Are Fringe Benefits Taxable- What To Know?

If you love your job, at least part of the reason for your happiness at work might have something to do with fringe benefits you receive.

According to the IRS, the fringe benefits as pay that an employer gives an employee for performing services. Fringe benefits are usually taxable unless the law particularly excludes the benefit from taxability.

As per recent numbers from the Bureau of Labor Statistics, employee benefits account for about 32% of the total cost of compensating employees.

Benefits may include everything from paid leave, retirement savings to flexible work arrangements, and more. The trick here is understanding whether there are taxable fringe benefits.

What Is De Minimis?

You may be familiar with several benefits included in the above list. But unless you deal with human resources and employee benefits as part of the job, the term de minimis benefits may not be familiar.

The IRS defines de minimis taxable fringe benefits as any property you provide to an employee that has little value that accounting for it would be unreasonable or administratively impractical.

How Are Fringe Benefits Taxed?

If the employer provides taxable fringe benefits, the value of those benefits must be determined before January 31 of the following year. This would let the employer withhold and deposit payroll taxes.

The value of those benefits is determined using the general valuation rule, which is basically the fair market value of the fringe benefit. For many fringe benefits, this is really easy.

Your employer can even add the value of your fringe benefits to your regular wages and apply an ordinary withholding rate to the total, or they can withhold federal income tax at a rate of 25%.

How Did Tax Reform Impact Fringe Benefits?

The Tax Cuts and Jobs Act eliminated the tax breaks for few taxable fringe benefits. As of January 1, 2018, your employer should treat some fringe benefits as taxable income, that used to be tax-free. It includes:

Moving expenses– The TCJA eliminated the provision for tax-free reimbursements of moving expenses unless the employee is a member of the US armed forces and inactive duty.

Employee achievement award– Before Jan 1, 2018, an employer could recognize employees by providing tax-free achievement awards in terms of cash, gift certificates, and more. These must be included in the employee’s taxable income.

Finally, from an employee’s perspective, handling fringe benefits should be simple. Your employer is responsible for figuring out which fringe benefits to include in taxable income, how much tax to withhold on the amount, and what needs to go in your W-2 bill.

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Legal Ways To Pay Less And Save More In Tax

Wouldn’t you prefer to lighten the tax load? Well, there isn’t anyone who wouldn’t cherish it. However, there are several things you can do to actually save your tax or increase your tax refund.

Most importantly, none of these methods are illegal.

But most of the time it doesn’t come to your mind.  If you have no idea how to go about it, hire experts who can help you find ways to reduce the tax bills.

Here are some of the easy ways you can save money on the tax.

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How To Save Money On Taxes?

Give yourself a raise– One of the ideal ways is to give yourself a raise.  If you have a tax refund this year, it means you have paid more than you actually needed to.

Simply talk to your employer about it and he would ensure you get more money when you earn it.

Now, if you are average, you deserve a raise of $225 a month extra. You can talk to the experts offering tax services to help you.

Boost the retirement savings– One of the other ideal ways to lower the tax bill is by reducing the taxable income. You can contribute up to $17,500 to the 401(k) or similar retirement savings plan.

Interestingly, the money contributed to this plan doesn’t get included in the tax income. If you haven’t started one, you can talk to your tax service expert regarding how to save tax.

Check if you qualify for earned income tax credit– the earned income tax credit applies to low and moderate-income taxpayers. They can offer credit as high as $6000.

In fact, several tax service experts have urged taxpayers earning less than $50,000 to check whether the credit applies to them.

Many people qualify however without knowledge lose out on the benefits. Availing tax services can help you solve this doubt.

How To Reduce Federal Taxes?

Start Your Own Business

Become an entrepreneur as it can improve your tax situations. It is because the business owners can take control over how they pay their taxes.

You also have the option of keeping more money in the company than drawing it as income. You can even count some costs as expenses.

Tax professionals can help you navigate the ins and outs of these expenses that are lengthy. So, now you know how to lower your taxable income.

Can You Save On Taxes? One of the first questions you need to determine is whether you need to enlist the help of a professional to handle your business taxes — and help you plan in advance so that you can take advantage of certain deductions.

How To Take The Right Deduction?

Set Up Books And Records

Even though you may use a casual approach to recordkeeping for personal taxes, you cannot do this for business. The tax law particularly requires certain records in order to take deductions.

Without the records, legitimate expenditures may not be deductible. Here’s what you must comply with tax rules:

A system to track the income and expenses– you can do it easily with a computer-based recordkeeping solution that enables you to handle the matter yourself.

Procedures to collect and store required receipts and other proof– set up file systems to categorize your receipts.

Finally, these are the ways to reduce the tax bills. Make sure you hire an expert to get the best results.

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What Should You Know Before Signing A W-9 Form?

Form W-9 is one of the simple IRS Forms that has just one function: it allows you to send a Tax Identification Number (TIN) that is employer identification number (EIN) or the social security number (SSN) to another bank, person, or other financial institution.

