* STARTING IN 1995, HOUSEHOLD employers report and pay federal employment tax obligations on their own form 1040s
. No deposits are required, but beginning in 1998 estimated tax penalties will be calculated by including employment taxes owed.
Naturally, the biggest target of the selected Form 1040s
is those with a Schedule C, particularly those with potentially unreported income.
Two worksheets can help isolate the amounts to be shown on the student's and the parents' 1040s
. Usually when there is scholarship income the family will save tax if the income is reported on the student's return and the student is claimed as a dependent on the parents' return.
Examples of this type of penalties are: failure to timely deposit payroll taxes, failure to file a wide variety of tax returns including 1040s
, and late filing of 1099s, W-2s, 1040s
and so forth.
Department of Treasury reported that more than 110 million form 1040s
were filed in 1994, compared with only 40,000 form 706s.
The new law also allows tax-payers employing only household workers to report their portion of FICA obligations on their own Form 1040s
starting with 1995, greatly decreasing their compliance burden of quarterly filings.
Clarification: In the February "From The Tax Adviser" (page 34), the first sentence under the heading "WHAT'S INVOLVED" should have read (in part) "...household employers must report and pay Federal Insurance Contributions Act, Medicare and Federal Unemployment Tax Act taxes and income tax withheld on an annual basis when filing their form 1040s
While the number of respondents who filed some of their 1040s
electronically remained at 15%, the percentage of returns filed electronically by these respondents increased to 14%.
Also, the fee increases were fairly consistent among the various types of returns with the 1040s
having the largest increase.
OPI can do the same thing it does with 1040s
: take the source documents, do the write-up work, create a trial balance, and then complete the business tax return (www.electronicaccountant.com).
In general, for wages of $1,000 or more paid after 1994, household employers must report and pay Federal Insurance Contributions Act, Medicare and Federal Unemployment Tax Act taxes and withhold income tax on an annual basis when filing their form 1040s
. (One major exception is for cash wages paid for domestic service by individuals under age 18 in the private home of an employer performed in any year--provided the service is not the employee's principal occupation).
This past tax season our firm changed the entire tax preparation process for individual 1040s
by converting to in-house processing.