• May 2017 Individual Due Dates

    28 April 2017
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    A new month is upon us. Dalgey & Co. has your two individual due dates from May 2017:

    May 10 – Report Tips to Employer 

    If you are an employee who works for tips and received more than $20 in tips during April, you are required to report them to your employer on IRS Form 4070 no later than May 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.
    May 31 –  Final Due Date for IRA Trustees to Issue Form 5498 

    Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2016. The FMV of an IRA on the last day of the prior year (Dec 31, 2016) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 70½ or older during 2017. If you are age 70½ or older during 2017 and need assistance determining your RMD for the year, please give this office a call. Otherwise, no other action is required and the Form 5498 can be filed away with your other tax documents for the year.

    Contact Dagley & Co. with any questions regarding May’s individual due dates.

     

     

     

     

     

     

     

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  • Tax Filing Deadline Is Around the Corner

    29 March 2017
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    REMINDER: April 18, 2017 is the due date to file your return(s), pay any taxes owed, or file for a six-month extension. It is important to know that with this extension you will end up paying the tax you estimate to be due.

    In addition, this deadline also applies to the following:

    • Tax year 2016 balance-due payments – Taxpayers that are filing extensions are cautioned that the filing extension is an extension to file, NOT an extension to pay a balance due.  Late payment penalties and interest will be assessed on any balance due, even for returns on extension.  Taxpayers anticipating a balance due will need to estimate this amount and include their payment with the extension request.
    • Tax year 2016 contributions to a Roth or traditional IRA – April 18 is the last day contributions for 2016 can be made to either a Roth or traditional IRA, even if an extension is filed.
    • Individual estimated tax payments for the first quarter of 2017 – Taxpayers, especially those who have filed for an extension to file their 2016 return, are cautioned that the first installment of the 2017 estimated taxes are due on April 18.  If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date. If the refund won’t be enough to fully cover the April 18 installment, you may need to make a payment with the April 18 voucher. Please call this office for any questions.
    • Individual refund claims for tax year 2013 – The regular three-year statute of limitations expires on April 18 for the 2013 tax return.  Thus, no refund will be granted for a 2013 original or amended return that is filed after April 18. Caution: The statute does not apply to balances due for unfiled 2013 returns.

    If Dagley  & Co. is holding up the completion of your returns because of missing information, please forward that information as quickly as possible in order to meet the April 18 deadline.  Keep in mind that the last week of tax season is very hectic, and your returns may not be completed if you wait until the last minute.  If it is apparent that the information will not be available in time for the April 18 deadline, then let the office know right away so that an extension request, and 2017 estimated tax vouchers if needed, may be prepared.

    If your returns have not yet been completed, please call Dagley & Co. right away so that we can schedule an appointment and/or file an extension if necessary.

     

     

     

     

     

     

     

     

     

     

     

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  • New Form 1099 Filing Date

    9 January 2017
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    Did your business utilize an independent contractor in 2016? Did you pay him/her $600 or more during the calendar year? If so, you are required to issue him/her a Form 1099-MISC. The purpose of this form is to avoid penalties and the possibility of losing the deduction for his/her labor and expenses in an audit. Different from last year, the IRS moved up the filing due date to January 31, 2017.

    In addition to being used to report payments to independent contractors, Form 1099-MISC is also used to report payments made by a business for rents and royalties and to attorneys for legal services, among others. If there are no independent contractor payments to report, the 2016 1099-MISC issued for other payments continues to be due to the IRS by the normal due date of February 28, 2017. However, where both independent contractor and other payments are being reported, the January 31 due date should be observed so that late filing penalties are avoided regarding the independent contractor payments.

    It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later in the year and have the total for the year exceed the $599 limit. As a result, you may have overlooked getting the information from the individual that you need to file the 1099-MISCs for the year. Therefore, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts. If you have been negligent in the past about having the W-9s completed, it would be a good idea to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you going forward.

    IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the data required to file 1099s for your vendors. It also provides you with verification that you have complied with the law in case the vendor gives you incorrect information. We highly recommend that you have potential vendors complete a Form W-9 before you engage in business with them. The W-9 is for your use only and is not submitted to the IRS.

    The penalty for failure to file the required informational returns is substantial and is $260 per informational return. The penalty is reduced to $50 if a correct but late information return is filed not later than the 30th day after the January 31, 2017, required filing date, or it is reduced to $100 for returns filed after the 30th day but no later than August 1, 2017. If you are required to file 250 or more information returns, you must file them electronically.

    Please note: To avoid penalties, all forms must be sent to the IRS by January 31, 2017.

    Dagley & Co. is here to prepare your 1099 for submission. We recommend using this 1099 worksheet  to provide us with the information needed to prepare your 1099.

