Minimum Wage Increases for Seattle and Tacoma 2017

Businesses with employees in Seattle should be preparing to take the new minimum wage into account. Your particular minimum depends upon the size of your operation, and the benefits that you offer.

Effective January 1, 2017, Large Employers, defined as employers with over five hundred employees, will be expected to pay a higher minimum than Small Employers with five hundred or fewer employees. If you pay towards medical benefits, your minimum is $13.50 per hour. If you do not pay towards medical benefits, your minimum is $15.00 per hour.

Small Employers will be expected to pay a minimum of $13.00 per hour. However, if the employer pays $2.00 per hour towards medical benefits, or if a given employee earns at least $2.00 per hour in tips, the minimum is $11.00 per hour.

If you live in the City of Tacoma, your minimum wage is also on the rise as the following:

  • January 1st, 2017: $11.15 per hour.
  • January 1st, 2018: $12.00 per hour.
  • January 1st, 2019: Starting on this date, the minimum will continue to be adjusted annually, according to the rate of inflation.

This minimum applies to most people who work for 80+ hours per year within the city limits of Tacoma.

Additionally, employees who work for 80+ hours in a calendar year are guaranteed a certain amount of paid time off every year. They earn an hour of such time for every 40 hours worked within Tacoma, up to 24 hours. Employees have the option of carrying forward up to 24 hours of unused paid leave, and can use up to 40 hours in a single hear. However, they can only use their paid leave 180 days after the start of their employment.

Should you require any further information on your legal obligations this coming year, or if you are looking for additional help keeping your business’s finances in order, consult Seattle CPA Alisa Na during normal business hours.

*All information presented in this article may subject to change with or without notice. Please check with your city department for the detail.

Year End General Business Deductions 2016

The end of the calendar year is soon about to close, and many are wondering how to be able to pay less in taxes. It just takes a sit-down and figuring out your strategy. We think that a few components of an easy-to-follow game plan make powerful tools to realize your goal.

  1. Prepay expenses using the IRS safe harbor
  2. Stop billing clients/patients in December
  3. Catch holiday and end-of-the-year sales and buy office equipment
  4. Use your credit cards
  5. Don’t assume you are taking too many deductions

Firstly, where your taxes are concerned, business tax deductions are key. Don’t you go thinking you’ve got too many already. The more business tax deductions you claim, the less you pay in regular taxes. One strategy is to prepay your 2017 qualifying expenses now, before 2016 closes; you’ll be enjoying that tax deduction this year. Another time-tested strategy is to stop billing your customers until after the last day of 2016. Doing so is postponing paying taxes on your December income.

Another is buying your company’s new assets, like computers, photocopiers, or office tables and chairs, or use your company’s credit card to purchase some office supplies and other necessities before the close of December. It’s also a great time to get your hands on holiday deals. Like what we say, if you have legitimate deductions, by all means use them. Spend now to be able to enjoy those tax deductions for the current year and pay less taxes for them.

It’ll be good to know also for Washingtonians, that as a result of the recent November elections, the Washington state minimum wage will go up to $11 dollars starting January 1st, 2017. This should enable a reasonable boost in spending, and with the above strategy, pay less in regular taxes for the coming year.

Remember the Child and Dependent Care Credit This Summer

It is common nowadays for parents to be too busy to properly look after their children during the summer months, prompting them to seek out the help of daycare or day camps. If you make use of such services this summer, you may be eligible for a federal tax credit. Here is what you need to know about the Child and Dependent Care Credit:

1. Expenses Must Be for Qualifying Persons: The expenses you claim the credit for generally must be for the care of dependents under the age of thirteen.

2. Expenses Must Be Work-Related: Expenses only qualify if you require care for your dependents so that you can either work or look for work. If you file a joint return, this rule applies to your spouse as well. Your spouse meets this requirement if he or she is a full-time student, or if he or she is physically or mentally incapable of self-care.

