The Small Business Tax Help Blog

Archive for the ‘Tax Withholding’ Category

Question: Restricted Stock Basis?

My company granted me approx. 100 shares of their stock as a bonus (restricted stock). At the time of vesting, instead of taking the entire 100 shares and paying withholding tax in cash on them, I asked them to withhold shares, so I was left with approx. 70 shares.

I understand how I am taxed on the vesting of the shares and the withholding. My question concerns my basis in the 70 shares I now hold.

When I get ready to sell the 70 shares, is my basis the fair market value at the time of vesting of the entire 100 shares, or the lesser amount of the value of the 70 shares? Of course, I have paid income tax (through the withholding of the 30 shares) on the entire 100 shares. Don’t I get basis for the withholding I essentially paid? This is a bit confusing for me.

Answer: When your stock vested, all 100 shares vested and the income was added to your W-2. At that point of time, your basis in each share is the FMV on that date.

The 30 shares used to pay withholding were sold. So don’t forget to include them on your schedule D for that year, even though the gain is zero.

The remaining 70 shares is still the FMV (per share).

Using John Edwards’ “It Was A Gift” Defense: San Francisco Tax Lawyer Rob Wood

Question: Will I be taxed on this stipend? Is it considered income/tax deductible?

I got this description from a stipend letter, of which the stipend I will be receiving at the end of the summer. I was wondering if I will have to include this as part of my tax payments, because I don’t understand the description (below) completely. Keep in mind that the stipend is for more than $600.

“Fellowship payments (via the SU-21 form) to U.S. citizens, permanent residents, and residents for tax purposes are taxable to the recipient, but are not reported by [school name] on a tax document. [school name] does not withhold tax from these payments. We recommend that recipients make quarterly tax payments to the IRS and the State of California. Please see Form 1040ES at www.irs.gov and Form 540ES at www.ftb.ca.gov. A courtesy letter summarizing payments greater than $600 is mailed to recipients in January and should be used in year-end tax reporting. Your pay statement also contains year-to-date payment totals.”

Answer: They are advising you that your stipend is taxable and must be reported to the taxing authorities as income. There is no withholding so you may have to file a Schedule C or simply report it as other income not subject to self employment tax. Whatever way they report it to you such as a 1099misc you will need to put that as income on your 2010 tax forms. Consult someone at H & R Block at that time. In the meantime if you have legitimate expenses such as supplies, car expenses or books then that can be charged against your earnings.

Wikirebels

Question: Tax Cut Software Glitch warning?

There seems to be a temporary glitch in the H&R Block Tax Cut software until a fix occurs which is planned for Jan 31st. If you have federal withholding on Govt Payments 1099-G such as Unemployment Comp., the software may prevent you from e-filing unless your interest, pension, Soc Sec, or IRA income exceeds the withholding. If anyone using this software (and maybe other tax software vendors also), you may need to wait a few more weeks for a fix. The problem is blamed on a faulty IRS update & cannot be fixed until the next scheduled IRS update.

Answer: that’s correct per IRS waring in December.Congress screwed up by takeing all year to patch the AMT law.

Crisis is Not Behind Us

Question: I need to find out if I am withholding enough taxes. I make $63,000 a year,have a child and wife to claim. ?

I also have a mortgage with claimable interest. This is my first year in this tax bracket. About 25% of my pay goes to taxes. I pay MD state tax.

Answer: Go to www.irs.gov and click on the individual tab. There is a withholding calculator that can help you out a lot in determining what your refund/payment will be. You just need your last paycheck and a bit of other information. I have used it over the last few years and find it very helpful.

I put the whole link in the source area.

Investing & Personal Finance Tips : How to Calculate Salary After Taxes

Question: Under the federal income Tax Withholding law, which of the following is not defined as an employee?

A) Partner who draws compensation for services rendered the partnership
B) General manager, age 66
C) Payroll clerk hired one week ago
D) Governor of the state of Florida
E) Secretary employed by a not-for-profit corporation

I think it is D but I am not sure I went through my book over and over but I would like someone elses educated opinion thank you.

Answer: A) is the only answer that MAY be correct. The Governor of the state of Florida IS an employee of the state.

Senate Session 2011-03-17 (15:00:16-16:01:02)