Make Money and Save Money

The IRS requires that you claim any self employment income that meets or exceeds $400 in one year. That includes the money you earn online through PTC, article and review publishing, Adsense and other advertising earnings,  paid Blogs (like Today.com) and digital sales. This is reportable on a Schedule C: Income or Loss From Your Business or Profession.

You should receive a 1099 MISC (Independent Contractor) if you made $400 with any one company, if you do not receive one that does not necessarily mean you do not have to report your earnings. As an independent contractor, which is what the IRS considers someone who is not paid as a W-2 employee, you are solely responsible for keeping records of income and expenses.  It is in your best interest to keep diligent and accurate accounts of your business activity, the IRS can require that you provide these in the future to prove your income and expenses.

The most confusing part of self employment can be deductions, what is and is not considered a legitimate deduction. The simplest determination is this: Is the expense ordinary and necessary in your business? Ordinary is defined as one that is common and accepted in your business, and necessary is defined as one that is helpful and appropriate to your business. A farmer would not reasonably deduct the new copy of Photoshop he purchased but a Graphic Artist would.

Basically, just because you purchased it does not mean you can deduct it; and just because it is listed on the Schedule C does not mean you can claim it. Most online earnings do not incur mileage expenses, this is one example of a deduction that although it is listed on the Schedule C, I as a Digital Scrapbook Designer can not legally claim. I also can not claim printing expenses; such as photo paper, toner or ink because it is not necessary to my business.

I will leave the floor open for any questions you may have at this point and return with more information on this subject tomorrow. If anyone has a specific question they would like answered please leave a comment and I will answer it in the next post. For those who are visiting for the first time, I am an Office Manager for a Tax Service with 6 years of tax preparation training and experience. If I feel that I can not answer your question I will seek the appropriate response from my colleagues who have experience in that area.

I just worked a thirteen hour shift as an office manager of a very busy tax service and will be working 77 hours a week for the next few weeks. I am excited yet a bit overwhelmed at this point people are streaming through the doors eager to get an early start this year.

I have a feeling that this season will be one of the busiest and profitable ones for the banks that fund the loans that are offered through many tax services. So many need that money as soon as they can get and they are shrugging the expense away due to necessity.

The economy (I know can we not find something else to talk about) feeling as shaky as it is right now tends to make people nervous and wary. This time of year is one alot of wage earners look forward to all year long. They tend to overspend during the holidays almost banking on their tax returns to pay it all off. I think it might be time for a change in thinking, especially for me. I need to stop thinking of it as a fresh start and start thinking in terms of “What if there were no tax refunds?”.

The Holidays are over and we are all taking a deep breath of relief; not so fast, it is time to start preparing to file your federal and state income taxes. The majority of us will be waiting for our W-2’s until the end of January to the beginning of February at which time we can file our taxes and some lucky few have a dedicated Human Resource department and will receive their W-2’s sometime in the next week.

If you have your taxes prepared by a tax professional, either by an accountant or a service such as Jackson Hewitt, then having all your proofs and documents set aside before you walk in their doors will save you time and frustration. While each persons tax situation is different their are a handful of items that everyone will need to have their taxes prepared; such as personal identification, wage documents, dependant information and deduction information.

Here s a small list of items you will want to bring to your tax preparer:

1. Property Taxes Paid
2. Mortgage Interest Paid
3. 1099’s (this includes DIV, MISC, INT etc.)
4. W-2’s
5. Unemployment
6. Tuition Statements
7. Charitable Contributions
8. Social Security Statement
9. Self Employment Income and Expenses
10. Union Dues and Fess Paid
11. Job related magazine subscriptions cost
12. Uniform costs if job required(can not be able to wear outside the workplace, i.e. safety goggles, steel-toe boots, scrubs.
13. Last years tax preparation cost
14. Safe Deposit Box fees
15. Childcare Providers cost and Employer Identification Number (EIN)

Well, that should get you close to having everything together when you wall through the doors to have your taxes prepared. Call you service beforehand and ask if they offer a checklist of items you should bring to your appointment. Most willing hand them out to eliminate needless waiting and running for information that can cause your filling to be delayed.
 

So many are giving self-employment a go these days and with the unemployment rate rising each day how could they not. When you are self-employed you work for yourself and are responsible for keeping accurate records of income and expenses. You are also solely responsible for reporting that income anfter exspense on your tax return, usually on a Schedule C.

