NOVEMBER 5TH, 2008
By CPA SAM
Q. I am a waitress in Florida claiming single – 1 on my W-4. I am paid bi-weekly. My paystub follows:
55.42 hours @ $3.77 an hour
GROSS Pay $908.18
FICA 56.31
MEDI 13.17
FIT 86.03
TotVolDed 0.00
CASH TIPS 699.25
This leaves me with a net pay for a two-week period of $53.42. PLEASE is this correct?
A. Employees in industries where tips are prevalent have an interesting situation. Most jobs fall under the Fair Labor Standards Act (FLSA) provisions where employers are required to pay the current federal minimum wage of $6.55 per hour (effective July 24, 2008). Those who receive tips can Read more »
OCTOBER 29TH, 2008
By CPA SAM
Q. My paycheck is wildly different each time because I am paid commission in the 2nd check and a draw on the first check of the month. I submit a new W-4 each period to keep my withholding down. Now my payroll department doesn’t want to accept more than 1 change each month. Is this legal?
A. Probably without knowing it, your question is very similar to the following scenario: I only want to Read more »
OCTOBER 15TH, 2008
By CPA SAM
Q. I am employed in the State of California and am curious to know what the tax limits and cutoffs are for Social Security and California SDI Payroll Taxes.
A. This question is a little more technical than I usually like to go. But there is common value and in this question and a possible tax planning opportunity available so here we go!
Social Security and Medicare are two taxes that should be withheld from every employee’s paycheck no matter who you work for. Many employees are incorrectly Read more »
SEPTEMBER 24TH, 2008
By CPA SAM
Q. I received a bonus check and the amount that was on the paystub was $500 less than what the bonus came out to. When asking the owner he stated that money was used to pay for the employer’s share of the taxes. On top of that, they took out taxes for my portion as well. On the paystub, it does not show the taxes that were taken out. Did I get cheated?
A. The short answer is Read more »
SEPTEMBER 17TH, 2008
By CPA SAM
Q. I’m a Non-Exempt employee. I had a vacation on Friday and worked thru my lunch a couple of days after I got back. Because of me having a vacation day do I still qualify for overtime pay? I get paid bi-weekly.
A. I applaud your use of the term non-exempt. It is not hourly or salary that makes a difference. This term comes from the fact that you are not Read more »
SEPTEMBER 3RD, 2008
By CPA SAM
Q. I am currently applying for a loan and need copies of my paystubs. Where can I get those? I checked online but can’t find them.
A. When I did support for PaycheckCity.com, I can’t tell you how many times I was asked that question. Everything from:
- How do I get my paystubs to
- What does my W-4 say to
- I lost my W-2. Can you get me a new copy?
was asked to the Read more »
AUGUST 20TH, 2008
By CPA SAM
Q. I would like to ask how I can decrease the withholdings from each paycheck…I am married, salaried about 52K yearly; HR explained to me that I needed to increase the number of dependents (?!) I bought a house, I will therefore deduct the mortgage interest and the taxes. I live in Florida. Thanks for your help!
A. I get so many W-4 questions that it’s almost impossible to know where to start. Your HR department Read more »
AUGUST 6TH, 2008
By CPA SAM
Q. I have been a sole proprietor and now hired a new employee. She will be working from home in California. The question is about State withholding. My company does business currently in Maryland. What do I do with California withholding, Unemployment etc. Somebody said I should not withhold state tax for her and have her send estimated payments to the state. Do you recommend that?
A. Both employers and employees get confused with the concept of withholding at the Read more »
MAY 21ST, 2008
By CPA SAM
Q. I am a painter and my boss says I am an independent contractor. He says I have to pay all my own taxes and my paycheck will be my total wages instead of minus taxes. Is that correct?
A. Unfortunately, I can’t make the distinction of whether or not you are actually an employee. I can tell you that in my experience many workers in the service industry like painters, plumbers and other laborers are incorrectly classified. The issue is the level of control exerted over your work. For a definitive answer, you can complete form SS-8 and send it to the IRS for review. I wrote an article about this topic that you can read here. For purposes of this blog, I will describe the effect of both scenarios from a tax perspective.
If you are truly an employee, then the employer matches what you contribute to Social Security and Medicare. Depending on your state, you could be eligible for health benefits. Your employer will also pay FUTA and SUTA (state and federal unemployment). Your state also requires that enmployers maintain some sort of workers compensation coverage in case you are injured on the job. As an employee, you get a certain level of protection again lay offs and on-the-job injury that the employer must pay for. You can see why certain companies try to skirt these requirements. They are expensive.
As an independent contractor, you are liable for self-employment taxes and have no work comp or unemployment insurance coverage in most cases. This means, the “employer” saves a ton of money. He also moves the risk off his own business and sticks it to the contractor. This also means that you the contractor must file quarterly estimated tax payments with the IRS or risk large penalty and interest payments. You are liable for all taxes.
In a mis-classified situation where you are actually an employee but considered a contractor by your “employer”, it is very likely that the “employer” is not paying tax on his/her income either. The IRS has identified this as a significant source of the so-called “tax gap” and is looking closely at ways to find and audit organizations in these industries.
Good luck on your quest. Ignorance is often the cause of misclassification. However, more often than not, it is an outright attempt to hide from the government in my opinion.
MARCH 10TH, 2008
By CPA SAM
This is the first installment of the Ask CPA Sam blog. I will be answering questions submitted to me through this blog and through PaycheckCity.com’s contact page.
Q. I get a large tax refund every year. It really helps me pay my bills. Some people says it’s not so good. Can you explain?
A. This is one of the most common questions from my tax practice. The simplest way to look at this is that a big refund is an interest-free loan to the government. You pay penalties when you underpay, but get nothing if you overpay. Your best bet is to make use of your money during the year and get your tax liability to match your payments. Tax liability is the amount you actually owe found on line 63 of the 1040 tax return form. Your payments are the amount withheld from each paycheck. If managed correctly, your refund will be small, or you may pay a little extra in. This way, you have more take home pay and can either invest the difference or pay off your bills a little earlier than you thought.
You can adjust your federal withholding by submitting a new Form W-4 to your payroll department. Your state may have a similar form. You can find a very comprehensive list here.