     

     

     

     

     

     

     

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  • W-2 and 1099-MISC Filing Dates Moved Up

    19 December 2016
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    Dagley & Co. is here to give you up-to-date tax and tax requirement details and due dates. Please read the following regarding a delay in a tax return due date:

    The IRS, in an effort to combat rampant tax filing fraud, has introduced what they hope will be two new fraud-prevention measures for the upcoming filing season. The first will purposely delay until February 15 the issuance of refunds for tax returns where there is an earned income tax credit (EITC) and/or a refundable child tax credit (CTC), giving the IRS more time to match the income reported on these returns to the income reported by employers. These two tax credits have been the favorite target of scammers who have been filing fraudulent returns with stolen IDs and fabricated income before the IRS is able to verify the income and withholding claimed on the returns.

    The second preventive measure is to require earlier filing of W-2 and 1099-MISC forms, which will enable the IRS to ferret out returns that report phony income and withholding. This measure will have a significant impact on employers by moving up the filing due date of the government’s copy of 2016 W-2s and 1099-MISCs to January 31, 2017 (the previous due date was February 28, or March 31 if filed electronically). January 31 has been and continues to be the date the forms are required to be provided to the employees (W-2s) or independent contractors (1099-MISCs).

    The 30-day automatic extension to file W-2s is no longer automatic. The IRS anticipates that it will grant the non-automatic extension of time to file only in limited cases where the filer or transmitter’s explanation demonstrates that an extension of time to file is needed as a result of extraordinary circumstances.

    With regard to the government’s copy of 1099-MISC forms, the earlier filing due date only applies to those 1099-MISC forms reporting non-employee compensation.

    If you have questions related to W-2 or 1099-MISC requirements, please give Dagley & Co. a call at (202) 417-6640.

     

     

     

     

     

     

     

     

     

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  • Dodging Tax Penalties

    13 December 2016
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    After the holiday season, the tax season quickly approaches. During this time, many taxpayers realize they were penalized with a tax penalty from that year. With this, often times it’s the case that the taxpayer is not aware of the impact that these penalties can have on their wallet.  To help educate, Dagley & Co. has created a list of the most common encountered penalties and how to avoid them:

    Underpayment of Estimated Taxes and Withholding – Taxpayers are required to pay their tax liability as they go during the year, either through withholding or by making estimated tax payments. If the taxpayer owes more than $1,000 when filing his or her return for the year, the IRS will assess the underpayment of estimated tax penalty, which is currently 4% of the underpayment computed quarterly. There are “safe harbor” payments that can protect you from this penalty, which include payments in the following amounts: 90% of the current year’s tax liability or 100% (110% for high-income taxpayers) of the prior year’s tax liability. Farmers and fishermen need only prepay 66-2/3% of the current liability or 100% of the prior year’s liability.

    Late Paying Penalty – When the tax owed on a return is paid after the un-extended due date of the tax return (usually April 15), the taxpayer is subject to a penalty of 1/2% per month (maximum 25%) on the unpaid balance. Taxpayers are frequently caught by this penalty when they need an extension to file their tax return. Many fail to realize that the extension does not include an extension to pay. The only way to avoid or minimize this penalty is to have no or little balance due on the return when it is finally filed. The extension form includes a provision to pay the projected balance owed when filing the extension.

    Late Filing Penalty – If the return is filed after the due date, including extensions, a late filing penalty of 4.5% per month (maximum 22.5%) applies. The automatic extended due date for 2016 returns is October 18, 2017, but an extension request form must be filed by the April 2017 due date to qualify. Thus, the penalty would generally apply to 2016 returns filed after October 18, 2017. If the return is over 60 days late, the minimum penalty for failure to file is the lesser of $205 or 100% of the tax shown on the return. While the obvious way to avoid a late filing penalty is to file in a timely fashion, the IRS will consider abating the penalty if it can be proven that there was reasonable cause and no willful neglect for filing late.

    Negligence – When underpayment is due to negligence on the part of the taxpayer or when there are errors in tax valuations, 20% of the tax underpayment is charged. This penalty is frequently encountered when the IRS adjusts a filed return due to unreported income or overstated deductions. To reduce the chance that you may be subject to this penalty, be sure you provide all of your W-2s, 1099s, K-1s, etc. for the preparation of your return, complete any organizer that have been requested and ensure that you can substantiate all of the deductions you claim.

    Dishonored Check – The penalty for dishonored checks is 2% of the check amount, but if the amount is $1,250 or less, the penalty is the amount of the check or $25, whichever is less. If you don’t have sufficient funds to pay your tax when you file your return, rather than writing a check that you know will bounce, you may be able to arrange an installment payment plan with the IRS. You may still incur late payment charges, but the penalty rate is lower if you are on a payment plan.