Now there are deductions that are obvious to most and that includes the cost of your goods, if any; rent and utilities, if you operate outside of the home; buisness mileage and hotel stays, if your work requires traveling; and buisness lunches and phone bills.

Other deductions that are often missed can make a huge impact on your adjusted gross income and self-employment tax amount. These would include; tax preperation fees, if you filed on your buisness the year before and paid someone else to prepare it; insurance on your goods or space; employee pay (if you withhold taxes, provide the work area and tools and the job they perform is recurring, otherwise they would be a 1099 (contract) employee; one half of your self-employment tax is also deductible from your adjusted gross income.

If you go to a professional tax preperation service, odds are they will know which deductions you can and can not claim. Always keep immaculate records that are stored seperate from your personal records, and read up on current tax changes just in case that professional missed something you are eligilble to claim.

If you do your own taxes then make sure you make a quick stop at the IRS web-site to brush-up on changes and requirements

Bankruptcy seems to be everyones fall back plan these days, if it doesn’t work out I can always file bankruptcy and start over. It is true that bankruptcy can be the difference between losing everything you have and giving yourself a fresh start to build upon, what they don’t tell you however is that it will cost you more than the legal and court fees.

I looked into filing bankruptcy, I even hired a bankruptcy lawyer; gave him a percentage of the final cost and paid for the required Debt Counseling. I went over my debts, assets and my possible tax filing situation and realized that bankruptcy was going to cost me more than I make in four months from my employment.

See with cancellation of unsecured debt you have the responsibily of reporting that forgiveness as income on your taxes. Not all debt cancellation falls into the reportable income, you could be in insolvent when you file (means that your total debts are more than half of the fair market value of your total assets, if you believe you may be eligible for this please seek the advice of a tax professional).

Now if you owned a home you could file using the Mortgage Forgiveness Debt Relief Act of 2007 to help offset the amount you will be taxed on. You can also itemize your deductions and include any medical bills that were payed off to bring your taxable income down further.

With all that being said, bankruptcy can be beneficial to some people you really need to scrutinize each possible alternative before you make a finite decision, this is your financial future we are taking about here.

Did you know that unless you make a certain level of income you are not required to file a tax return? That does not mean that you should toss those W-2’s to the side and forget about them, just because you are not required to file does not mean you are not intitled to a refund. This year those who do not usually file a tax return should seek information about the STIMULUS that most received startng in early April of 2008. Even those who are not required to file a tax return can be eligible for this stimulus payment.

Most are stuggling in the current state of the economy and many are losing their jobs due to employers feeling the lag. Check out the information on the IRS web-site to decide if you should think seriously about filing a return, you may end up with a much needed surprise.

Tax season is almost upon us and for most it can not get here fast enough, so many are struggling to make ends meet in the current economy. I recently attended a two day seminar to train for my seasonal employment, Tax Office Manager, and I learned about some interesting updates for the 2008 and 2009 tax years.

How many will be affected by these updates? I can only guess at this point but the implications seem to be millions; if you have never read an entire tax law then you know why I say that, unless you enjoy reading completely complicated legal jargon that deal with taxes you can get lost by the second paragraph. From what I understand from going over the summaries of just a handful with the tax school advisor, the new updates mean more money in the tax payers pockets come time to file.

Increases in the amount of the refundable portion of Child Tax Credit and a special computation effective for 2008 only, is the biggest change brought on by the Emergency Economic Stabilization Act of 2008, and Tax Extenders and altenative Minimum Tax Relief Act of 2008. This bill passed in October of this year also has sections that cover buisness credits, disaster relief, energy incentives and revenue raising. The definition of a qualifying child was modified as well through this bill; a child must be younger than the tax payer and be unmarried.

Take a look on the IRS website and learn a few things about the coming tax seasons, it is always a good idea to keep up to date with laws and regulations that will affect you tax situations when it is time to file.

IRS.GOV

Link to IRS page highlighting the Child Tax Credit and standard deduction changes found HERE.

NOTE AND DISCLAIMER:This is not tax advice nor do I claim to be an authority on the subject of tax laws and procedures, if you are seeking advice or wish to learn more about this bill, please visit the links above for the IRS official website. Some changes are in the Proposed stage and may not take effect.