My Odeo Channel (Code: 11a1db75c4117aa5)

Tax Quip - Switching from Employee Status to Independent Contractor

2018-02-13 by Eva Rosenberg

employee photo
Today TaxMama® wants to give you something to think about before switching from employee status to independent contractor.


 

 

 

Dear Friends and Family,

As far as individual taxpayers, the biggest losers under the Tax Cuts and Jobs Act are employees who have unreimbursed out-of-pocket expenses. You won’t be able to deduct them any longer – from at least January 1, 2018 – December 31, 2025. And longer, if Congress extends this harsh rule.

That’s why many employees are thinking of taking aggressive action and considering changing their status at work, to become freelancers. This will allow the former employee to deduct all their expenses, and potentially, reduce your taxes. For those who successfully negotiate a change in status, it’s important to understand the full impact of what you are doing.

You will now be in business – and will have to act like a business. With all the responsibilities of a business – formation, filing, licensing, and reporting. And if you chose to set up a corporation, partnership or LLC, you might have to face the costs of an extra business tax return.

What do you lose that you were getting as an employee?

  • Sick days
  • Vacation days
  • Health Insurance
  • Some reimbursed expenses
  • Bonuses
  • Paid holidays (remember Christmas, Thanksgiving and at least 8 – 10 other paid days off, or long weekends)
  • Promotions and raises
  • Employer pays half of your Social Security and Medicare (7.5% of $128,700 – nearly $10,000 and 1.3% of everything over that income level)
  • State disability benefits
  • State and federal unemployment benefits


So, instead of taking off on your own – consider trying to negotiate with your employer. It’s time that they paid your expenses, via an accountable plan. That means you would submit your expense reports each month and they would reimburse you. That might require a slight reduction in your wages or commission percentage so everyone stays even. It’s a good idea to sit down with a skilled tax professional to sort out the numbers to determine the best path for both you and your employer.

You can find Enrolled Agents (EAs)   here – http://taxexperts.naea.org/and Certified Public Accountants (CPAs) here – https://www.aicpa.org/forthepublic/findacpa/findacpa.html

And remember, you can find answers to all kinds of questions about the Tax Cuts and Jobs Act and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

Please post all Comments and Replies to this post in the TaxQuips Forum.

Photo by scriptingnews

Download the MP3 (0:00min, 0MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments


Bipartisan Budget Act of 2018

2018-02-09 by Eva Rosenberg

windmill energy photo



Last week, I promised you that the Legislature would pass an extender bill by spring.
Well, good news!



They didn’t wait that long.
They included most of the provisions of  S. 2256 in today’s budget bill.
Alas, Congress only extended them for the short-term.
All the extenders are retroactive to January 1, 2017.
But the bad news is, most of the provisions also expire on December 31, 2017 – for one year only.


You can read all of the provisions in the summary that Congress provided -http://iTaxMama.com/BudgetAct2018_Extenders .

 

Here are the key provisions that affect you:

Sec. 40201. Extension of Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness.
Effective for debts discharged during 2017, or if a binding written agreement was in effect by December 31, 2017 for the foreclosure or short sale or other transfer or property, which would result in cancellation of debt income.

Sec. 40202. Extension of Mortgage Insurance Premiums (PMI) Treated as Qualified Residence Interest.
Effective for PMI paid during 2017. This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000.

Sec. 40203. Extension of Above-The-Line Deduction for Qualified Tuition and Related Expenses.
Effective for tuition and fees paid during 2017.
The Bipartisan Budget Act of 2018 extended this deduction through December 31, 2017. The deduction limits and income phase-outs are as follows:
•             The deduction is capped at $4,000 for an individual with (AGI) up to $65,000 ($130,000 for joint filers)
•             or $2,000 for an individual with AGI does up to $80,000 ($160,000 for joint filers). (See Tip #216)

Sec. 40304. Extension of Classification of Certain Race Horses as 3-Year Property.
Effective for racehorses purchased or placed into service during 2017.
This means you don’t have to use a 7-year r

ecovery life for any qualified racehorses purchased in 2017.

Sec. 40311. Extension of Empowerment Zone Tax Incentives.
Businesses that opt to set up shop in certain designated distressed areas get a variety of incentives for taking on that risk. The incentives include higher depreciation and certain tax credits or increases to other business-related tax credits, including the right to exclude the gain from the sale of certain small business stock.
Effective for certain Empowerment Zone costs paid during 2017.

