The Good Tax Guide

According to the workers compensation act one do not have to pay the tax on workers compensation which is received by the person who is given or by survivors for work related sickness. It is mentioned in workers compensation act. Also tax exemption is not applicable to the benefits given on the retirement plans. These benefits are given on the basis of age, service period or length, your contributions to the plan. This is applicable even if the cause of the retirement is injury or sickness related to occupation. In case if the payment is obtained from your employer then you have to include the obtained workers compensation in the taxable amount. Workers compensation may include social security benefits. The social security benefits included in the workers compensation is taxable and should be reported while filing the tax returns. Failure to report the social security benefits can lead to charges of penalties to you. In such a case one may have to pay more money as tax. So make sure that you enter all the income details before filing the tax form. The railroad benefit is also taxable and comes under the category of social benefits. So, it should be included in the taxable income.

If the amount paid to the household employee is $1,500 or more then one has to remit the IRS social society tax and Medicare tax, called as FICA. There will be another tax also known as FUTA. FUTA refers to Federal Unemployment tax which is to be paid to the IRS. This amount is to be paid if the employee does not work for any agency. FICA will not be applicable if the employee is your spouse or a child under the age of 21 years or if the wages are paid to the parents or if the household employee is under the age of 18 years. In case of FUTA tax, it is not applicable if the household employee is your spouse or a child under the age of 21 years. Also if the wages are paid to your parents then also the FUTA tax will not be applicable. The FUTA tax will be applicable if the amount of money paid to the household employee is 1,000$ or more. So if the salary exceeds the limit tax has to be paid for household employees, but if it remains within the limit then that amount will be exempted from taxes.

Wages and salary belong to the taxable income. They are taxable because they are the payments received by the person for doing services for an employer. But there will be exemption in certain cases also. It include social security tax, Medicare tax, pensions, insurance and union dues. These things must be included in the gross taxable income on one’s tax return in that particular year. The items which are taxable income include commissions, royalties, salaries, tips, vacation pay, dismissal pay, sick pay, wages, back pay and bonuses. In case if the employer pays you social security tax and Medicare tax without making any tax deductions then they have to be included in the gross taxable income. All the wages and salaries obtained through all the means should be mentioned in the tax form. Failure to mention anyone may risk you to pay penalties. So before filing the tax form ensure that all the salaries or wages are properly mentioned in the form at appropriate places. In certain cases you may receive another tax form after filing the first original tax form. The new form sent has to be filled with the changes if any and should be filed.

Yes, it is possible to get a tax extension from the IRS. A six month automatic extension will be provided by them. This can be obtained if one files the extension tax form. It is filed for getting more time for the payment of tax. It is also useful in certain situations where you can escape from tax penalties due to the late payment. But here the problem is that once you file the extension tax form you will have to pay the interest when you make the tax payment on that year up to the date. Such a rule is made so that the person will pay the tax as early as possible for avoiding the further interest. The extension tax form should be sent to the IRS service centre. There is another option available for the person; he can pay the tax in instalments. The penalties of late payment can be avoided if the amount paid as tax equal about 90% of the total tax due. In this case the interest will be charged only on the unpaid amount left. In case of tax extension there are two separate rules. One rule is for the U.S citizens and the other one for the non residents.