Time sure does fly! We are well into 2022 and this month’s newsletter gives you a short to-do list so you can keep on top of your tax situation while (hopefully) planning and enjoying some summertime fun.
We also would like to have you give us your feedback about your experience with Moskowitz LLP. You can do this anonymously if you choose. By completing our survey, you will give us insight on how we can make your experience with us better. We believe that most individuals and small businesses pay more than their fair share of taxes because they don’t have a team of accountants and attorneys to help them navigate complex tax codes and limit their tax liability. We are that team and we want you to have the best experience possible.
– Flag Day
– PTE payments due
– 2nd quarter estimated tax payments due
– Deadline for employers to register with CalSavers
– Check your witholdings calculations
In This Issue
- Q2 Estimated Taxes Due
- Don’t Miss Possible Passthrough Savings — Deadline: June 15th
- Sign Up for Cal-Savers Retirement Plan — Deadline: June 30th
- Time for a Paycheck Check UP
- Recent Podcasts and Webinars
Q2 Estimated Taxes Due
Federal estimated taxes due June 15th
Who Must Pay Estimated Tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
You may have to pay estimated tax for the current year if your tax was more than zero in the prior year. If you are not clear on whether or not you have an estimate tax payment due, please contact us or your tax preparer immediately.
How To Pay Estimated Taxes
For estimated tax purposes, the year is divided into four payment periods. You may send estimated tax payments with Form 1040-ES by mail, or you can pay online, by phone or from your mobile device using the IRS2Go app. Visit IRS.gov/payments to view all the options.
Corporations must deposit the payment using the Electronic Federal Tax Payment System. For additional information, refer to Publication 542, Corporations.
Penalty for Underpayment of Estimated Tax
If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers, fishermen, and certain higher income taxpayers. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.
California Q2 Estimated Tax Payments – due June 15th
How to pay:
To make your payment online. Visit the CA FTB payment options.
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0008
Use Estimated Tax for Individuals (Form 540-ES) vouchers to pay your estimated tax by mail. Make your check or money order payable to the “Franchise Tax Board”. Write your SSN or ITIN and “2021 Form 540-ES” on it.
Don’t Miss Possible Passthrough Savings – Deadline June 15th
California enacted AB 150 in 2021, allowing eligible businesses to elect into a PTE tax as a workaround to the $10,000 limitation on federal itemized deduction for state and local taxes, applicable for tax years beginning 2021 through 2025. As of February 9, 2022, twenty-two states have enacted PTE (Passthrough Entity) legislation.
If you have a business, you should immediately consult with your tax advisor regarding this potentially available credit. The payment due date for TY 2022 is June 15th 2022.
How to pay
The PTE elective tax payment can be made electronically using Web Pay FTB’s website. Entities can use Web Pay to pay for free and to ensure the payment is timely credited to their account. Entities can also use the Pass-Through Entity Elective Tax Payment Voucher (FTB 3893) to make a PTE elective tax payment by printing the voucher from FTB’s website and mailing it to FTB. Once the payment is made, the payment will remain as a PTE elective tax until a tax return is filed.
PTE elective tax calculation
The elective tax is 9.3% of the entity’s qualified net income, which is the sum of the pro rata or distributive share and guaranteed payments of each qualified taxpayers’ income subject to California personal income tax.
Qualified taxpayers are eligible to claim a nonrefundable credit for the amount of tax paid on the qualified taxpayers’ pro rata or distributive share and guaranteed payments included in the qualified entity’s qualified net income. Unused credits can be carried over for up to 5 years.
How to claim your tax credit
Qualified taxpayers can claim the credit on their personal income tax return.
Sign Up for CalSavers Retirement Plan – Deadline: June 30th
By June 30, all businesses and nonprofits with five or more employees in California must either offer their adult workers a “qualified” retirement plan (such as a pension with defined benefits or a 401[k] plan) or sign up for the state-run CalSavers Retirement Savings Program. See our prior blog post, Employers with 5 or more Employees Required to Offer Retirement Savings Program by June 30, 2022.
Larger companies already have to comply with the mandate, and the state has begun penalizing the ones that don’t. Employers with 5 or more employees in California are the last group to face the requirement to offer retirement benefits or sign up for CalSavers.
Small Business Owners are notoriously hard to reach and this law has not been overly publicized, despite the fact that legislation passed in 2016. That is why Moskowitz LLP is urging employers to review their retirement policies to make sure they are in compliance with the law and encouraging employees to discuss this law with their employers to help ensure compliance. “The last thing California businesses need are more enforcement penalties” says Steve Moskowitz. Katie Selenski, executive director of CalSavers, said “the program contacts employers that miss the deadline to try to get them into compliance. If after several months an employer still doesn’t offer a plan, she said, the board will start imposing penalties.” See Treasurer site for more information on enforcement and January 12, 2022 News Release. And of course, Moskowitz LLP is here to assist.
Time for a Paycheck Check UP
Moskowitz LLP always recommends that taxpayers take a look at their current year tax obligations to make sure they are on track. For employees, one way to do this is to contact us for a review. Another way is to take advantage of the IRS anonymous tool: Withholding Calculator available on IRS.gov. With careful planning, any taxpayer can determine the correct amount of tax to ask their employer to withhold to avoid tax filing surprises at the end of the year. Have your most recently filed tax return and recent paystubs available.
Though primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to some recipients of pension and annuity income.
Moskowitz LLP Resources for You
We are striving to offer you relevant and timely resources to assist you. Please check out our recent additions:
Episode 20: Practical Tax ft. Kerry Lutz, of Financial Survival Network
Episode 19: Government Incentives and Tax Breaks for Real Estate Investors
Episode 18: Tax Debt Resolution Strategies Pt.2
Episode 17: Tax Debt Resolution Strategies Pt.1
Watch: Steve’s Recent Webinars
Cryptocurrency and Taxation 2022 Update
California SALT Tax Workaround: AB150 & SB113
Tax Planning for Real Estate: Opportunity Zones