Sec. 40401. Extension of Credit for Nonbusiness Energy Property.  This is the $500 lifetime credit for the costs of insulating your home, replacing doors and windows and such.  If you have ever claimed this credit before, you cannot get it again.
Effective for qualified home improvements made during 2017.
Use Form 5695 https://www.irs.gov/pub/irs-pdf/f5695.pdf

Sec. 50402. Extension and Modification of Credit for Residential Energy Property. This is the credit for 30% of the cost of solar, geothermal, wind and fuel cell installations. The Bipartisan Budget Act of 2018 extended this credit to include geothermal, wind and fuel cell installations. Prior to that, only solar electric and heating properties could still use this credit after December31, 2016.
Effective for qualified home improvements made during 2017 and ending on December 31, 2021.

Use Form 5695 https://www.irs.gov/pub/irs-pdf/f5695.pdf

Sec. 40403. Extension of Credit for New Qualified Fuel Cell Motor Vehicles. This is the credit for hybrid vehicles, qualified fuel cell vehicles or other alternative fuel vehicles. The credit varies based on the weight, model and make of the vehicle, and how many vehicles have been sold by the manufacturer.
Use Form 8910 – https://www.irs.gov/pub/irs-pdf/f8910.pdf
For updated information about which vehicles qualify and the amount of allowable credit for the vehicle you bought (in 2017) or are considering buying, visit this IRS page – http://iTaxMama.com/AlternativeVehicleCredit .
The provision allows a credit of between $4,000 and $40,000, depending on the weight of the vehicle. Effective for qualified vehicles purchased during 2017.

Sec. 40405. Extension of Credit for 2-Wheeled Plug-In Electric Vehicles. This is the golf-cart credit.
This is a 10-percent credit for two-wheeled plug-in electric vehicles (capped at $2,500). You do need to have a tax liability high enough to cover the credit. Like all the previous energy credits, this too, is not refundable.    Use Form 8936 https://www.irs.gov/pub/irs-pdf/f8936.pdf
For updated information, visit the IRS site here http://iTaxMama.com/Plug-In_Vehicle .
Effective for qualified vehicles purchased during 2017.

Photo by H.P. Brinkmann

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can see more Tax Quips


Key Tax Tips for Right Now

2018-01-31 by Eva Rosenberg

deadline photo


 

Today TaxMama® realizes that this is the last day of January. There are some important things for you to know today.


 

 

 

 

 

Dear Friends and Family,

Let’s start with today’s deadline – January 31st. That’s the deadline for W-2s and 1099-MISC forms to be filed. Employers already know and are meeting the deadline. But small businesses without employees…if you want to claim a deduction for $600 or more that you paid to someone for services – that deadline is today. What, you didn’t know? Or you’re still trying to get them to give you their Social Security Number? Don’t panic. You can get a 30 day extension using Form 8909. https://www.irs.gov/pub/irs-pdf/f8809.pdf

The IRS opened their electronic filing system on January 29th. But please, don’t be in a hurry to file.  In fact, you just might want to put your tax return on extension. I’ll tell you why in a moment.

These tax provisions that might affect your tax return, have expired, effective 12/31/2016:

  1. Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness.
  2. Mortgage Insurance Premiums Treated as Qualified Residence Interest.
  3. Above-The-Line Deduction for Qualified Tuition and Related Expenses
  4. Empowerment Zone Tax Incentives.
  5. $500 Lifetime Credit for Nonbusiness Energy Property
  6. 30% Credit for Residential Energy Property
  7. Credit for New Qualified Fuel Cell Motor Vehicles
  8. Credit for 2-Wheeled Plug-In Electric Vehicles


As I told you earlier there is a Tax Extender Bill introduced by Senator Orrin Hatch on December 20, 2017. Nothing has happened to it yet.
But I am confident that it will be acted on by spring. But when passed, it will restore everything I’ve just listed, retroactively to January 1, 2017.

It’s often better to file for all these tax breaks on an original tax return. Amended returns get more closely scrutinized. So, unless you’re in a real hurry for your money – or don’t fear an audit, put your tax return on extension. Incidentally, you don’t have to wait until April 17th to do that. You can file Form 4868 as early as you like.  https://www.irs.gov/pub/irs-pdf/f4868.pdf  So don’t wait until the last minute.

To make comments and tell us about how the Trump Tax plan affects you, please drop into the TaxQuips Forum.

And remember, you can find answers to all kinds of questions about the Tax Cuts and Jobs Act and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies to this post in the TaxQuips Forum.

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments


Introduction to the Trump Tax Plan

2018-01-09 by Eva Rosenberg

Today TaxMama® wishes you a Happy New Year, and brings you some basics about how the Trump Tax Plan will affect this filing season.


