A sampling of answers to questions that our clients ask about tax matters - business and personal.
Business
Q: What is the wage limit for Social Security taxes?
A: For 2008, a taxpayer must pay social security tax on wages up to $102,000. For 2007 the limit was $97,500.
Q: What is the wage limit for Medicare taxes?
A: There is no limit. Medicare taxes must be paid on 100% of wages.
Q: How much is self-employment tax?
A: Self-employment tax is 15.3% on net earnings from self-employment. The rate consists of 12.4% for old-age, survivors and disability insurance (OASDI) and 2.9% for Medicare. The OASDI rate applies to net earnings up to $102,000 for 2008, and $97,500 for 2007. The good news is that half (50%) of self-employment taxes are deductible from total revenue.
Q: What is the federal mileage rate?
A: For 2007 the mileage rate is 48.5¢ per mile. For 2008 the mileage rate is 50.5¢ per mile.
Q: Do self-employed individuals have to make estimated tax payments?
A: Yes. If you do not have sufficient withholding to pay your tax liability, the Internal Revenue Service (IRS) expects you to pay your liability with installment payments, as you earn the income.
Q: What are the due dates on estimated tax payments?
A: For calendar-year taxpayers, the estimates are due as follows:
Q: What happens if I do not make my estimated tax payments?
A: The IRS assesses a penalty on all estimated tax payments that are made late. A tax payment is considered late if it is: not made at all (until date of filing return) or if it is made beyond the due dates.
Q: When does an employer have to make a Federal Unemployment deposit?
A: For 2007, if at the end of a calendar quarter, the employer owes more than $500 in undeposited federal unemployment tax, then the tax owed must be deposited by the end of the next month.
Personal
Q: How much is the standard deduction?
A: The standard deductions are as follows:
Q: How much is the personal exemption?
A: For 2007 the personal exemption is $3,400; for 2008 it is projected to $3,500.
Q: What is the maximum I can put in my IRA?
A: An individual can contribute up to $4,000 for 2007 (50 and over an additional catch-up of $1,000) to an IRA subject to some restrictions based on income and whether you are eligible to participate in a qualified retirement plan. In 2008 an individual can contribute up to $5,000, plus a catch-up contribution of $1,000 if 50 or older.
Q: When do I have to make my IRA contributions?
A: Your IRA contribution must be made before you file your individual tax return or by April 15. For example, if you complete and mail your 2007 tax return on March 3, 2008 for your 2007 tax return, you must make your IRA contribution by April 15. You do not get an extension on the due date of the IRA contribution.
Q: Are child support and alimony payments taxable income to the recipient and deductible to the payer?
A: Child support payments are never taxable or deductible to the parties involved. Alimony, however, is taxable to the recipient and deductible by the payer.
Q: Do I have to pay tax on a gift I received?
A: No, gifts are not taxable to the recipient. In certain situations, gifts can be taxable to the giver.
Q: Can I take the new sales tax deduction (in lieu of state income taxes) if I didn't save my receipts for 2005?
A: Yes, the Internal Revenue Service has published optional state sales tax tables (Publication 600) to use instead of actual expenses if you didn't save your receipts or don't want to add the sales tax up for the year. This deduction will not be available in 2008.
Q: What is the gift tax exemption?
A: For 2007 - $12,000. For 2008 it will remain at $12,000.
Q: What is the wage limit for Social Security taxes?
A: For 2008, a taxpayer must pay social security tax on wages up to $102,000. For 2007 the limit was $97,500.
Q: What is the wage limit for Medicare taxes?
A: There is no limit. Medicare taxes must be paid on 100% of wages.
Q: How much is self-employment tax?
A: Self-employment tax is 15.3% on net earnings from self-employment. The rate consists of 12.4% for old-age, survivors and disability insurance (OASDI) and 2.9% for Medicare. The OASDI rate applies to net earnings up to $102,000 for 2008, and $97,500 for 2007. The good news is that half (50%) of self-employment taxes are deductible from total revenue.
Q: What is the federal mileage rate?
A: For 2007 the mileage rate is 48.5¢ per mile. For 2008 the mileage rate is 50.5¢ per mile.
Q: Do self-employed individuals have to make estimated tax payments?
A: Yes. If you do not have sufficient withholding to pay your tax liability, the Internal Revenue Service (IRS) expects you to pay your liability with installment payments, as you earn the income.
Q: What are the due dates on estimated tax payments?
A: For calendar-year taxpayers, the estimates are due as follows:
| Individuals & Trusts | Corporations |
| #1 - April 15 | #1 - April 15 |
| #2 - June 15 | #2 - June 15 |
| #3 - September 15 | #3 - September 15 |
| #4 - January 15 | #4 - December 15 |
Q: What happens if I do not make my estimated tax payments?
A: The IRS assesses a penalty on all estimated tax payments that are made late. A tax payment is considered late if it is: not made at all (until date of filing return) or if it is made beyond the due dates.
Q: When does an employer have to make a Federal Unemployment deposit?
A: For 2007, if at the end of a calendar quarter, the employer owes more than $500 in undeposited federal unemployment tax, then the tax owed must be deposited by the end of the next month.
Q: How much is the standard deduction?
A: The standard deductions are as follows:
| 2007 | 2008 projected | |
| Married filing joint | $10,700. | $10,950. |
| Surviving spouse | $10,700. | $10,950. |
| Head of household | $7,850. | $8,000. |
| Single | $5,350. | $5,450. |
| Married filing separate | $5,350. | $5,450. |
Q: How much is the personal exemption?
A: For 2007 the personal exemption is $3,400; for 2008 it is projected to $3,500.
Q: What is the maximum I can put in my IRA?
A: An individual can contribute up to $4,000 for 2007 (50 and over an additional catch-up of $1,000) to an IRA subject to some restrictions based on income and whether you are eligible to participate in a qualified retirement plan. In 2008 an individual can contribute up to $5,000, plus a catch-up contribution of $1,000 if 50 or older.
Q: When do I have to make my IRA contributions?
A: Your IRA contribution must be made before you file your individual tax return or by April 15. For example, if you complete and mail your 2007 tax return on March 3, 2008 for your 2007 tax return, you must make your IRA contribution by April 15. You do not get an extension on the due date of the IRA contribution.
Q: Are child support and alimony payments taxable income to the recipient and deductible to the payer?
A: Child support payments are never taxable or deductible to the parties involved. Alimony, however, is taxable to the recipient and deductible by the payer.
Q: Do I have to pay tax on a gift I received?
A: No, gifts are not taxable to the recipient. In certain situations, gifts can be taxable to the giver.
Q: Can I take the new sales tax deduction (in lieu of state income taxes) if I didn't save my receipts for 2005?
A: Yes, the Internal Revenue Service has published optional state sales tax tables (Publication 600) to use instead of actual expenses if you didn't save your receipts or don't want to add the sales tax up for the year. This deduction will not be available in 2008.
Q: What is the gift tax exemption?
A: For 2007 - $12,000. For 2008 it will remain at $12,000.