5 Tax Tips for Self-Employed Individuals in Any Field

Self-employment is like ice cream; it comes in a large variety of flavors. You can be a freelance writer, a graphic designer, a landscaper or a dog walker. Some people are self-employed full time, while others work part-time around their “day job”. Whatever your flavor of self-employment is, there are some definite tax tips you need to know.

If You Earn It, You Have to Declare It

If you do work for businesses, they will generally send you a 1099 form that you have to file at the end of the year. However, even if you work for individuals, or a business that does not send you a 1099 form, you still have to declare that income. Do not be fooled by thinking, “If I make less than $600 from one person (or business) during the year then I don’t have to declare it.” That is an often-misunderstood concept. The IRS expects you to declare every penny you earn.

Track Your Income and Expenses

You do not want to hand your accountant envelopes full of unsorted receipts and cashed checks come tax season. The accountant may miss some deductions because he or she could not find the right slip of paper. Even relatively inexpensive programs like Quicken work great. Keep track of all your hard copy paperwork and keep it organized as well. The IRS has very specific rules about business tax deductions and whoever does your tax return will need as clear a picture as possible to maximize your deductions.

Estimate Your Taxes

There are two ways to avoid being hit with a whopping tax debt at the end of the year. Either you have to be frugal enough to put away a certain percentage of every payment you receive, or you have to arrange with the IRS to pay quarterly estimated tax throughout the year. Most people choose the latter in order to avoid yearly penalties for underpayment. It may be tempting to spend all your money as quick as you earn it, but remember that just because no one took taxes out when you earned it, that does not mean you will not have to pay later. Estimating and paying your taxes is one way of avoiding having to file a tax extension form in the future.

Pick Your Name

If you are doing business under your own name, that is great. You just file a Schedule C form with the IRS and life is simple. However, if you are doing business under a company name, then you should have some sort of business license in order to avoid problems with the IRS. It can be a simple DBA (doing business as) license, but you want to make sure that you have all your legal paperwork in order before filing your taxes.

Self-Employment Tax

The IRS does charge a special tax rate for people who are self-employed. You will have to pay the self-employment tax, but you can deduct half of when figuring out your adjusted gross income. Form 1040 Schedule SE, available on the IRS website, will help you figure out exactly how much your self-employment tax will be.

Filing a tax return when you are self-employed is trickier than filing a regular tax return. Many people find that going to a professional tax accountant is well worth the initial fees in order to get the highest possible return they can. Unless you are very knowledgeable about business tax laws, you should keep yourself as organized as possible and seek the help of a reputable professional when it comes time to file your taxes.

About the Author: Annita Grosh is an accountant who specializes in working with self-employed invididuals. She loves watching as an idea becomes a workable and profitable business.

Supreme Court Ruling Will Affect Taxes

How will the healthcare ruling by the Supreme Court affect taxes?

The individual mandate is not the only thing about the Affordable Care Act. There are tax changes to consider. Because of the three day hearing about the ACA, here at TaxVox, I believe it is time to ponder some of the revenue provisions.

Provisions in the law allow for tax cuts as well as increases. Unless the whole thing is thrown out, these tax changes would likely remain.

If it can be considered a tax at all, the only one would be the mandate penalty for not purchasing insurance. The Supreme Court will have to decide if this is a penalty or a tax.

Included in the ACA are some very important tax cuts; credits for helping small businesses that purchase insurance for their workers. You may not realize that they are there, as over $1 million has been paid by the NFIB to challenge the ACA.

The NFIB will more than likely think that those subsidies should be thrown out if the Supreme Court rejects any of the key parts of the reform.

There are some tax increases in the new law, including an excise tax for high value health plans that are sponsored by the employer. That would begin in 2018 and make it harder to take itemized deductions on their medical costs.

There are a couple of other tax increases of note. The first tax increase of the bill is a .9% increase for higher income workers in the medicare wage tax. This is for supporting the health system for seniors. The second increase, sometimes referred to as a Medicare surtax, is a 3.8% high income tax on households that enjoy income from investments and non-wage sources.

These new taxes, according to a Tax Policy Center study, would increase taxes on those households earning between $500,000 – $1,000,000 by about $4,600 and those earning $1 million+ by $41,000. Those making $250,000+ ($125,000 single) will also be affected.

It would not be wise, then, to forget these tax changes. We may not have seen the end of the tax code modifications.

Tax Help For The Rest Of Us

For many people doing taxes may seem like an overcomplicated burden which they may not be ready to face. The reality is that there is tax help available with turbo tax.

By using the  services of professional tax preparers your refund may be maximized as well as saving the hassle of paperwork. There are many different services out there offering tax help but some charge enormous fees and may be less than professional in their business dealings. The best thing to do is use a service which is established with a good reputation of customer service.