 

 

 

Dear Friends and Family,

Happy 2018!

2017 ended with quite a bit of turmoil, as Congress scrambled to pass a sweeping new tax law. It’s massive, increasing the size of the U.S. Internal Revenue Code by several hundred thousand words.

Too big to handle here. Enough to fill a book – which, as it happens, I am in the process of writing. My publisher, Humanix, hopes to release it by the end of next month. So stand by.

Meanwhile, the good news is, very little in the Tax Cuts and Jobs Act (TCJA) affects your 2017 tax returns. Here are a few things that do affect 2017:

  • Charitable contributions – you absolutely must have a receipt for all donations of $250 or more to any organization. You must have it in your hands before you file your tax return. In the past, in some instances, if the organization filed a report showing that you paid them, the IRS would let it slide. No longer. So chase after those receipts immediately.
  • Medical expenses – You can reduce your medical expenses by only 7.5% of your adjusted gross income. Why “only?” Because this year, everyone, including seniors, were on track to reduce our medical expenses by 10% of AGI. For a tax return with an AGI of $50,000, that increases your potential medical deductions by $1,250.
  • Aircraft Transportation Fees – When aircraft owners turn their aircraft over to a management company to lease out for them, they no longer have to pay the federal transportation tax when they use their own aircraft. This affects all owners’ flights made after December 22, 2017. (The IRS decided owners had to pay these fees for flights back in 2012.)


Naturally, there are a LOT of things that will affect you for 2018. Don’t worry, I will be posting articles about the changes over the next couple of weeks.

One major 2018 issue that really needs to change is the loss of the deduction for casualty and theft losses. For instance, if you have a fire in your home, or if someone steals your identity and wipes out your bank accounts, or you fall for a Ponzi scheme – none of that is deductible any longer. This is definitely one of those deductions you want to put pressure on Congress to restore. You can reach your legislatures here – http://taxmama.com/special-reports/call-to-action/ .

Incidentally, there are many provisions that have been part of the tax law in the past that expired for 2016 or 2017. Congress normally extends them. They didn’t do that in the TCJA. However, there is a Tax Extender Bill introduced by Senator Orrin Hatch. Nothing’s happening to it yet. But when passed, it will restore several expired tax breaks – including relief from cancellation of debt income on foreclosed homes (expired 12/31/16).

In the meantime, if you want to see the effect on your taxes, MarketWatch has a nifty calculator for you to play with. Just scroll down and enter your numbers. (It doesn’t look like a tool, just like part of the article.) https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26

 

To make comments and tell us about how the Trump Tax plan affects you, please drop into the TaxQuips Forum.

And remember, you can find answers to all kinds of questions about the Tax Cuts and Jobs Act and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies to this post in the TaxQuips Forum.

For those interested in earlier information – drop by here – http://taxmama.invisionzone.com/topic/8527-tax-cuts-and-jobs-act/

Download the MP3 (0:00min, 0MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments


Storage Costs

2017-12-06 by Eva Rosenberg

public storage photo  Today TaxMama® hears from Bob with this question. “In order to rent my residence (house) as “unfurnished”, I had to move my furniture and other belongings to a storage facility (like Public Storage). Can I deduct the expense of this storage against my rental income?”

 

                                                                      

Dear Friends and Family,

Your personal furniture is just that – personal. 
It has nothing whatsoever to do with your rental. 

About the costs, may I make a suggestion?

Look at the value of your belongings.
Compare that value to how long they will remain stored – and the related cost. Is it really worthwhile to store ALL those things?

Consider selling the furniture and other items that can be replaced. 
(Naturally, keep the highly personal things like family pictures and artifacts.)

Frankly, I have seen people store things for years, with the storage costs exceeding the value of their furnishings. Meanwhile, the items were deteriorating or becoming worth less, all the while.

In fact, my office manager, Lulu, just told me about her friends. They are storing personal belongings in storage units and paying about $500 per month. Just for one year costs $6,000. Imagine just leaving those things lingering there for a few years. 5 years passes quickly. The costs can easily escalate to $30,000 in that time. Can’t you think of a much better use for $30,000? I certainly can!

To make comments and tell us about your storage shame, please drop into the TaxQuips Forum.

And remember, you can find answers to all kinds of questions about deductions and other tax and business issues, free.
Where? Where else? At www.TaxMama.com.

 [Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!] 

Please post all Comments and Replies to this post in the TaxQuips Forum.

Photo by jm3

Download the MP3 (0:00min, 0MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments



:: next page >>

Google Custom Search



create & buy custom tax nerd products at Zazzle