3. Earned Income is Required: You must have earned income in the form of wages, salaries, or tips. This includes net earnings from self-employment. If you file jointly, your spouse must also have earned income unless he or she is either a full-time student or incapable of self-care.

4. Married Couples Must File Joint Returns: You must file jointly with your spouse, unless you are either legally separated or living apart.

5. Expenses Must Be for Qualifying Types of Care: You may qualify if you are paying for care in your home, at a daycare facility, or at a day camp. You may not claim the expenses for certain types of care, including the following:
    • Summer school tutoring costs.
    • Overnight camps.
    • Care provided by either your spouse or your child who is under the age of nineteen at the end of the year.
    • Care provided by a person you can claim as a dependent.
    • If you get dependent care benefits from your employer, special rules may apply.

6. Credit Amount: The credit equals between twenty and thirty-five percent of your allowable expenses, depending on your income. The total expense that you can claim in a single year is limited to $3,000 for one qualifying person, or $6,000 for two or more.

7. Keep Records: You should be prepared to keep all receipts and records pertaining to your expenses, including the name, address, and taxpayer identification number of your care provider. You will submit this information on Form 2441.

Should you require any assistance in preparing your taxes, please consult Seattle CPA Alisa Na for further information.

Minimum Wage Increases for Seattle and Tacoma

Businesses with employees in Seattle should be preparing to take the new minimum wage into account. Your particular minimum depends upon the size of your operation, and the benefits that you offer.

Large employers, defined as employers with over five hundred employees, will be expected to pay a higher minimum than employers with five hundred or fewer employees. If you pay towards medical benefits, your minimum is $12.50 per hour. If you do not pay towards medical benefits, your minimum is $13.00 per hour.

Many small employers will be expected to pay a minimum of $12.00 per hour. However, if the employer pays $1.50 per hour towards medical benefits, or if a given employee earns at least $1.50 per hour in tips, the minimum is $10.50 per hour.

If you live in the City of Tacoma, your minimum wage is also on the rise as the following:

  • February 1st, 2016: $10.35 per hour.
  • January 1st, 2017: $11.15 per hour.
  • January 1st, 2018: $12.00 per hour.
  • January 1st, 2019: Starting on this date, the minimum will continue to be adjusted annually, according to the rate of inflation.

Please visit City of Tacoma website for the full detail.

This minimum applies to most people who work for 80+ hours per year within the city limits of Tacoma.

Additionally, employees who work for 80+ hours in a calendar year are guaranteed a certain amount of paid time off every year. They earn an hour of such time for every 40 hours worked within Tacoma, up to 24 hours. Employees have the option of carrying forward up to 24 hours of unused paid leave, and can use up to 40 hours in a single hear. However, they can only use their paid leave 180 days after the start of their employment.

Should you require any further information on your legal obligations this coming year, or if you are looking for additional help keeping your business’s finances in order, consult Seattle CPA Alisa Na during normal business hours.

*All information presented in this article may subject to change with or without notice. Please check with your city department for the detail.

Understanding the Changing Obamacare Penalties

The Patient Protection and Affordable Care Act, more commonly known as Obamacare, imposes penalties on taxpayers who choose not to purchase qualifying health care coverage. These penalties were modest at first, but have been jumping up by large degrees. To make sure that you don’t get caught by surprise, consider the following summary of current penalties and how they are scheduled to progress in the near future:

In 2014, the first year that Obamacare penalties were in effect, they were relatively minor. The minimums were set at $95 per adult and $45.50 per child, capped at a total of $285. Higher income households could have a penalty as high as 1% of any income earned over the tax filing threshold.

The penalties increased for 2015. Currently, you can expect to pay $325 per adult and $162.50 per child, up to a limit of $975 or 2% of your household income above your tax filing threshold, whichever is higher.

Penalties are only going to get worse next year. Once 2016 rolls around, the rates will jump to $695 per adult and $347.50 per child, up to a limit of $2,085 or 2.5% of your household income above your filing threshold, whichever is higher. Following this, penalties shall go up by modest amounts according to the Consumer Price Index.

