Important Update Regarding Freezing Your Credit

A 30-second read by the Baron Team: This is an update to our September 2017 blog post concerning the Equifax data breach that occurred in September of 2017.  Due to the data breach, we advised considering freezing your credit reports to stop thieves from opening new credit cards or loans in your name. Freezing your report also prevents you from opening new accounts, so each time you apply for a credit card, mortgage or loan, you need to lift the freeze a few days beforehand. 

Now, you can freeze and unfreeze your credit at the three major credit bureaus for free, thanks to a new federal law that took effect on September 21, 2018.

In addition, the law extends the length of time a fraud alert remains on your credit report to one year, from the previous period of 90 days.

You will need to contact all three credit bureaus to place a freeze on your credit report:

For more information regarding credit reports and identity theft, read our Equifax data breach post.

Please contact your Baron team with any questions.  

Nanny Tax: What You Need to Know When You Hire a Household Employee

A 60-second read by the Baron Team: 

  • Nanny taxes are taxes paid to the government from a person working in and/or around your home. These jobs can include nanny, housekeeper, gardener, chef, personal assistant or caregiver.
  • The worker is considered a household employee if the employer controls what work is done and how it is done and can be full time or part time work.
  • If you pay someone that works in your home $2,100 or more a year or $1,000 in a quarter they are considered a household employee.
  • The employer must obtain the employee’s name and social security number.
  • The employer must withhold a certain amount of compensation from a household employee for FICA and Medicare.
  • As well as withholding a certain amount of money from your household employee, you must also pay your share of FICA employer taxes and federal and state unemployment taxes.
  • The employee, as well as the employer, can benefit from filing these taxes. The employee can prove she/he was working for a set amount of time and qualify for certain government benefits, such as social security and unemployment.

  • Forms Required to file:
    1. Form SS-4 to obtain your federal Employer Identification Number, which is needed for the other forms.
    2. Form I-9 is needed to be filled out by your employee to verify she/he is eligible to work in the United States.
    3. W-4 Forms are used to determine what taxes are needed to be deducted from the household employee’s wages and sent to the IRS.
    4. Schedule H Form is part of your personal return with Form 1040 & an accountant can help determine the amount the employer is taxed for FICA and unemployment.

  • Insurance requirements:
    1. You must register for unemployment insurance in your residing state.
    2. You also need to have workers compensation insurance, which is very important.
      • If you reside in NY, you will also need to purchase a separate disability policy.

  • State taxes are generally paid quarterly while Federal taxes are paid annually.
  • If you refuse to file the proper tax documents you may be subjected to an audit from the IRS leading to tax evasion. Trying to classify your household employee as an “independent contractor” is a red flag to the IRS and should be avoided.

For more information on hiring household employees visit:  https://www.irs.gov/businesses/small-businesses-self-employed/hiring-household-employees

For more information on what forms are needed for hiring employees visit: https://www.irs.gov/businesses/small-businesses-self-employed/hiring-employees

If you have more specific questions on this matter, we recommend speaking with a tax professional.

If you have any other questions, please reach out to your Baron Financial Group team.

 

 

Things to Consider If You Have Over-Contributed to an IRA

A 60-second read by Victor Cannillo:

#1 – We highly recommend you hire a Certified Public Accountant to help you resolve the issue.

Here are some points to consider:

  • There are limitations on the total amount that may be contributed to an IRA. Currently, it’s the greater of either $5,500 ($6,500 if the person is 50 or older) or your taxable compensation for the year.

  • The IRS considers each individual person to have a single IRA.  The maximum contribution limits apply to all of your IRA accounts.  If you have more than one IRA account open, you can contribute to one account or all of your accounts as long as the total contributions meet the yearly limit.

  • If there are excess contributions to your IRAs, there is an annual additional 6% tax penalty (paid with the filing of Form 5329) on those excess contributions until you withdraw them from your account.

  • Normally, if the excess contribution for the tax year is withdrawn with any related earnings before the tax return deadline (including extensions), you are not subject to the 6% additional tax. Also the earnings on the excess IRA contributions as determined by the custodian will be subject to tax for the year the excess contribution was made. Those earnings are also subject to a 10% early withdrawal penalty if the person’s age is under 59 and a half for the year of the contribution.

  • You will need to consult a Certified Public Accountant to determine what tax returns need to be filed.

If you have more specific questions on this matter, we recommend speaking with a tax professional.

For any other questions, please reach out to your Baron Team.

How to File an Extension on Your 2017 Tax Return

A 60-second read by the Baron Team: With the filing due date fast approaching, you are probably in the process of collecting all of your tax-related documents from the past year. Tax returns must be submitted by April 17th this year. If by that time you realize that you are going to need more time to compile information for your tax return or haven’t received all of the documents you need, it will be in your best interest to file a tax extension. This will extend the due date up until October 15, 2018.

How to file a Paper Tax Extension:

 To file an extension, you are going to need to fill out Form 4868 [Application for Automatic Extension of Time to File U.S. Individual Income Tax Return]. You can download the form and instructions from the IRS website.

With the form, you also need to send in at least 90% of your estimated tax liability due for the year. To pay by check, mail the form with the check together. Make the check out to United States Treasury. On the memo line, write your Social Security Number, Form 4868, and the tax year (2017). This way, they know that you are sending the check as part of your extension.

When mailing in the tax extension, it is highly recommended that you send it via certified mail or another method that provides you with a tracking number. The envelope needs to be postmarked by April 17th. Check the instructions portion of Form 4868 for the correct mailing address (it varies according to what state you reside in).

 To Prevent any Penalties:

  • Carefully read all instructions and follow all directions on Form 4868.
  • Correctly estimate your tax liability for the year and send in 90% of the amount due.

Miscellaneous tips:

  • It is possible to file your extension online. See the IRS website for more details.
  • If you ever feel unsure or concerned about the process, consult a Tax Professional to assist you.

For any other questions, contact the Baron Financial Group Team.

Tax Identity Theft Awareness Week 2018

A 30-second read by Nicholas Scheibner: The week of January 29th – Feb 2nd has been designated “Tax Identity Theft Awareness Week.” The FTC (Federal Trade Commission) will be offering some free webinars and chats on this topic. To learn more about the free webinar offerings, click here.

According to the FTC, tax identity theft occurs when another person uses your social security number for the purpose of getting a job or a tax refund. You will usually know when you receive a letter or notice from the IRS saying that you filed more than one tax return or see on their records that you were paid by an unknown employer. To learn more, click here for the FTC’s article on Tax-Related Identity Theft. If you’re the victim of tax fraud, visit the IRS website.

On a related note – if you are interested to know how long you should be keeping your tax returns, please refer to our “What documents are safe to shred? What must I keep?” blog post.

Feel free to reach out to us for any questions.