Section 125 Tax Preparer Income Tax Question

by Dee
(Indy)

Section 125 Tax Preparer Income Tax Question

Section 125 Tax Preparer Income Tax Question

We just started a section 125 plan. I know federal, FICA, FUTA are exempt.

But are state, local and SUI tax exempt as well?

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Jan 20, 2024
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starstarstarstarstar 		What Section 125 Means
by: BB

A Section 125 plan, also known as a cafeteria plan, allows employees to use pre-tax dollars for certain benefits, resulting in savings on federal income tax, FICA (Social Security and Medicare) tax, and often state income tax. However, state laws vary, and not all states conform to federal tax treatment. In some states, you may still be subject to state income tax on these benefits. Additionally, SUI (State Unemployment Insurance) tax may not be affected by Section 125 plans.

To ensure accuracy, consult with a tax professional or your state's tax agency to understand the specific tax implications in your location.

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Tax Preparer Makes an Error

In our 2022 taxes, our tax preparer erred when computing our Federal withholding. As a result, we received a larger refund than we should. IRS has just found this error and is asking for us to repay it. I believe the tax preparer is liable for this payment, but do not know if there is a legal standpoint.

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Jan 20, 2024
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starstarstarstarstar 		Understanding Tax Preparer Liability
by: BB

While tax professionals are expected to provide accurate services, taxpayers are ultimately responsible for the information on their tax returns. However, if the error was due to the tax preparer's negligence or misconduct, you may have legal recourse. Consult with a tax attorney or professional to assess your specific situation and determine the best course of action.

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