401(k) Uni Retirement plans must be opened by
LANDLINE
OCTOBER, 2006
ARTICLE 1006LL
INFORMATION YOU REQUESTED
(S CORP INSURANCE, EMPLOYEE CLASSIFICATION, IDENTITY THEFT)
We are going to address the rising health insurance rates as pertains to S corporations along with other matters concerning the owner-operator today.
Bulletin: Health insurance for S corporation shareholders – “Clarity of IRS Position”
In order to deduct health premiums as an adjustment to gross income, the policy
must be purchased in the corporate name. The premium is deductible by the corporation
as compensation and reported on the shareholder’s W-2. If the policy is in the name of
the individual, the premiums are deducted only as an itemized deduction, and only the
excess of 7.5% of adjusted gross income. And if you don’t itemize, the owner is really
out of luck. The same rule applies to partnerships.
Note: Ask your insurance agent about a medical reimbursement plan.
TAX TIP
In most circumstances, married taxpayers filing “married filing separate” returns should have uniform below the line deductions, i.e. both must itemize or both must take the standard deduction. Income can vary depending on to whom it belongs. However, a taxpayer who qualifies as unmarried under HOH rules can claim the standard deduction even if the other spouse itemized deductions.
If there is a divorce, once the divorce is final, and the parents of one or more children have legal joint custody, it is extremely important to keep accurate records of days of custody for purposes of filing “Head of Household” and the earned income tax credit.
INDEPENDENT CONTRACTORS AND COMMON LAW EMPLOYEES
If an employer misclassifies a worker as an independent contractor, the employee is still responsible for paying his or her share of Federal income tax withholding and their share of social security taxes. Employers are still liable for the full amounts of their share. If the employee corrects the misclassification, IRC Code 3509 provides reduced rates.
An employer can get relief from paying the federal income tax that should have been withheld by providing evidence that the employee reported the income on his or her tax return and paid the tax due.
Section 530 of the Revenue Act of 1978, as amended provides for relief for the employer. It is necessary to meet all three of the following requirements:
1. Reasonable basis for not treating a worker as an employee (a, b, or c will qualify
for meeting rule 1).
a. Judicial precedent
b. Past IRS audit regarding this matter when there was no assessment of tax
c. Long standing recognized industry practice.
2. All workers must have been treated as independent contractors for all applicable
Periods beginning
after
3. If required, Form 1099 MISC for each worker must have been filed.
Protecting your Financial Privacy
Identity theft is a growing problem worldwide. It’s estimated that as many as 750,000 Americans are the victims of identity theft every year. Protecting your financial privacy is more important now than ever.
With just a small bit of information, namely your Social Security number, identity thieves can open phony bank accounts qualifying them for credit card accounts, even expensive purchases like cars, boats and jewelry.
Guard your Social Security number. Don’t carry your Social Security card with you and don’t have your Social Security number or driver’s license number printed on your checks. Always tear or shred documents with private financial information including old bank & credit card statements and solicitations for credit cards or loans. Never leave credit card, ATM or gas station receipts behind.
It is recommended that you check your credit report at least once a year. Verify all account information. Subscribe to a credit monitoring service such as Privacy Guard or Credit Watch that will alert you any time credit is applied for or checked in your name. It is estimated that victims of identity theft spend on average 200 hours cleaning up their credit reports and resolving the numerous problems caused by identity theft. Guard your privacy and your private information as much as possible.
This article has been presented by PBS Tax & bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at 800-697-5153. Visit our Web Site at www.pbstax.com .
“Everyone’s financial situation is different. This article does not give and is not
intended to give specific accounting and/or tax advice. Please consult with your own tax or
accounting professional.”
