Theresa Arndt, CPA

This time of year we get lots of questions about giving gifts to employees.   Are employee gifts taxable to the employee?  What about gift cards or certificates? The answer depends on the type of bonus or gift that you give.  Each have varying tax consequences.  Let's take a look at some of the most popular ones and their tax treatment. Cash Bonus Giving a cash bonus to employees during the holidays, or anytime throughout the year, is treated as taxable  income to the employee regardless of the amount.   The amount of the bonus will be subject to payroll and income taxes as if they were normal wages.    Non-cash Gifts A small property gift given to an employee will most likely be excludable from income as a de minimis fringe benefit.  The term  de minimis  is generally used to describe something that is too small or insignificant to be considered, something unimportant.  It actually comes from a La...

If you can afford health insurance but choose not to buy it, you must pay a fee called the individual shared responsibility payment.  You might also see it referred to as the "penalty," "fine," or "individual mandate." But you may be wondering, "Which costs less, health insurance or the penalty?" That is a good question since the decision of whether you will purchase health insurance for 2016 needs to be made NOW.   If you want coverage to begin January 1, 2016 your last day to sign up is December 15th.   Also, many people are under the false impression that the tax penalty is only $95 and that it's cheaper to pay the penalty rather than purchase health insurance.     So what is the tax penalty for not having insurance in 2016?  Let's find out. As the table above shows, you will pay… Either a fixed fee  OR   a percentage of your income, whichever is  greater . The fixed fee penalty usually hits low income families...

In most cases, your retirement accounts including a 401k are protected from your creditors in bankruptcy.  What Happens to my Property in Bankruptcy?  Many people mistakenly believe that they will have to give up almost all of their property if they file bankruptcy relief.  While a Chapter 7 bankruptcy trustee has the power to liquidate your nonexempt assets to pay back creditors, state and federal laws provide exemptions that protect a certain amount of your property in bankruptcy. Specifically, retirement accounts have some of the broadest protections in bankruptcy. Are 401k's Excluded Property in Bankruptcy? 401k and other retirement accounts that are qualified under the Employee Retirement Income Security Act (ERISA) are typically not part of your bankruptcy estate.  This means they can't be taken by the trustee to pay your creditors.  Most employer sponsored retirement plans are ERISA qualified. But if you are considering filing for ban...

People who waited until Wednesday’s deadline to file their tax returns may have found that someone hijacked their refund.  That’s what happened to several of my clients this year.  Here are a couple of their stories: One client arrived home to find a letter from the IRS that they were conducting a review of questionable income amounts and claims for credits listed on his return.  His conversation went like many thousands before... Client: " What return?  I haven't even filed yet. "  IRS: " Ummm…yes you have ".  Well my client was right of course; he hadn't filed his return...but someone else had filed it for him. Other clients discovered the identity theft when I attempted to electronically file the return.  The IRS will not accept a return that has already been filed. Naturally, the first question they ask me is:  " How can this happen? "  That's a good question and one I myself wanted to know the answer too. Th...

Earlier this week I received a call from a client who came home from work to find the following message on his voicemail: "Hello, we have been trying to reach you. This call is officially a final notice from the IRS, Internal Revenue Service. The reason of this call is to inform you that IRS is filing a lawsuit against you." Fortunately, my client knew better than to call the number in the message.  Instead he called me to confirm this really was a scam.  But not everyone is so fortunate. “Oh I would never fall for a scam like that”, you say?  Hopefully not.  But sadly many have.   In fact the IRS impersonation phone scam has claimed nearly 3,000 victims who have collectively paid over $14 million, according to a recent TIGTA report .  Phones are ringing in every state.  Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they ...

One of the fun parts about my job is finding cool tax deductions or credits that people don’t know about but can be a real tax saver.  The one I want to talk about today is called the “Missouri Income Tax Deduction for New Workers”. Notice this is a “state” tax deduction.  The thing about state deductions is that most of them won’t just pop up on your tax software.  You have to actually know about them and specifically request the forms to come up.   How sneaky is that. Here’s how it works: If you are a small business you may qualify to claim a special state tax deduction for each new job you create in 2013 and 2014. Eligible Small Business : Employ fewer than 50 full-time and part-time employees at all times during the tax year for which the deduction is taken. Eligible Employee: Completed at least 52 consecutive weeks of full-time employment (average 35-hours/week). Earned wages for the 52 week period abov...

The IRS issued  Notice 2015-17 clarifying the application of Notice 2013-54 to certain situations. The notice provides relief for employers who are not applicable large employers (ALES), as defined in §4980H. In summary, the IRS will not assess any penalties for reimbursement arrangements for 2014 through June 30, 2015. After June 30, 2015, the IRS states they may start assessing penalties. Specifically, the IRS addresses: The transitional relief through June 30, 2015. The treatment to 2% S corporation shareholders. Reimbursing for Medicare, TRICARE or Medigap. Increasing employee compensation on an after-tax basis in a way that is not tied to health insurance. Treating insurance reimbursements as taxable wages. The IRS confirmed that for the time being, they'll allow an S corporation shareholder to deduct reimbursed insurance as a self-employed health insurance under §162 (l).  The IRS has also clarified that treating insurance rei...