W 9 California is an information return, meaning it is just for giving someone else a piece of information they need. But as you are not sending it to the IRS, you should be careful about who exactly to send it to. Want to know what is a W9 tax form? Read on.

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What is A W-9 Form For Business And What’s Its Purpose?

Form W-9 is a tax document that the independent contractor’s sign to provide a taxpayer ID number. If the employer doesn’t have a taxpayer ID, or if the taxpayer ID is incorrect, the independent contractor should have federal income taxes withheld, as backup withholding.

Form W-9 is a standard tax document often utilized in business and finance transactions. So, by itself, a W-9 doesn’t pose problems. Still, there are some issues you must be aware of.

Where Do I Get A W-9 Form?

Your client, bank, or other financial institution have to send a W 9 themselves if they need to fill it out. Usually, if you want to file one, it is on its way. Download a PDF version of it on the IRS website.

Want To Know More About W-9 Form? Form W-9, Tax Identification Number and Certification is a one-page IRS information that businesses and individuals send to their clients, or other individuals. Form W-9 doesn’t get sent to the IRS.

When Not To Send Someone A W-9?

If You Get It From Someone You Don’t Know

If you are a contractor and you get a W-9 from a business or individual who isn’t a client, don’t fill this out. Sending your Social Security Number or SSN and other personal information to a stranger must be dangerous.

Scammers will sometimes send individuals W-9s to collect the SSNs. If you are suspicious about W-9 that someone has sent, ask them which tax forms they plan to send you back after filling it.

If you don’t know how to fill out a w 9 form for an individual. Consult a tax CPA, consult a tax CPA for assistance. Remember the only reason anyone would need a W-9 from you is that they need it to send some type of IRS form.

When You Employer Sends You One

Employers shouldn’t ask you for a W-9. The appropriate form for them is W-4. If you are starting a full-time job, and your employer gives you a W-9 instead of a W-4, it means they have hired you as an independent contractor and not an employee. Now, it can be a hook for tax payments to the IRS.

When To Send W-9 Form?

If someone is asking for a W 9 California, they need it to send you to form 1099, which you will need to report some kinds of income to the IRS.

It is in both your interest to get the forms in as soon as possible. Even though there isn’t any official deadline for filing a W-9, you must fill it out as soon as you get one.

Remember: if you fail to send someone a W-9 or send one with the wrong information, you may be subject to a penalty.

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Dealing with Tax Problems- IRS Problem and Solution

Every year numerous people run into trouble with the IRS. You might have unpaid taxes or unfiled returns or facing audit or garnishment, etc.

In other words, there are several IRS tax problems that you might have to face if you don’t hire proper CPAs. However, regardless of these problems, there is a resolution.

The IRS is willing to work with the taxpayers, and a tax professional can help you deal with the IRS. Here are some of the common tax-related problems that you might have.

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What Are Unpaid Taxes?

Do you have any unpaid tax? The best option is to pay the balance in full. Nut if you cannot afford it, the IRS has several options.

Depending on how much you owe and the current financial situation, you might be able to set up the payment plan or pay less than the total balance.

In some cases, you might even get the account labeled as not collectible whereby the IRS suspends temporarily all collection activity.

To get proper help, you can of course get in touch with the tax experts for tax problem-solving.

What To Know About Tax Lien?

When the IRS files the Notice of Federal Tax Lien, it alerts the creditors the IRS has a legal claim against the property.

Now, at this point, the IRS is not taking the property yet. Also, traditionally the tax liens show up on the credit report.

To sort this income taxation problem solving, you must contact the IRS immediately for making arrangements as soon as possible.

Why is Tax Lien Important? When you have unpaid taxes, the tax lien is one of the important steps the IRS actually takes against you. The tax lien is a legal claim to the assets. For example, if you have a car loan, the lender has a lien against the vehicle.

What Is Tax Levy?

The tax levy is when the IRS actually starts seizing the assets. It is one of the agency’s harshest collection methods undoubtedly.

Through this, the IRS takes the money from your bank account, real estate, cars, and almost anything holding value.

Usually, the IRS gives you a time period of 30 days before moving ahead with the tax levy and provides you the right to hear.

So, if you have already received the tax levy notice, you must act quickly to stop it from taking the assets. Hiring a tax expert would be really helpful in solving problems with taxes today.

How To Deal With Unfiled Tax Return?

Do you have returns that you have never filed? Now, the fees and penalties for the unfiled returns are really worse than the penalties for unpaid taxes.

Even if you cannot pay, you must file the return. There is a statute of limitation for audits and tax debt. But in both cases, the clock doesn’t start ticking until you prepare as well as submit the tax return of the IRS file for you.

If you don’t have the right documentation or money to pay, the tax specialist can help you file the taxes back.

For tax problems and solutions, you must hire proper experts with sound knowledge and experience.

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