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- Seasonal Workers and the Healthcare Law
- Tips for Taxpayers: Backup Withholding
- Tax-Related Items To Keep in Mind When Disaster Strikes
- Individual Retirement Arrangements: Terms To Know
Seasonal Workers and the Healthcare Law
Businesses often need to hire workers on a seasonal or part-time basis. For example, some businesses may need seasonal help for holidays, harvest seasons, commercial fishing, or sporting events. Whether you are getting paid or paying someone else, questions often arise over whether these seasonal workers affect employers with regard to the Affordable Care Act (ACA).
For the purposes of the Affordable Care Act the size of an employer is determined by the number of employees. As such, employer-offered benefits, opportunities, and requirements are dependent upon your organization’s size and the applicable rules. For instance, if you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE (Applicable Large Employer) for the current calendar year.
If you hire seasonal or holiday workers, here’s what you should know about how these employees are counted under the health care law:
Seasonal worker. A seasonal worker is generally defined for this purpose as an employee who performs labor or services on a seasonal basis, generally for not more than four months (or 120 days). Retail workers employed exclusively during holiday seasons, for example, are seasonal workers.
Seasonal employee. In contrast, a seasonal employee is an employee who is hired into a position for which the customary annual employment is six months or less, where the term “customary employment” refers to an employee who typically works each calendar year in approximately the same part of the year, such as summer or winter.
The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions; however, there is an exception for seasonal workers:
Exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE.
For additional information on hiring seasonal workers and how it affects the employer shared responsibility provisions please contact us today.
Tips for Taxpayers: Backup Withholding
Taxpayers receiving certain types of income typically reported on certain Forms 1099 and W-2G may need to have backup withholding deducted from these payments. Here are three tips to help taxpayers understand backup withholding:
1. Backup withholding is required on certain non-payroll amounts when certain conditions apply.
The payer making such payments to the payee doesn’t generally withhold taxes, and the payees report and pay taxes on this income when they file their federal tax returns. There are, however, situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income.
2. Backup withholding is set at a specific percentage. For 2020, it is 24 percent.
3. Payments subject to backup withholding include:
- Interest payments
- Payment card and third-party network transactions
- Patronage dividends, but only if at least half the payment is in money
- Rents, profits or other gains
- Commissions, fees or other payments for work done as an independent contractor
- Payments by brokers
- Barter exchanges
- Payments by fishing boat operators, but only the part that is paid in actual money and that represents a
- share of the proceeds of the catch
- Royalty payments
- Gambling winnings, if not subject to gambling withholding
- Taxable grants
- Agriculture payments
Let’s take a look at a couple of examples of when the payer must deduct backup withholding:
Example 1: If a payee has not provided the payer a Taxpayer Identification Number (TIN).
A TIN specifically identifies the payee and includes Social Security numbers, Employer Identification Numbers, Individual Taxpayer Identification Numbers and Adoption Taxpayer Identification Numbers.
Example 2: If the IRS notified the payer that the payee provided an incorrect TIN.
If the TIN does not match the name in IRS records, then payees should make sure that the payer has their correct name and TIN to avoid backup withholding.
Not sure if you need backup withholding? Help is just a phone call away.
Tax-Related Items To Keep in Mind When Disaster Strikes
Unfortunately, disaster can strike at any time. If you’ve been affected by a disaster this year, here are six tax-related things to keep in mind that usually happen after a major disaster strikes:
1. FEMA Declaration of Major Disaster Area
Before the IRS can authorize any tax relief, FEMA must issue a major disaster declaration and identify areas that qualify for their Individual Assistance program. Recent examples of federally declared disaster areas include the California and Oregon wildfires, Iowa derecho, and Hurricanes Delta, Sally, and Laura.
2. More Time to File and Pay
Individuals or businesses located in the disaster area whose address of record is located in an area identified by FEMA for their Individual Assistance program automatically receive extra time from the IRS to file returns and pay taxes.
Generally, these affected taxpayers have until the last day of the Extension Period to file tax returns or make tax payments, including estimated tax payments, that have either an original or extended due date falling within this Period. The IRS also abates interest and any late filing or late payment penalties that would normally apply during these dates to returns or payments subject to these extensions.
3. Casualty Loss Tax Deduction
Taxpayers who have damaged or lost property due to a federally declared disaster may qualify to claim a casualty loss deduction. This deduction can be claimed on a current or prior-year tax return. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.
4. Disaster Loans or Grants
The Small Business Administration offers financial help to business owners, homeowners and renters in a federally declared disaster area. To qualify, a taxpayer must have filed all required tax returns.
5. Prior Year Tax Return Transcript
If you need a tax transcript to support your disaster claim, you can obtain free transcripts by using Get Transcript on the IRS website to access your transcripts immediately online. You can also request mail delivery. You can also call 800-908-9946 to request mail delivery or submit Form 4506-T, Request for Transcript of Tax Return.
If you need a copy of their tax return file Form 4506, Request for Copy of Tax Return. The IRS waives the usual fees and expedites requests for copies of tax returns for taxpayers who need them to apply for disaster-related benefits or to file amended returns claiming disaster-related losses. To speed up the process, when filing Form 4506 (or Form 4506-T), taxpayers should state on the form whether the request is disaster-related and list the state and type of event.
6. Change of Address
After a disaster, some people might need to temporarily or permanently relocate. If this applies to you, you will need to notify the IRS of your new address by submitting Form 8822, Change of Address.
For questions about this and other federal disaster relief that might be available, please contact us today.
Individual Retirement Arrangements: Terms To Know
While many taxpayers already know about Individual Retirement Arrangements, or IRAs, and have set up an IRA with a bank or other financial institution, a life insurance company, mutual fund or stockbroker, there are other taxpayers such as those new to the workforce who may not understand how IRAs help them save for retirement. With this in mind, here is a list of basic terms to help people better understand their IRA options:
Contribution. The money that someone puts into their IRA. There are annual limits to contributions depending on their age and the type of IRA.
Distribution. The amount that someone withdraws from their IRA.
Required Distribution. There are requirements for withdrawing from an IRA:
- Someone generally must start taking withdrawals from their IRA when they reach age 70 1/2.
- Due to tax provisions in the 2019 SECURE Act, if a person’s 70th birthday is on or after July 1, 2019, they do not have to take withdrawals until age 72.
- Special distribution rules apply for IRA beneficiaries.
Traditional IRA. An IRA where contributions may be tax-deductible. Generally, the amounts in a traditional IRA are not taxed until they are withdrawn.
Roth IRA. This type of IRA that is subject to the same rules as a traditional IRA but with certain exceptions:
- A taxpayer cannot deduct contributions to a Roth IRA.
- For some situations, qualified distributions are tax-free.
- Roth IRAs do not require withdrawals until after the death of the owner.
Savings Incentive Match Plan for Employees. This is commonly known as a SIMPLE IRA. Employees and employers may contribute to traditional IRAs set up for employees. It may work well as a start-up retirement savings plan for small employers.
Simplified Employee Pension. This is known as a SEP-IRA. An employer can make contributions toward their own retirement and their employees’ retirement. The employee owns and controls a SEP.
Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.
For more information about this topic, don’t hesitate to call the office today.