More tax info

[Sarah Arthur]

Hi Tammie,

As you can see, this is a MESS. Let's talk about it on Thursday.

s

---------- Forwarded message ----------
From: Sarah Arthur <sa...@saraharthur.com>
Date: Tue, Sep 11, 2012 at 5:20 PM
Subject: Re: Quick question
To: mi...@bcwncpa.com


Looks like my "quick question" has turned into a mess--thanks so much for following up on this for me! I'll look this over with Tammie on Thursday and see what needs to happen.

On Tue, Sep 11, 2012 at 4:23 PM, Michael L Nuorala, CPA <mi...@bcwncpa.com> wrote:

From the IRS.....................








Publication 926 - Main Content

  _____


Do You Have a Household Employee?


You have a household employee if you hired someone to do household work and
that worker is your employee. The worker is your employee if you can control
not only what work is done, but how it is done. If the worker is your
employee, it does not matter whether the work is full time or part time or
that you hired the worker through an agency or from a list provided by an
agency or association. It also does not matter whether you pay the worker on
an hourly, daily, or weekly basis, or by the job.

Example.

You pay Betty Shore to babysit your child and do light housework 4 days a
week in your home. Betty follows your specific instructions about household
and child care duties. You provide the household equipment and supplies that
Betty needs to do her work. Betty is your household employee.

Household work. Household work is work done in or around your home. Some
examples of workers who do household work are:

・         Babysitters

・         Caretakers

・         House cleaning workers

・         Domestic workers

・         Drivers

・         Health aides

・         Housekeepers

・         Maids

・         Nannies

・         Private nurses

・         Yard workers

Workers who are not your employees. If only the worker can control how the
work is done, the worker is not your employee but is self-employed. A
self-employed worker usually provides his or her own tools and offers
services to the general public in an independent business.

A worker who performs child care services for you in his or her home
generally is not your employee.

If an agency provides the worker and controls what work is done and how it
is done, the worker is not your employee.

Example.

You made an agreement with John Peters to care for your lawn. John runs a
lawn care business and offers his services to the general public. He
provides his own tools and supplies, and he hires and pays any helpers he
needs. Neither John nor his helpers are your household employees.

More information. More information about who is an employee is in
Publication 15-A, Employer's Supplemental Tax Guide.




Do You Need To Pay Employment Taxes?


If you have a household employee, you may need to withhold and pay social
security and Medicare taxes, pay federal unemployment tax, or both. To find
out,
read Table 1.

You do not need to withhold federal income tax from your household
employee's wages. But if your employee asks you to withhold it, you can. See
Do You Need To Withhold Federal Income Tax, later.

If you need to pay social security, Medicare, or federal unemployment tax or
choose to withhold federal income tax, read Table 2 for an overview of what
you may need to do.

http://www.irs.gov/publications/images/taxtip.gif

If you do not need to pay social security, Medicare, or federal unemployment
tax and do not choose to withhold federal income tax, read State employment
taxes, next. The rest of this publication does not apply to you.

State employment taxes. You should contact your state unemployment tax
agency to find out whether you need to pay state unemployment tax for your
household employee. For the address and phone number, see the Appendix near
the end of this publication. You should also determine if you need to pay or
collect other state employment taxes or carry workers' compensation
insurance.


Table 1. Do You Need To Pay Employment Taxes?


IF you ...

THEN you need to ...


A-

Pay cash wages of $1,800 or more in 2012 to any one household employee.

Withhold and pay social security and Medicare taxes.

・         The taxes are 13.3% of cash wages.

・         Your employee's share is 5.65%.
(You can choose to pay it yourself and not withhold it.)

・         Your share is 7.65%.


Do not count wages you pay to-

・         Your spouse,

・         Your child under the age of 21,

・         Your parent (see Social Security and Medicare Taxes, later, for
an exception), or

・         Any employee under the age of 18 at any time in 2012 (see Social
Security and Medicare Taxes, later, for an exception).


B-

Pay total cash wages of $1,000 or more in any calendar quarter of 2011 or
2012 to household employees.

Pay federal unemployment tax.

・         The tax is 0.6% of cash wages.

・         Wages over $7,000 a year per employee are not taxed.

・         You also may owe state unemployment tax.


Do not count wages you pay to-

・         Your spouse,

・         Your child under the age of 21, or

・         Your parent.


Note. If neither A nor B above applies, you do not need to pay any federal
employment taxes. But you may still need to pay state employment taxes.

Example.

In 2012 you hire a household employee (who is an unrelated individual over
age 18) to care for your child and agree to pay cash wages of $100 every
Friday. You expect to pay your employee $1,800 or more for the year. You
decide to pay your employee's share of social security and Medicare taxes
from your own funds. You pay your employee $100 every Friday without
withholding any social security or Medicare taxes.

For social security and Medicare tax purposes, your employee's wages each
payday are $100. For each wage payment, you will pay $13.30 when you pay the
taxes. This is $5.65 ($4.20 for social security tax + $1.45 for Medicare
tax) to cover your employee's share plus $7.65 ($6.20 for social security
tax + $1.45 for Medicare tax) for your share. For income tax purposes, your
employee's wages each payday are $105.65 ($100 + the $5.65 you will pay to
cover your employee's share of social security and Medicare taxes).











Table 2. Household Employer's Checklist



You may need to do the following things when you have a household employee.




When you hire a household employee:

□ Find out if the person can legally work in the United States.
□ Find out if you need to pay state taxes.