Depending on how you earn your income changes many things when it comes time to file taxes. Turbo tax has software keyed for all different types of people. For example if you work for wages and do not have any investments you may need to file one kind of form while a small business owner will need something different. To ensure you get all the refund you deserve and to avoid any fees or penalties doing the proper paperwork is the first step. While doing this yourself is possible professionals that deal with these matters on a daily basis have the advantage of here.

So do not despair when it is time to do your taxes. Asking for help in this matter is advisable and there is tax help out there to help you. One of the many places worth looking into is turbo tax to get your refund done correctly and on time.

Talking About Capital Gains

Some Things To Be Aware Of Regarding Capital Gains And Losses

Many people are not aware of the fact that their capital assets are all the things they own and use for either investment or personal use purposes. This may include bonds and stocks held in a personal account, as well as household furnishings and their home itself. The difference between what one paid for a capital asset and what they sold it for is recognized as either a capital loss or a capital gain for them.

Let’s look at some facts about how a person’s income tax return might be affected by losses or by gains according to the IRS.

1. Basically, a capital asset is everything a person uses for their investment, pleasure or personal issues.

2. The difference between what a person sells their capital asset as opposed to what they paid for it is either a capital loss or a capital gain for them.

3. All capital gains absolutely must be reported.

4. Capital losses may not be deducted on personal use property, but only on investment property losses.

5. It is either short term or long term that capital gains are classified as.

6. If long term losses are exceeded by long term gains, the difference is then a net capital gain.

7. Usually lower than the tax rates applied to other income are those applied to net capital gains.

8. If exceeding any capital gains are in fact capital losses, it can and should be deducted from other income.

9. Capital loss deductions can be carried over from one year to the next if in fact they exceed the yearly limit.

10. It is important this year that all involved with these issues refer to and use Form 8949.

Planning For Early Retirement

Retirement planning is something that people usually do to prepare for old age. But did you know that it’s also something that you can do early on? Early retirement is an option for some but not many fully grasp its concept. Even though it seems impossible, do note that many have made this happen. Expatriates are among those that have retired early and are now enjoying life.

Before you opt for early retirement, think hard and ask yourself – do I really want to retire at an early age? For those of you who find it impossible to achieve given your circumstances in life, don’t push it. Maybe early retirement isn’t for you and you can always retire at an early age anyway, like most people do. But if you feel like it’s right for you and that it’s achievable at the same time, you can consider it as an option.

Once you have set your mind for early retirement, the next thing you have to do is plan for it. Early dream retirement planning starts with managing your finances properly. Try to live a minimalistic life and only buy what you need. Do not indulge too much on things that you want because that would be detrimental to your plans of retiring early. Living a minimalist life doesn’t mean taking your health for granted though. You must try to keep your body fit and healthy at all times to prevent most illnesses associated with poor diet and a sedentary lifestyle. The last thing you want to happen is waste away all the money you saved for retirement on medical care.

If you have kids, instill in them the value of saving money and being independent early on. Along with early retirement, save money for their education as well. If you want to retire early, your kids should also develop a sense of personal responsibility and independence at an early age. Besides, you will be more at peace with yourself if you are able to raise kids that aren’t too dependent on you finance-wise.

Also part of early retirement planning is deciding what you’ll do by the time you retire. Decide whether you’re staying in your home country. Most early retirees, however, leave their country and migrate to countries with lower costs of living and have higher value for the money they saved. There, they can set up their own businesses or simply enjoy the rest of their lives free of burden.

Would You Like To Have the IRS Do Your Taxes?

To paraphrase Will Rogers, more liars were made of the American people from income tax than from golf.

But if the IRS made it easy and almost impossible to lie on a tax return, would anyone be interested?

Doug Shulman, the IRS Commissioner, recently hinted that if the IRS would prepare taxpayers’ returns the potential for tax fraud would be reduced. No-one would have to prepare their own returns at tax time because the IRS would do it for them.

The common name for this idea is a “ready return” or “simple return.” The IRS would complete the taxpayer‘s wage information and identification under this plan and send out the completed returns. Taxpayers would sign them after checking them for accuracy and correcting any mistakes, and return them.

It is already the responsibility of employers and other parties to provide income information to the IRS, so they already have most of our information at their disposal.

Completing the returns for taxpayers would be expensive, however, and the IRS does not presently have the budget nor the manpower to carry out the plan. It would mean a major undertaking to add preparing returns to the collections and enforcement they are already obligated to do. However, Shulman apparently thinks it is worth discussing.

California already has a similar, if limited, plan for their state taxpayers. Not many have signed on, though, because of limits such as no more than five dependents, income from wages only and mandatory standard deduction. Those who do use the system reported they like it. Nobody knows if the IRS will ever implement such a plan.