Do you have a household employee? Don’t ignore the nanny tax

It’s simple enough to overlook this tax related to household employees. But you could be in trouble if you do. Here’s why you’d better pay attention to the nanny tax.

As you review your filing requirements for 2018, make sure you don’t overlook the nanny tax related to household employees. If you have a housekeeper or any other household employee, you could be liable to pay state and federal payroll taxes.

How to know if you must pay the nanny tax

First, you’ll need to determine whether you have a household employee. Generally, this is someone you hire to work in or around your house. It could be a babysitter, nurse, gardener, etc. It doesn’t matter whether they work part-time or full-time, or whether you pay them hourly, weekly, or by the job.

But not everyone who works around your house is an employee. For example, if a lawn service sends someone to cut your grass each week, that person is not your employee.

As a general rule, workers who bring their own tools, do work for multiple customers and/or control when and how they do the work are not your household employees.

Your responsibilities

If you have a household employee, you’ll generally be responsible for 2017 payroll taxes if you paid that individual more than $2,000 last year. However, federal unemployment tax kicks in if you pay more than $1,000 to all domestic employees in any quarter.

It’s not always easy to tell whether you have a household employee, or whether exceptions apply. If in doubt, don’t hesitate to call our office.

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Don’t say yes to a reverse mortgage until you read this!

You’ve likely heard the good and the bad about reverse mortgages. But what’s real? Before you consider this strategy, consider a few key components.

There’s no doubt you’ve seen TV advertisements telling seniors that their lives could improve if they use reverse mortgages to harvest the equity in their homes. They go on to tell you that you can free up money to take an expensive trip, remodel your home or just have fun. It sounds appealing — but is it worth it?

What is a reverse mortgage?

As the name implies, a reverse mortgage is the opposite of a traditional mortgage. With a traditional mortgage, you borrow a sum of money to purchase a home and then pay off the debt over time.

With a reverse mortgage, you receive loan proceeds (as a lump-sum payout, an annuity, a line of credit or a combination of all three) but make no payments as long as you reside in the property. The loan, with any accrued interest, comes due when you move out or pass away. To qualify for a reverse mortgage you need to be 62 or older, own your residence and generally have significant equity in your home.

Unfortunately, reports of abuse regarding aggressive and predatory sales practices are common. Here are a few items to analyze if you’re thinking about a reverse mortgage:

  • Determine if a reverse mortgage is logical for your situation. Evaluate alternatives. Conventional solutions such as a home-equity loan might be a better answer.
  • Consider the financial ramifications. Reverse mortgages can be expensive. Upfront fees are significant. If you stay in your home just a few years, the effective interest rate can be very high.
  • Be wary of bundled sales pitches. Commission-driven salesmen can push life insurance or various annuity products along with a reverse mortgage. You could end up with products you don’t need.

If you are considering a reverse mortgage, call us. We can help you determine potential tax issues, plus other alternatives.

 

 

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Your tax-time financial review

It’s the new year … and that means it’s time to review your financial affairs. Take advantage of all of that top-of-mind tax-time knowledge and increase your changes of a fiscally sound 2018.

Now is the perfect time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for the well being of your wallet?

The following suggestions will help you with your financial review:

  • Talk to your family. You should factor in the financial decisions and goals of your spouse and children.
  • Put your financial goals in writing. Figure out how much money you’ll need to meet each goal, when you’ll need it and how you’ll get it.
  • Create a net worth statement. Create a list of your assets and debts, and compare it to last year’s statement. Are you gaining ground or losing it?
  • Review investment performance. Weigh your investment performance minus the effects of inflation, and compare your progress with your goals. Determine what investments are worth it and what may need to change this year.
  • Protect what you have. Consider the risks of your financial strategies. Your long-term goals may be unobtainable if you lose your present assets or your income potential.
  • Determine if you need the insurance you have — or if you’re missing something. Don’t duplicate employer-provided coverage. Review your coverage annually; don’t just automatically renew policies.
  • Review your will and your estate plan. Did your situation change during 2017? Make appropriate changes to your will and estate plan if it did. Stay informed about the 2018 tax reform changes that affect your plan.

We can help you create an effective 2018 tax strategy for your situation. Give us a call today.

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