct amount of taxes withheld for the year is that:

 

    • If your taxes are significantly underwithheld for the year, you risk being hit with a nondeductible IRS interest rate penalty.

 

 

    • If your taxes are significantly overwithheld for the year, you are basically making an interest-free loan to the government when you could be putting that money to work for you.

 

Neither situation is good. The simplest way to correct your withholding is by turning in a new Form W-4 (“Employee’s Withholding Allowance Certificate”) to your employer. Taking this action now will adjust the amount of federal income tax that is withheld from your paychecks for the rest of 2014.

Specifically, you can adjust your withholding by increasing or decreasing the number of allowances claimed on your Form W-4. The more allowances claimed, the lower the withholding from each paycheck; the fewer allowances claimed, the greater the withholding. If claiming zero allowances for the rest of the year would still not result in enough extra withholding, you can ask your employer to withhold an additional amount of federal income tax from each paycheck.

While filling out a new Form W-4 seems like something that should be quick and easy, it’s not necessarily so – because the tax rules are neither quick nor easy. Fortunately, there is an online Form W-4 calculator on the IRS website at www.irs.gov that can help to make the job simpler. From the IRS home page, click on the “More …” link under “Tools.” Then click on the “IRS withholding calculator” link. You will see the entry point for the online calculator. It’s pretty easy to use once you assemble information about your expected 2014 income and expenses, plus your most recent pay stub and tax return.

Please understand that the IRS calculator is not perfect. (Remember, it’s free, and to some extent, you always get what you pay for.) However, using the calculator to make withholding allowance changes on a new Form W-4 filed with your employer is probably better than doing nothing, especially if you believe you are likely to be significantly underwithheld or overwithheld for this year.

Of course, if you want more precise results, we would be happy to put together a 2014 tax projection for you. At the same time, we can probably recommend some planning strategies to lower this year’s tax bill. Contact us for details.


Setting a dateTax Calendar

July 15

 

    • If the monthly deposit rule applies, employers must deposit the tax for payments in June for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

 

July 31

 

    • If you have employees, a federal unemployment tax (FUTA) deposit is due if the FUTA liability through June exceeds $500.

 

 

    • The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is also due today. (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.

 

August 15

 

    • If the monthly deposit rule applies, employers must deposit the tax for payments in July for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

 

September 15

 

    • Third quarter estimated tax payments are due for individuals, trusts, and calendar-year corporations.

 

 

    • If a five-month extension was obtained, partnerships should file their 2013 Form 1065 by this date.

 

 

    • If a six-month extension was obtained, calendar-year corporations should file their 2013 income tax returns by this date.

 

 

  • If the monthly deposit rule applies, employers must deposit the tax for payments in August for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Low Income Taxpayer Clinics

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

2015 Application Period Opened May 5, 2014

The 2015 application period opened May 5, 2014, and closes June 20, 2014. The 2015 Publication 3319, LITC Grant Application Package and Guidelines will be available on IRS.gov and two copies will be shipped to all current clinics. Organizations that must submit a full application must do so via Grants.gov and those that do not must complete their application in Grant Solutions.

About Low Income Taxpayer Clinics

The Low Income Taxpayer Clinic program provides partial funding and oversight for Low Income Taxpayer Clinics (LITCs). LITCs are independent from the IRS.

Some clinics serve individuals who need to resolve a tax problem and their income is below a certain level. These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee.

Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language.

For more information and to find a clinic near you see the LITC page on www.irs.gov/advocate or IRS Publication 4134Low Income Taxpayer Clinic List. This publication is also available by calling 1-800-829-3676 or at your local IRS office.

Low Income Taxpayer Clinic (LITC) Program Reports on Activities

The Low Income Taxpayer Clinic (LITC) Program, administered by TAS, has issued a 2014 Program Report. The report summarizes how clinics assist thousands of low income taxpayers through pro bono representation, education and advocacy efforts. The report includes examples of how the clinics assist taxpayers daily.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.