Taxpayers are required to pre-pay their taxes for any tax year through payroll withholding, estimated tax payments or a combination of the two. Employees and retirees generally accomplish this through withholding, and self-employed individuals and those with investment income by paying quarterly estimated payments.
It’s that time of the year – the season for preparing tax returns is about to begin. Unfortunately, it is also the season for scammers who are out to steal your identity, swindle you out of your money and even file tax returns in your name. All of this can ruin your credit rating, cause financial havoc and cost you hours upon hours of time trying to straighten out the messes caused by cybercrooks.
If you engage the services of an individual (independent contractor) in your business, other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, then you are required to issue that person a Form 1099-MISC to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit. Payments to independent contractors are referred to as non-employee compensation (NEC).
The Internal Revenue Service (IRS) computes standard mileage rates for business, medical and moving each year, based on a number of factors, to determine the standard mileage rates for the following year.
As it does annually around the end of the year, the IRS has announced the 2019 optional standard mileage rates. Thus, beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:
As a small business owner, this is the time to take a closer look at your profit and loss sheets to determine how you can make the most out of this current economy. In the U.S., the economy is thriving and expected to grow over the next few months. Businesses are expanding. The Federal Reserve has inched up interest rates, creating investment opportunities, and lenders are offering small business loans. All of this points to a promising outlook for the coming months.
Because individuals are always looking for tax deductions that can reduce their tax liability it’s important to know what the actual tax benefit is derived from a tax deduction. There is no straightforward answer because some deductions are above the line, others must be itemized, some must exceed a threshold amount before being deductible, and certain ones are not deductible for alternative minimum tax purposes, while business deductions can offset both income and self-employment tax. In other words, there are many factors to consider, and the tax benefits differ for each individual, depending on his or her particular situation and tax bracket.
As a result of tax reform, most taxpayers will be paying less tax for 2018 than they did in 2017. But that may not translate into a larger refund. Your refund is the amount that your pre-payments (withheld income tax, estimated tax payments, and certain credits) exceed your tax liability, and if the pre-payment also got reduced, you could be in for an unpleasant surprise at tax time.
One of the most bone-chilling situations an American taxpayer can experience is receiving notification from the Internal Revenue Service that there’s some kind of problem. Just receiving an envelope with a return address from the IRS can strike fear. There are many different reasons that the IRS might reach out, but some are more common than others.
Here are the top issues that would cause a taxpayer to hear from the IRS or require you to resolve an issue:
Unlike a C corporation, which itself pays the tax on its taxable income, an S corporation does not directly pay taxes on its income; instead, its income, losses, deductions, and credits are distributed across its shareholders’ individual tax returns on a pro rata basis. These distributions are not subject to self-employment (Social Security and Medicare) taxes. As a result, many S corporations ignore the requirement that each shareholder-employee must take reasonable compensation in the form of W-2 wages in exchange for services performed for the corporation. These wages are subject to Social Security and Medicare taxes (which the corporation and the employee generally split equally); the corporation is also responsible for paying the Federal Unemployment Tax (as well as any state unemployment taxes).
There are many ways to save money for your retirement or children’s future education such as investing in the stock market, buying real estate for income and appreciation or simply putting money away in education savings accounts or retirement plans.
Keeping in mind how these various savings vehicles are taxed is important for choosing the ones best suited to your particular circumstances. Let’s begin by examining the tax nuances of IRA accounts.
