A recent IRS notice stated that employers and other taxpayers won’t face penalties for 2025 if they…
1 – Don’t provide a separate accounting of amounts reasonably designated as cash tips or the total amount of qualified overtime compensation as required by information-reporting provisions in the new tax law.
2 – The IRS also said that employers and other taxpayers won’t be penalized for not providing the occupation of the person who received the tips on the W-2.
This penalty relief applies only to tax year 2025, the IRS said, because it will not issue new forms for this year. This interested me because I thought they were going to update the W-2 to include a place for these new items.
I guess they aren’t going to be doing that now.
The Service said it’s providing this relief because employers may not have the information needed to report these items under H.R.1. Also, that employers may not have systems in place to file the information to the IRS, to report it to the Social Security Administration, or to provide it to employees and other payees on a W-2.
The IRS Notice further said that employers are encourages but not required to provide the separate accounting on W-2’s so that employees can not pay income tax on cash tips and overtime.
When I wrote about this a couple of months ago, I warned that this was going to turn into a s**t show, and here we are.
Encouraged but not required? Are they serious? Can you imagine the problems you will have with your employees if you don’t lay this out correctly on their W-2’s? If this is done incorrectly and your employees end up paying taxes on these items you’re going to have a real problem.
Get it done and get it done correctly. No one needs to lose solid employees over something like this. If you need help, I’m here.
Let me leave you with this…
I have a new client story that isn’t just enjoyable but also a warning.
I did the initial tax planning consultation with the client and determined that if we amended their 2023 returns they would save about $40K in taxes. Their 2024 returns also remain uncompleted, so we need to hop on that right away as well.
So we signed an agreement and received the bank statements, credit cards, and payroll statements necessary to look at 2023 and begin working on this year. As part of my review, I looked at their existing financial statements in the online version of Quickbooks, knowing that I wouldn’t use them to complete the amendment, but in looking at them I would learn more about the new client.
What I found was frightening.
When I pulled up an Income statement for the period, it showed a little more than $4M in sales, but when you pushed the print button it only had $3M in sales on the printed statement. When I pulled up a sales report by customer total for the period the screen shot showed $3.4M in total sales but when I printed it, the report showed a million less than that figure.
The last time I saw an accounting system that was that unreliable, I was at DePaul getting my bachelors degree back in the late 80’s. The professors used the phenomenon to teach us to watch the system and to check our work.
Suffice it to say that I’m not going to be using any of that work for the amendment.
But we’re talking about the online version of Quickbooks that’s doing this. Obviously, there are no circumstances where any accounting program should show any variance whatsoever in a sales figure whatsoever.
If you’re using that program, you might want to think about using something else.
One last thing…
I have a case where the IRS lost the S Election that we had originally sent in several years ago, and they’re rejecting the S Corp return saying that the client didn’t have an S Status for the year in question. So I put together a case for the Taxpayer Advocate Service to straighten this out and tried to fax it to their number yesterday morning.
It seems that during the government shutdown, even the fax machines aren’t working at the Federal Government. In 36 years of my professional career, that was a first.
If you need something, you know my number.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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