Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business. Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees’ pay and both the employer’s and employees’ share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.
* Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
* Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.
For more information on tax deadlines that apply to your business, contact our office.
What’s New in Taxes
Tax changes in three new laws
Congress has passed three laws that contain some tax provisions. Here’s a quick overview.
* FARM ACT. The Food, Conservation and Energy Act of 2008 was vetoed by President Bush but became law when Congress overrode his veto. As the short title implies, the law mainly affects farmers and includes provisions on conservation donations, race horse depreciation, timber sales, CCC loan transactions, and farm loss deductions. Relief for certain disaster victims and increases in estimated tax payments for large corporations in 2012 are among other miscellaneous provisions.
* HEROES ACT. The Heroes Earnings Assistance and Relief Tax Act of 2008 provides tax breaks for military personnel, civilian employers of those called to military service, veterans, and reservists serving in the military. The Act’s revenue-raising provisions include an increase in the minimum penalty for failing to file a tax return, a requirement that certain foreign subsidiaries of U.S. corporations must now pay employment taxes, and an immediate tax bill on Americans who give up their U.S. citizenship to escape income and estate taxes.
* HOUSING ACT. The Housing and Economic Recovery Act of 2008 was passed to provide financial stability to the troubled housing market and tax relief to homeowners and home buyers. The law gives first-time home buyers a refundable tax credit of up to $7,500 that must be paid back over 15 years. The credit phases out for singles with incomes over $75,000 ($150,000 for couples) and are available for home purchases from April 9, 2008, through June 30, 2009. Another provision gives homeowners an additional standard deduction for real property taxes in 2008. The maximum deduction is $500 for singles and $1,000 for joint filers. One of the revenue-raising provisions in the law will limit the exclusion of gain on the sale of a principal residence that had been used previously as a rental property or second home. For details on these tax changes, please contact our office.
Summer is a good time for retirement tax planning
When it comes to your retirement, three areas are hot for summertime tax planning: establishing a plan, making contributions to existing plans, and taking distributions.
* Establish a retirement plan for your business. Qualified retirement plans shelter self-employment income and provide tax-free growth. In 2008 you can contribute up to $10,500 to a SIMPLE IRA (plus another $2,500 if you’re over age 50). If you’re self-employed, you may be able to contribute more. Initial and ongoing paperwork for many plans is generally minimal. Setting up a plan during the summer lets you sock away your total contribution over several months, instead of scrambling for a lump-sum at year-end. Need additional incentive? Your business may be able to claim a tax credit that helps offset the cost of implementing your new plan.
* Make contributions. No matter what retirement plan you have, it’s never too early to put money aside. Budget now for manageable monthly set-asides. Smaller amounts add up by year-end and can offer multiple current tax advantages in addition to longer-term benefits. For instance, depending on your income, contributions to traditional IRAs can be an above-the-line deduction that lowers your tax. The Saver’s Credit, which applies directly against your tax liability and is available to lower-income taxpayers for making contributions to IRAs or other retirement plans, may also save you money. Contribution limits for traditional and Roth IRAs have been increased to $5,000 for 2008. If you’re over age 50 by year-end, the additional catch-up contribution is $1,000. You can set up an IRA even if you’re covered under other plans (though deductibility of contributions may not be permitted in some situations).
* Schedule your distributions. Retirement plan distributions are generally taxable at ordinary income rates, so you’ll want to know now how withdrawals will affect your 2008 tax liability. If you’re not yet required to take distributions, you may have some flexibility as to which accounts you tap to meet your cash flow needs. A summertime inventory of your assets lets you compare different distribution tactics and calculate the tax effect of withdrawals from taxable assets versus those from your retirement plans. What if you’ve already reached age 70-1/2? At that point, under the required minimum distribution rules, you generally have to start withdrawing funds from your retirement accounts to avoid penalties. Advance planning can help you decide if shifting your taxable accounts to tax-efficient investments will save money. For assistance with your retirement tax planning, give our office a call.
New Business
Federal minimum wage increases again
The federal minimum wage increased from $5.85 an hour to $6.55 an hour, effective July 24, 2008. This increase is part of a three-stage increase in the federal minimum wage mandated by the Small Business and Work Opportunity Act of 2007. The first increase took place July 24, 2007, raising the then-current rate of $5.15 an hour to $5.85. This was the first increase in the minimum wage since 1997. The next and final step in the minimum wage increase takes place next year when, effective July 24, 2009, the federal minimum wage will go to $7.25. Note that many states already have a minimum wage higher than the federal required rate. For more information or assistance, give us a call.
Cirimelli, Pyle and Associates LLP (CPA) are certified public accountants who could definitely help all tax payers. They are located in the State of California and have in-depth knowledge and expertise in the field of income tax and various other professional skills. They have CPA firms in Campbell, Cupertino, Los Altos, San Jose, Santa Clara and Saratoga. They help for tax filing in all these areas. For more information on the services offered, contact them at their office: 901 CAMPISI WAY, SUITE 380, CAMPBELL, CA 95008. Or on the phone at: 408-879-9990 or Email at: cpa@cpasllp.com
Tags: Cirimelli, cpa firms, Pyle and Associates LLP (CPA), Tax, tax planning
