You are a CPA being paid to prepare a tax return for a client. Your client...

You are a CPA being paid to prepare a tax return for a client. Your client has a maid that cleans their house twice a week, and is paid about $3,000 per year. You notice your client has not been reporting, withholding, or paying any taxes on the wages of this household employee. When you bring this issue up to your client, they are quick to reply that the maid is a part-time employee and not subject to the “nanny tax”. Is your client right? What would you do in this case?

Solutions

Expert Solution

Answer:

As per US federal tax provision, if Client hired someone to do household work and that worker is employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee. It does not matter whether the work is full time or part time. Household work is work done in or around your home. As per understanding of the provision it is clear that maid cleans the room of client is household work.

If client is controlling the work of maid and provide direction the work how to be done, maid are considered as employee of client.

Therefore, client opinion is not right because whether it is full time or part time, if above conditions are fulfilled she will be employee of client.

As per tax law provision, if you pay cash wages of $2100 or more in 2018 to any one household employee then client need to withhold and pay social security and Medicare taxes. The taxes are 15.3% of cash wages. Client employee's share is 7.65% and your share 7.65%, client can choose to pay it yourself and not withhold it.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

John is your client and has come to you to prepare his tax return. During the...

John is your client and has come to you to prepare his tax return. During the 2018-19 financial year, John disposed of the following assets: (a) A two-storey residence at Stuart Park which he acquired in May 1991. In 1995 John vacated the premises to work in Japan for three years, during this period the property was rented. Other than the 3 year period, John has lived in the property as his residence. He paid $370,000 to purchase the property...

A client hired you to file an individual tax return. The client is a divorced single...

A client hired you to file an individual tax return. The client is a divorced single custodial parent with two children. The client claims they are entitled to the dependency deduction for the children. The ex-spouse of your client contends it is their right to claim the dependency deduction for the children on their tax returns. Explain in detail which one has the right to claim the dependency deduction for the children relying on the applicable income tax laws. Communicate...

Imagine that you are a Certified Public Accountant (CPA) and your client has asked for your...

Imagine that you are a Certified Public Accountant (CPA) and your client has asked for your help in mitigating or eliminating the potential estate tax liability for the property the client owns, in order for the taxpayer to pass the property to heirs at the lowest possible tax rates. Analyze the options that may be open to your client and propose a strategy to mitigate or eliminate the client's potential tax liability.

Generally, if you were a CPA, would you advise your client to enter into a like-kind...

Generally, if you were a CPA, would you advise your client to enter into a like-kind of exchange if they were looking to sell one piece of land and acquire another piece of land? Why? Why would you not suggest your client into a like-kind exchange? Give specific examples.

According to the IRS, the chances of your tax return being audited are about 15 in...

According to the IRS, the chances of your tax return being audited are about 15 in 1,000 if your income is less than $100,000 and 30 in 1,000 if your income is $100,000 or more. a) If five tax payers with incomes under $100,000 are randomly selected, what is the probability that more than one of these five taxpayers will be audited? b) If two taxpayers with incomes under $100,000 are randomly selected and two with incomes of $100,000 or...

A client for whom you have prepared the current tax return approaches you for advice and...

A client for whom you have prepared the current tax return approaches you for advice and support for an audit covering the last five returns. You were not involved in the preparation of the previous four returns. The client has written notice from the ATO regarding the audit. What advice will you provide and what support will you give? ( PLEASE: 300 words

You are the tax manager in a CPA office. One of your clients, Snapper Corp, is...

You are the tax manager in a CPA office. One of your clients, Snapper Corp, is also an audit client of the firm. The CFO of Snapper invites you and the audit manager for a one-week deep-sea fishing trip to Mexico, all expenses to be paid by Snapper. The audit manager says that you both should go and just not tell your supervisor at the CPA firm any details (like who paid the expenses) about the trip. Cite the AICPA...

Assume you are a CPA and during a review of your clients' tax papers for completion...

Assume you are a CPA and during a review of your clients' tax papers for completion of the client’s tax return, you discover certain deposits to your client’s accounts that you suspect may be additional income which your client did not advise you about. When you ask the client about the deposits they say “let’s just make that our secret.” What are your ethical obligations in this situation and what authority did you use to determine your obligation?

According to the Internal Revenue Service (IRS), the chances of your tax return being audited are...

According to the Internal Revenue Service (IRS), the chances of your tax return being audited are about 6 in 1,000 if your income is less than $50,000; 10 in 1,000 if your income is between $50,000 and $99,999; and 49 in 1,000 if your income is $100,000 or more (Statistical Abstract of the United States: 1995). If two taxpayers with incomes under $50,000 are randomly selected and two with incomes more than $100,000 are randomly selected, what is the probability...

Suppose you are a CPA, and your client has requested advice regarding establishing an irrevocable trust...

Suppose you are a CPA, and your client has requested advice regarding establishing an irrevocable trust for his two (2) grandchildern. He wants the income from the trust paid to the childern for 20 years and the principal distributed to the childern at the end of 20 years.. Use the internet to research the rules regarding irrevocable trusts, gift tax, and estate tax. Write a one to two (1 - 2) page client letter in wich you: 1) Analyze the...

Subjects