September Info 2013

Individual – 2013 Due Dates

September 1 - 2013 Fall and 2014

Tax Planning - Contact our office to schedule a consultation.

September 10 - Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during August, you are required to report them to your employer on IRS Form 4070 no later than September 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

September 16 - Estimated Tax Payment Due

The third installment of 2013 individual estimated taxes is due. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include:

• Payroll withholding for employees;

• Pension withholding for retirees; and

• Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

When a taxpayer fails to prepay a "safe harbor" (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus three percentage points and the penalty is computed on a quarter-by-quarter basis.

Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than the $1,000 de minimis amount, no penalty is assessed. In addition, the law provides safe harbor prepayments. There are two safe harbors:

• The first safe harbor is based on tax owed in the current year. If your payments equal or exceed 90 percent of what is owed in the current year, you can escape a penalty.

• The second safe harbor is based on tax owed in the immediate preceding tax year. This safe harbor is generally 100 percent of the prior year’s tax liability. However, for higher-income taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110 percent.

Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90 percent of $10,000 is $9,000, your prepayments fell short of the mark. You can't avoid the penalty under this exception.

However, in the above example, the second safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than the 110 percent of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.

CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those of the federal estimates. Please call this office for particular state safe harbor rules.

Business – 2013 Due Dates  

September 16 - Corporations

File a 2012 calendar year income tax return (Form 1120 or 1120-A) and pay any tax, interest, and penalties due. This due date applies only if you requested an automatic six-month extension in a timely manner.

September 16 - S Corporations

File a 2012 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you requested an automatic six-month extension.

September 16 - Corporations

Deposit the third installment of estimated income tax for 2013 for calendar year corporations.

September 16 - Social Security, Medicare and withheld income tax

If the monthly deposit rule applies, deposit the tax for payments in August.

September 16 - Nonpayroll Withholding

If the monthly deposit rule applies, deposit the tax for payments in August.

September 16 - Partnerships

File a 2012 calendar year return (Form 1065). This due date applies only if you were given an additional five-month extension. Provide each partner with a copy of K-1 (Form 1065) or a substitute Schedule K-1.

September 16 - Fiduciaries of Estates and Trusts

File a 2012 calendar year return (Form 1041). This due date applies only if you were given an additional five-month extension. If applicable, provide each beneficiary with a copy of K-1 (Form 1041) or a substitute Schedule K-1.

Partnerships, S-Corps and Trusts

• September 16 is the extended due date for partnership, S-corporation, and trust tax returns.

• Late-filing penalty for partnerships and S-corporations is $195 times the number of partners or shareholders during any part of the taxable year, for each month or fraction of a month.

• Late-filing penalty for trust returns is five percent of the tax due for each month, or part of a month, for which a return is not filed up to a maximum of 25 percent of the tax due.

If you have a calendar year 2012 partnership, S-corporation, or trust return on extension, don’t forget the extension for filing those returns ends on September 16, 2013.

Pass-through entities such as partnerships, S-corporations, and fiduciaries (trusts, estates) pass their income, deductions, credits, etc., through to their investors, partners, or beneficiaries, who in turn report the various items on their individual tax returns. Partnerships file Form 1065, S-corps file Form 1120-S, and fiduciaries file Form 1041, with each partner, shareholder, or beneficiary receiving a Schedule K-1 from the entity that shows their share of the reportable items.

If all of the aforementioned entities could obtain an automatic extension to file their returns on the same extended date as allowed to individuals, it would be difficult for individuals to meet the filing deadline without estimating the pass-through information and then later filing an amended return when the actual data was received.

To overcome this problem, the automatic extension period for partnerships and trusts is set at five months, thus providing individual taxpayers with a month’s grace period to complete their individual 1040 returns. The original due date for calendar year S-corporation returns was March 15 and they are allowed a six-month extension period, making the due date for these returns also September 16. Thus, individual S-corp shareholders also have a month to finish up their individual returns.

An S-corporation or partnership which fails to file on time is liable for a monthly penalty equal to $195 times the number of persons who were partners or shareholders for S corps, during any part of the taxable year, for each month or fraction of a month for which the failure continues. These penalties can be substantial.

Trusts are subject to a penalty of five percent of the tax due for each month, or part of a month, for which a return is not filed up to a maximum of 25 percent of the tax due.

If this office is waiting for some missing information to complete your pass-through return, please forward this information at least a week before the September 16 due date. The late-filing penalties are substantial, so please call this office immediately if there are anticipated complications related to providing needed information so a course of action can be determined to avoid potential penalties.