September 2020 Individual Due Dates
September 1 - 2020 Fall and 2021
Tax Planning Contact this office to schedule a consultation appointment.
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 15 - Estimated Tax Payment Due
The third installment of 2020 individual estimated taxes is due. Our tax system is a “pay-as-you-earn” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-earn” 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 3 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 $1,000 (the 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 the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty.
The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.
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% 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 safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% 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 for the Federal estimates. Please call this office for particular state safe harbor rules.
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Our Team
At IAM Accounting LLC, we take pride in our diverse and experienced team of professionals, each dedicated to providing exceptional service in accounting, tax planning, payroll, and financial management. Our team members bring a wealth of knowledge from various financial backgrounds, working together to ensure that every client receives the personalized attention and expertise they deserve. From managing complex accounting operations to providing tax-saving strategies, we’re here to help you achieve your financial goals with precision and care.
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Ibrahim Mohammed
Founder & Tax StrategistIbrahim leads IAM Accounting LLC, offering expert tax strategies and financial guidance to help clients reduce tax liabilities and achieve their financial goals.
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Jasleen Daswal
ControllerJasleen is a highly skilled Controller with over five years of experience as a Chartered Accountant. She ensures accurate financial management and oversees accounting operations.
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Sahil Shaikh
Chartered Accountant & Tax PreparerSahil is a Chartered Accountant and tax preparer with expertise in tax compliance, financial reporting, and strategic tax planning, helping clients optimize their financial outcomes.
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Ankit Gupta
Accounts AssociateAnkit brings a wealth of experience in finance and accounting, providing key support in day-to-day financial operations to ensure accuracy and compliance.
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Neha Sharma
Key Accounts ManagerNeha manages our most valued client relationships, with over four years of experience as a Chartered Accountant, ensuring that client needs are met efficiently and professionally.
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Michael Holsinger
Payroll Representative, ADP PartnerMichael is our dedicated payroll expert and ADP partner, managing payroll processes with precision and helping clients navigate payroll services seamlessly.