For more information on taxes, and how to avoid penalties, please consult Seattle CPA Alisa Na during normal business hours.

Important Tax Deadlines

Being aware of all of your important tax-related deadlines throughout the year is a good way to save time and avoid penalties in the long run. What follows is a list of important deadlines for businesses and individuals as they typically occur; remember that these days may be moved to accommodate federal holidays:

Filing Deadlines

Your deadline for filing taxes may vary, depending on the nature of the entity you represent:

  • April 15th: This deadline applies to individuals, sole proprietorships, single-member LLC’s, partnerships, real estate mortgage investment conduits, estates, and trusts.
  • March 15th: This deadline applies to corporations, S-corporations, homeowners associations, cooperative associations, and real estate investment trusts.

Estimated Tax Payments

If you are self-employed or otherwise receive income that requires you to pay estimated taxes every quarter, there are four deadlines to be mindful of:

  • April 15th: 1st Quarter Payment Due
  • June 15th: 2nd Quarter Payment Due
  • September 15th: 3rd Quarter Payment Due
  • January 15th: 4th Quarter Payment Due

Tax Extension Deadlines

People who require more time to prepare their tax returns should take note of the following two deadlines:

  • April 15th: This is the last day to request a tax extension.
  • October 15th: Should you be approved for a tax extension, you will be required to file by this date.

IRA Deadlines

If you have an IRA, there are two deadlines to be aware of:

  • April 15th: This is the last day to contribute to a traditional or Roth IRA for the previous tax year. If you have a Keogh or SEP, and you are approved for a filing extension, you have until October 15th to put money into such accounts.
  • October 15th: If you converted your traditional IRA to a Roth and paid taxes on this conversion with your most recent return, this is the deadline for recharacterizing the conversion.

For further information on your taxes, or for help managing your finances, please contact Seattle CPA Alisa Na during normal business hours.

Deducting Your Moving Expenses

When you move for the sake of a job, some of the expenses relating to your move may be deductible on your tax return. Such expenses can include the costs of transportation and lodging incurred during your move, the costs of packing, shipping, storing, or insuring your property, and the cost of disconnecting or connecting utilities. You cannot deduct the cost of meals, the cost of your new home, costs associated with selling your home, or the cost of breaking or entering into a lease.

To find out if you are eligible to deduct your moving expenses, consider the following requirements:

  • The move must relate to the start of work. You can generally consider the moving expenses for your return if the move is made within one year of starting a job at a new location.
  • The move must meet the distance requirements. The new location of your job must be a minimum of fifty miles farther away from your old home than your previous job location.
  • Your job must meet the time requirements. The job requiring you to move must be a full-time position, and you must work in this job for at least thirty-nine weeks the first year following your move. Additionally, you must work full-time for a minimum of seventy-eight weeks throughout the first two years at the new job location. These rules also apply if you are self-employed. If your tax return is due prior to you meeting these requirements, but you expect to meet them later on, you can still claim the deduction for this tax year.

Any reimbursement that you receive from your employer regarding your moving expenses may need to be reported as income.

For further details, see Publication 521. Should you require any additional help with your taxes or finances, please contact Seattle CPA Alisa Na during normal business hours.

Dealing With Tax-Related Identity Theft

Identity theft can be one of the more infuriating crimes to find yourself the victim of. It can strike unexpectedly, and be very difficult to amend. Fortunately, the IRS works to help you overcome your tax-related identity theft so that you can return to your normal, secure life as quickly and easily as possible.

Tax related identity theft happens when your Social Security number is stolen and used to file a return, claiming your refund for another individual. Since this generally happens early in the year, you may not discover this theft until months after it has happened. You may receive a notice from the IRS that more than one return has been filed in your name, or you may find that you owe additional tax on wages from an employer you have never heard of.