When you pay your household employee:

□ Withhold social security and Medicare taxes.
□ Withhold federal income tax.
□ Decide how you will make tax payments.
□ Keep records.


By January 31, 2013:

□ Get an employer identification number (EIN).
□ Give your employee Copies B, C, and 2 of Form W-2, Wage and Tax
Statement.


By February 28, 2013 (April 1, 2013, if you file Form W-2 electronically):

□ Send Copy A of Form W-2 to the Social Security Administration (SSA).


By April 15, 2013:

□ File Schedule H (Form 1040), Household Employment Taxes, with your 2012
federal income tax return (Form 1040, 1040NR, 1040-SS, or Form 1041).
If you do not have to file a return, file Schedule H by itself.











From Mike:  The determining factor for whether the person is an employee is
whether you control their schedule, provide tools, and a place to perform
the services, among other factors.  For the work that the individual does at
her home: they are an independent contractor.  Can you estimate how much she
will be paid for 2012 in total? And then how much is attributed to services
performed in her home (or elsewhere?)

Michael L. Nuorala, CPA

mi...@bcwncpa.com



Bunker, Clark, Winnell & Nuorala, P.C.

2301 Mitchell Park Drive; Petoskey, Michigan 49770

Office 231.347.3963, #17; Cell 231.499.3900

Facsimile 231.347.5509

CONFIDENTIALITY NOTICE: This electronic mail (including any attachments) may
contain information or advice which is confidential or privileged and is
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including copyright, are specifically reserved. If the recipient of this
electronic mail is not the intended recipient, the retention, disclosure,
copying, dissemination or other use of this electronic mail is prohibited,
and the recipient is requested to notify us immediately.



IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to
notify you that any tax advice contained in this communication (including
attachments) is not intended or written to be used, and cannot be used, by
any person for the purpose of avoiding tax penalties that may be imposed by
law.



From: Michael L Nuorala, CPA [mailto:mi...@bcwncpa.com]

Sent: Tuesday, September 11, 2012 1:39 PM
To: 'Michael L Nuorala, CPA'; 'Sarah Arthur'

Subject: RE: Quick question



Sarah - forgot to mention, please call if you need more information.
Unfortunately this topic can go so many different directions that it is
possibly easier to discuss by phone.  J



Thanks - Mike







Michael L. Nuorala, CPA

mi...@bcwncpa.com



Bunker, Clark, Winnell & Nuorala, P.C.

2301 Mitchell Park Drive; Petoskey, Michigan 49770

Office 231.347.3963, #17; Cell 231.499.3900

Facsimile 231.347.5509



CONFIDENTIALITY NOTICE: This electronic mail (including any attachments) may
contain information or advice which is confidential or privileged and is
solely for the use of the intended recipient. All proprietary rights,
including copyright, are specifically reserved. If the recipient of this
electronic mail is not the intended recipient, the retention, disclosure,
copying, dissemination or other use of this electronic mail is prohibited,
and the recipient is requested to notify us immediately.



IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to
notify you that any tax advice contained in this communication (including
attachments) is not intended or written to be used, and cannot be used, by
any person for the purpose of avoiding tax penalties that may be imposed by
law.



From: Michael L Nuorala, CPA [mailto:mi...@bcwncpa.com]
Sent: Tuesday, September 11, 2012 9:29 AM
To: 'Sarah Arthur'
Subject: RE: Quick question



If you pay that person more than $600 in a year they are supposed to be
issued a Form 1099 by you.  They will then have to report the income on
their tax return.  The amount can then be reported on your tax return as a
deduction if it is business related.



If some of the business services are NOT business related, then they can not
be deducted on your tax return, but the amounts are still income to the
assistant.



Michael L. Nuorala, CPA

mi...@bcwncpa.com



Bunker, Clark, Winnell & Nuorala, P.C.

2301 Mitchell Park Drive; Petoskey, Michigan 49770

Office 231.347.3963, #17; Cell 231.499.3900

Facsimile 231.347.5509



CONFIDENTIALITY NOTICE: This electronic mail (including any attachments) may
contain information or advice which is confidential or privileged and is
solely for the use of the intended recipient. All proprietary rights,
including copyright, are specifically reserved. If the recipient of this
electronic mail is not the intended recipient, the retention, disclosure,
copying, dissemination or other use of this electronic mail is prohibited,
and the recipient is requested to notify us immediately.



IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to
notify you that any tax advice contained in this communication (including
attachments) is not intended or written to be used, and cannot be used, by
any person for the purpose of avoiding tax penalties that may be imposed by
law.



From: sarth...@gmail.com [mailto:sarth...@gmail.com] On Behalf Of
Sarah Arthur
Sent: Monday, September 10, 2012 7:48 PM
To: Mike Nuorala
Subject: Quick question

Hi Mike,

Question for you: I'm hiring a personal assistant 3-5 hours per week (rather
like one hires a babysitter or someone to mow the lawn) to help me around
the house, run errands, maintain my website, and some other work-related
help. Do I need to claim this somehow, or what do you suggest?

Thanks!
Sarah Arthur
517-889-5540

--
Author of the award-winning Walking with Bilbo: A Devotional Adventure
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--
Author of the award-winning Walking with Bilbo: A Devotional Adventure through The Hobbit
www.saraharthur.com

https://www.amazon.com/author/saraharthur

--
Author of the award-winning Walking with Bilbo: A Devotional Adventure through The Hobbit
www.saraharthur.com
https://www.amazon.com/author/saraharthur