General Tax Talk – Page 2 – File Old Tax Returns

Cities With An Income Tax

Maybe you are considering moving and want to know if your income taxes will be higher as a result. Maybe you are a tax professional and just want to know what tax returns that new out of state client you landed needs to file. Either way, knowing what cities levy an income tax is always helpful information to have. So without further adieu, here is the summary of cities that impose some form of income tax:

Alabama: Birmingham and Mountain Brook have a 1% occupational tax on gross wages.
Colorado: Three cities impose flat taxes on compensation. Aurora charges $2 per month on compensation over $250, Denver charges $5.75 per month on compensation over $500, and Greenwood Village charges $4 per month on compensation over $250.
District of Columbia: Washington D.C. imposes an income tax at a rate of 4% for the first $10,000 of income, 6% for $10,001 to $40,000 of income, 8.5% for $40,001 to $350,000 and and 8.95% for income over $350,001.
Delaware: Wilmington has a 1.25% tax on income.
Iowa: While not necessarily “cities” there are hundreds of school districts that impose an income tax surcharge on their residents. These surcharges range from 1% up to close to 20% of the state income tax owed.
Indiana: Similar to above, this state’s counties tend to have an individual income tax assessment.
Kentucky: Several cities in Kentucky levy income taxes, some of the larger ones being: Bowling Green (1.85%), Covington (2.5%), Florence (2%), Lexington-Fayette (2.25%), Louisville (2.20% for residents and 1.45% for non-residents), Owensboro (1.33%), Paducah (2%), and Richmond (2%).
Michigan: Several cities in Michigan impose income taxes with rates ranging from 0.50% to 2.50%. Detroit’s income tax rate is 2.50% for residents and 1.25% for non-residents.
Missouri: Both Kansas City and St. Louis have a 1% income tax.
New York: New York City and Yonkers both have individual income taxes. NYC rates range from 2.907% to 3.876%. Effective with tax year 2014, the rate is 16.75% of the net New York State tax (i.e., the sum of all state taxes imposed for a tax year, less any credits).
Ohio: Hundreds of cities in Ohio have an income tax, including Columbus, Toledo, Cincinnati, and Cleveland.
Oregon: The Lane County Mass Transit District (Eugene, Springfield, and surrounding communities) assesses an income tax of 0.67% and Tri-Met Transportation District (Portland) imposes a 0.6918% income tax. However, these taxes are charged to the employers.
Pennsylvania: 2,400+ municipalities and 400+ school districts within Pennsylvania impose a local income tax or local services tax. Take a look at the Earned Income Tax page to learn more regarding the cities.

Understanding Estimated Taxes

When you work for yourself you generally have your employer withhold federal and state (if applicable) income taxes from your wages. Then at the end of the year it becomes a calculation of if you had enough withheld (i.e. you get a refund) or have to make a balance due payment.

But what if you work for yourself (i.e. self employed) and no one is “withholding” anything from your check? Then this post will clue you in on how you make your payments and keep Uncle Sam happy.

What is estimated tax?
Estimated tax is how you pay your taxes when you have income that isn’t subject to withholding. Just think of it as what your employer does for you when you don’t have an employer ( so to speak).

Who has to pay it?
If you are filing as a sole proprietor (Schedule C), or receive income as a partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments. Fortunately, you only have to make payments if you expect to owe tax of $1,000 or more when you file your return.

If you own a corporation, be advised that you generally have to make estimated tax payments if you expect it to owe tax of $500 or more when you file its return.

When are payments due?
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

For the period: Due date:

Jan. 11 – March 31           April 15
April 1 – May 31                June 15
June 1 – August 31          September 15
Sept. 1 – Dec. 31               January 15 of the following year

How do you pay it?
To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. The worksheet in Form 1040-ES will help you figure the amount. You can then make your payment(s) using the voucher contained within or electronically via the EFTPS system.

Each state will have a similar form or electronic platform for you to pay the corresponding state taxes. In our home and surrounding states you would use:

Illinois Form 1040 ES
Indiana Form ES-40
Wisconsin Form 1-ES
Missouri Form 1040ES
Iowa Form 1040ES
Kentucky Form 740ES

What happens if you don’t pay it?
If you didn’t pay enough tax throughout the year (either through withholding or estimated tax payments), you may have to pay a penalty for underpayment of estimated tax. You can avoid this penalty if you owe less than $1,000 in tax after subtracting withholdings and credits, or if you pay at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

Need help estimating your tax liability?
Give us a call at 1-844-829-3788 or shoot us an email via the link below and we’ll be happy to assist you with your quarterly projections, filling out your forms or just coaching you through the process.

Understanding Your IRS Notice

When you receive an IRS notice, the first reaction is to panic and want to toss the envelope into the trash can! We recommend that you don’t do that but instead, take a deep breath and keep the following in mind:

An IRS notice typically will be about your federal tax return or tax account. It will be about a specific issue, such as changes to your account. It may ask you for more information. It could also explain that you owe tax and that you need to pay the amount that is due.

Each notice has specific instructions, so read it carefully. It will tell you what you need to do.

If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice OR respond via fax if a number is provided.

Always keep copies of any notices you receive with your other tax records.

There are dozens of IRS notices that one can receive; for a comprehensive list check out this link on the IRS’ website. Listed below is a brief summary of some of the more common notices and a description of what they mean.

CP10: The IRS made a change(s) to your return because they believe there’s a miscalculation. This change affected the estimated tax payment you wanted applied to your taxes for next year.

CP11: The IRS made changes to your return because they believe there’s a miscalculation. You owe money on your taxes as a result of these changes.

CP14: This IRS sent you this notice because you owe money on unpaid taxes.

CP54G: Your tax return shows a different name and/or ID number from the information the IRS has for your account.

CP2000: The income and/or payment information the IRS has on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.

CP2005: The IRS accepted the information you sent them. They’re not going to change your tax return and have closed their review of it.

CP2501: You need to contact the IRS as they have received information not reported on your tax return.

Form 668Y: Notice of Federal Tax Lien.

CP501: You have a balance due (money you owe the IRS) on one of your tax accounts.

CP503: Reminder notice that the IRS has heard from you and you still have an unpaid balance on one of your tax accounts. Typically sent 30 days after the filing of a tax lien.

CP504: Notice of intent to level. If you do not pay the amount due immediately, the IRS will seize (levy) your property and apply it to pay the amount you owe. Typically sent 30 days after the above notice.

LT1058: Final Notice prior to levy. If no response is received within 30 days, the IRS can levy you. This is also your opportunity to request a hearing with regards to the matter.

jaredrogers2015-05-08T10:19:29-05:00May 1st, 2015|Categories: General Tax Talk|Tags: 5 tips for dealing with an IRS notice, common IRS notices, CP10, CP11, CP14, CP2000, CP2005, CP2501, CP501, CP503, CP504, CP54G, file old tax returns, fileoldtaxreturns.com, Form 668Y, Here's What to Do, If You Receive an IRS Notice, Letter 1058, LT1058, most common IRS notices, understanding your IRS notice, understanding your irs notice or letter, wilson rogers and company|