Should you fall victim to identity theft, take the following steps:

  • File a report with law enforcement officials
  • Go to www.ftc.gov to report the theft
  • Close any accounts that have been opened or tampered with without your permission
  • Have a fraud alert placed on your credit records by contacting one of the three major credit bureaus:
    • Equifax, www.Equifax.com, 1-800-525-6285
    • Experian, www.Experian.com, 1-888-397-3742
    • TransUnion, www.TransUnion.com, 1-800-680-7289

If you know that your SSN is compromised, and suspect that you might be a victim of tax-related identity theft, take the following steps:

  • Fill out IRS Form 14039, Identity Theft Affidavit
  • Respond immediately to any notices you receive from the IRS
  • Continue to pay taxes and file returns as appropriate, even if you must do so by paper

You can reduce your risk of falling victim to identity theft by taking the following precautions:

  • Do not carry your Social Security card around on your person
  • Only give out your SSN to businesses and other entities if it is absolutely necessary
  • Secure your computer with a reliable antispyware program
  • Check your credit report and Social Security Administration earnings statement annually
  • Do not give out personal information over the phone, through the mail, or via the internet unless you initiated the contact or are confident about who you are sending it to
  • Remember that the IRS will never initiate contact with taxpayers via email to request personal information

You can learn more about identity theft by visiting identitytheft.gov. Should you require any further help with taxes or other financial business, please contact Seattle CPA Alisa Na during normal business hours.

June 30th Deadline Approaches for Taxpayers with FBAR Requirements

Though tax time is well behind us, certain citizens with offshore assets need to be thinking about their FBAR requirements. These requirements, designed to make it more difficult for taxpayers to conceal assets and income offshore, are separate from your normal tax return. If you meet the FBAR filing requirements, your filing deadline is June 30.

Taxpayers must file an FBAR if the individual or entity had a financial interest in or a signature authority over one or more financial accounts located outside of the United States, and the aggregate value of all of the applicable foreign financial accounts exceeded $10,000 at any point during the calendar year in question. This applies to US citizens, US residents, trusts or estates formed under US laws, and entities including corporations, partnerships, and limited liability companies which were created or organized in the US or under the laws of the US. Exceptions to this filing requirement include the following:

  • Certain financial accounts owned jointly by spouses
  • Individuals included in consolidated FBAR’s
  • Correspondent/Nostro accounts
  • Financial accounts owned by government entities
  • Financial accounts owned by international financial institutions
  • Owners and beneficiaries of United States IRA’s
  • Participants and beneficiaries of tax-qualified retirement plans
  • Individuals with signature authority over, and no financial interest in, an offshore financial account
  • Trust beneficiaries, if the individual reports the account on an FBAR filed on behalf of the trust
  • Financial accounts maintained on a US military banking facility

If you are required to file, you will need to fill out and submit Form 114 on the BSA E-Filing System website. Should you require any assistance with your finances, please contact Seattle CPA Alisa Na during normal business hours.

Phantom Income

Tax time can be full of surprises, few of them pleasant. Every so often, even a taxpayer reporting absolutely no incoming funds can find that he or she is expected to pay on taxable income. Such phantom income will often come in one of three forms, as follows:

Cancellation of Debt

If you were, at any time over the tax year, forgiven of the obligation to repay a debt, this is called cancellation of debt (COD) income. The sum of the debt forgiven can be taxable, unless it was forgiven due to bankruptcy or insolvency. In many cases, your lender will be indicating the amount of debt you were forgiven on a Form 1099-C, which is submitted to the IRS to assure that it is not omitted on your return.

Partnerships, LLC’s, and S Corporations

These kinds of businesses are known as pass-through entities, which means that their owners are the ones expected to pay taxes on their income even in the event that the income is not distributed to them. If you are an owner in such an entity, you should receive a Form K-1 that lists your share of the loss or income.

Constructive Receipt

If you are legally entitled to a payment, but choose not to collect on it, the IRS may still tax you on the money you are turning down. This includes payments that you attempt to delay, and then collect on a later date so that it applies to a different tax year; you will be expected to pay taxes on it for the year that you first had the right to the money.

Should you require any assistance in avoiding the IRS’s nastier surprises, please contact Seattle CPA Alisa Na during normal business hours.