    Missing ID Number – This penalty of $50 for each missing number is charged when a taxpayer doesn’t provide a required Social Security number (SSN) for him or herself, a dependent or another person on his or her tax return or doesn’t. It is also charged when the taxpayer doesn’t provide his or her SSN to another person or entity when required.

    Please note: There are more severe penalties (not mentioned) that apply to fraudulent actions/claims.  If you ever have questions related to these penalties, please give Dagley & Co. a call at  (202) 417-6640.

     

     

     

     

     

     

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  • Don’t Be Left Holding the Tax Bag

    5 October 2016
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    Have you used an independent contractor this year in your business? If yes, and you paid them $600 or more, you are required to issue them a 1099-MISC after the close of the year. If you fail to do so, and your business’s income tax return is subsequently audited, you could lose the deduction for those payments and end up paying taxes on that income yourself, not to mention potential penalties.

    A big tax trap for businesses is the $600 reporting threshold. Say your business uses the services of an independent contractor early in the year at a cost below the $600 threshold, and you don’t bother to obtain the necessary reporting information from the contractor. If you use the contractor’s services again later in the year and the combined total you’ve paid him or her exceeds the reporting threshold, you won’t have the required reporting information.

    Sorry to say, you may find it difficult to obtain that information after the fact, as not all self-employed individuals report all their income, and contractors may not be willing to give you their tax ID information once they’ve completed the work and gotten your payment for their services. So, it is good practice to collect that information upfront before engaging the contractor regardless of the amount.

    The IRS provides Form W-9 – Request for Taxpayer Identification Number and Certification – as a means for you to obtain the data required from your vendors in order to file the required 1099-MISC forms after the close of the year. A completed W-9 also provides you with verification that you complied with the law should the vendor provide you with incorrect information.

    In addition, there are substantial penalties if you fail to file a correct 1099-MISC by the due date and you cannot show reasonable cause for not filing. Generally, for 1099 forms due in 2017, the penalty is $50 per 1099-MISC for not filing by the due date. The penalty increases to $100 if the form is not filed within 30 days of the due date and $260 after August 1, 2017. The maximum penalty for small businesses is $532,000, so you can see this is not a reporting requirement to be taken lightly.

    Oh, and by the way, the due date for filing 2016 Forms 1099-MISC with the IRS is January 31, 2017, when you are reporting nonemployee compensation (box 7 of the form), which includes the income paid to independent contractors. This due date is a month (two months if you’ve been filing your 1099s electronically) earlier than it has been in the past. So now both the government’s copy and the one you provide the contractor are due by the same date.

    If you have questions related to your 1099-MISC reporting requirements or need assistance filing the required forms after the end of the year, please give Dagley & Co., CPA a call.

     

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  • March 2016 Business Due Dates

    4 March 2016
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    If you own a business, here are some important due dates for March that you should be aware of:

    March 15 –  S-Corporation Election

    File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S corporation beginning with calendar year 2016. If Form 2553 is filed late, S treatment will begin with calendar year 2017.

    March 15 –  Electing Large Partnerships

    Provide each partner with a copy of Schedule K-1 (Form 1065-B), Partner’s Share of Income (Loss) From an Electing Large Partnership, or a substitute Schedule K-1. This due date applies even if the partnership requests an extension of time to file the Form 1065-B by filing Form 7004.

    March 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in February.

    March 15 – Non-Payroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in February.

    March 15 – Corporations

    File a 2015 calendar year income tax return (Form 1120 or 1120-A) and pay any tax due. If you need an automatic 6-month extension of time to file the return, file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns, and deposit what you estimate you owe. Filing this extension protects you from late filing penalties but not late payment penalties, so it is important that you estimate your liability and deposit it using the instructions on Form 7004.

    March 31 – Electronic Filing of Forms 1098, 1099 and W-2G

    If you file forms 1098, 1099, or W-2G electronically with the IRS, this is the final due date. This due date applies only if you file electronically (not paper forms). Otherwise, February 29 was the due date. The due date for giving the recipient these forms was February 1.

    March 31 – Electronic Filing of Forms W-2
    If you file forms W-2 for 2015 electronically with the IRS, this is the final due date. This due date applies only if you electronically file. Otherwise, the due date was February 29. The due date for giving the recipient these forms was February 1.

    March 31 – Large Food and Beverage Establishment Employers 

    If you file forms 8027 for 2014 electronically with the IRS, this is the final due date. This due date applies only if you file electronically. Otherwise, February 29 was the due date.

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