Paying income taxes every year is a necessary evil, but it can be even more unpleasant if you fail to pay your taxes on time. The IRS may assess an estimated tax penalty on top of the regular income tax you'll owe.


This often causes problems for self-employed individuals who don't have tax regularly withheld from paychecks. However, with some timely planning, you can avoid any adverse tax consequences.


How to avoid estimated tax issues


Generally, you may meet your income tax obligations during the year through any combination of income tax withholding and quarterly installment payments. The due dates for the installments are April 15, June 15, Sept. 15 and Jan. 15 of the following year (the deadline is postponed to the next business day if it falls on a weekend or federal holiday). That means the installment for the fourth quarter of 2017 is due Jan. 16, 2018.


If you don't pay your taxes on time, you may be hit with an underpayment penalty. Fortunately, you can avoid a penalty for the 2018 tax year through any one of these safe-harbor rules approved by the IRS:

• Pay at least 90 percent of your 2017 tax liability. This requires you to make a reasonable estimate for what you will owe for the year.

• Pay at least 100 percent of your 2016 tax liability, or 110 percent if your adjusted gross income (AGI) exceeded $150,000. This is usually the easiest method for avoiding a penalty because you already know the tax figures for 2016.

• Pay at least 90 percent of the current year's "annualized income." This more complex calculation often works well for taxpayers who receive most of their income seasonally. We can help you determine this figure when you call our office.

​Of course, you don't have to pay the bare minimum if it suits your purposes. For instance, you might overpay tax during the year to produce a bigger refund at tax return time. In any event, pay enough to avoid an unnecessary tax penalty.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

​Do you remember "Nannygate"? Back when Bill Clinton was president, his nomination of corporate attorney Zoe Baird for U.S. Attorney General was derailed after it was revealed that she failed to pay the "nanny tax" for illegal aliens employed as household workers.

Although you may not move in political circles, it's easy to be tripped up by the nanny tax if you're not careful.

The tax law imposes employment tax responsibilities — including withholding Social Security and Medicare taxes on wages and paying the employer's share — if a household worker's wages is more than an annual amount. The nanny tax threshold of $2,000 for 2017 is increasing to $2,100 in 2018.

Although you may not think of yourself as an employer, if a household worker (such as a maid or gardener) works for you and earns more than that amount, you're responsible for paying a nanny tax.

Follow these rules to avoid nanny tax issues:

1. Make it official. Apply for an Employment Identification Number (EIN) with the IRS. The EIN will be used in your future nanny tax dealings.

2. Meet the employment tax obligations. As an employer, you're generally required to pay Social Security and Medicare taxes equal to 7.65 percent of the worker's wages.

3. Keep detailed records. This is usually a good idea when you have tax obligations. Handle these employment matters in a business-like fashion.

4. Check for liability of other taxes. These could include federal and state unemployment taxes.

5. Remember to file forms. The IRS requires certain forms to be filed. For instance, you must submit a W-2 for a worker for 2017 and send copies to the worker and SSA by Jan. 31, 2018.

Finally, resist the temptation to dodge the nanny tax. You'll have peace of mind if you follow the tax rules in this area. We can help you determine your nanny tax liabilities. Give us a call today.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
​

​

​If you are divorced and have young children, there's a good chance that you are paying or receiving alimony or child support (or both) under a divorce decree. What's the difference? The distinction is important to the IRS.

Currently, alimony is deductible by the party who pays it and taxable to the party who receives it. Child support is neither deductible nor taxable.

Depending on what side of the fence you're on, you should negotiate for payments to be characterized as either "alimony" or "child support" as part of a divorce agreement.

How to qualify for alimony deductions
Just saying that payments are alimony won't suffice. According to the IRS, these are the requirements that must be met if you're hoping to qualify for alimony deductions:

• You don't file a joint return with your ex-spouse
• Payments are made in cash or an equivalent
• Payments follow the instructions of a divorce or separation agreement
• The agreement doesn't designate the payment as not being alimony
• You and your spouse aren't members of the same household when the payment is made
• There's no liability for making the payment after your spouse dies

The following alimony payments aren't considered deductible:

• Non-cash property settlements in a lump-sum or installments
• Payments that are a spouse's part of community property income
• Payments to keep up the property owned by the person paying alimony
• Use of the property owned by the person paying alimony
• Voluntary payments

The terms can often be worked out to the satisfaction of both parties. For instance, the deduction for alimony can be valuable to someone who pays alimony and earns more while the taxable income may not cause any dire consequences to someone who earns less.

According to the new tax bill, alimony will not be deductible or taxable starting in 2019. This may also affect divorce and separation agreements executed in 2018 and modified in 2019 and beyond.

Keep these rules in mind when your 2017 tax return is filed. We can help you determine tax issues related to your alimony payments. Give us a call.
​
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
​

​Once you've retired, you may think you have it made, especially if you've managed to save enough money through IRAs and employer-sponsored plans like 401(k)s. But you still have to meet the tax obligations for required minimum distributions (RMDs).

Essentially, you must take a certain amount of money every year from IRAs and qualified plans after reaching age 70½, whether you want to or not. Otherwise, the IRS can assess a penalty equal to 50 percent of the amount that should have been withdrawn, on top of the regular tax that is due. Keeping that in mind, here are three little-known rules relating to RMDs:

1. Starting date: Technically, RMDs don't have to begin until April 1 of the year following the year in which you turn 70½. For example, if you turned 70½ this year on July 15, you don't have to take an RMD for the 2017 tax year until April 1, 2018. However, RMDs are due by Dec. 31 of each subsequent year (after you turn 70½), so you would have to make a "double payment" in 2018 if you don't take an RMD in 2017.
2. Amount of RMDs: The amount of the RMD is based on your account balance in the prior tax year and special life expectancy tables provided by the IRS. In other words, RMDs for 2017 are generally based on account values as of Dec. 31, 2016, and your life expectancy. The financial institution handling your account will usually do the calculation for you if you ask.
3. "Still working" exception: If you're still working for the employer providing a 401(k) where you're required to take an RMD, you can skip this obligation if you don't own 5 percent or more of the company. But you still must take RMDs from any other employer plan where you have assets, and from all of your IRAs.

These are just three factors that may affect RMDs this year. The stakes are high, so make sure you comply with all the rules. Call us if you have questions about tax obligations related to your RMDs.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720