Free Tax Tips

Question: $2,000 tax on $8,000 income?!?

I recently became a self-employed Pilates instructor (because there is no other kind), and am preparing my self-employment tax forms. I have estimated that I will make $8,000 for the second half of this year. And after calculating the honest way, my taxes owed on this $8,000 will be $2,000! I’m a full time student, so I can’t build up more hours or a business proper at this point. So, what the heck? Is this an egregious mistake on my part or does the IRS expect independent contractors to lie out to wazoo about their business expenses?

Answer: That will depend upon any other income that you have.

You’ll owe about $1,128 in Self-Employment taxes on $8,000 profit. If that’s your only income for the year you won’t owe any income tax unless you can be claimed as a dependent. (If you can be, tack on about $260 for Federal income tax.) If you have other income for the year, the $8,000 will be added to it to figure your income tax so it is entirely possible that you will owe a total of around $2k on it.

Forget about “lying out the wazoo” on your expenses. Small businesses are the MOST likely to be audited. Anything you claim that you don’t have proof of payment for will be disallowed. You’ll owe the tax, plus whatever penalties and interest are due on top of it.

Since you’re going to owe more than $1,000 on it, you do need to make estimated tax payments to avoid penalties and interest for underpayment of estimated taxes. Today was the due date for the 3rd quarterly payment so unless you’ve already been earning money at it for the past couple of months you don’t need to make any payments until Jan 15, 2009. So set aside enough to cover your tax bill and either make the Jan 15th payment, or file and pay in full by Jan 31st to avoid any extra penalties and interest.

Recapping final months of ‘09 news

The Enterprise today completes its annual week-by-week look back at the most significant news stories of 2009 with capsule summaries from every issue in September, October, November and December. The first eight months of 2009 were recapped in the final t read more

Bookkeeping for the Self Employed Tracks Income & Expenses Automatically and Free

Question: Is it illegal to 1099 an employee if he/she is not a contractor ?

I was originally hired and paid as a regular employee and now my employer has cut my paycheck in half and has been paying me as a 1099 when nothing about my job has changed. I still have to go into the office everyday and work as usual. Isnt this illegal? I think he is doing this to avoid paying the withholding taxes, that now I will have to pay. Isnt this illegal? He is doing this with all his employees. What can I do to get him to pay all the taxes from the last 5 months this has been going on?

Answer: Yes, this is illegal.

There are forms that you can file to have the IRS make a determination of whether or not you are an employee.

There is no choice when it comes to determining whether a person is an employee or contractor. There are many criteria.

go to this site:
http://www.irs.gov/govt/fslg/article/0,,id=110344,00.html

What you have going for you is that he paid you as an employee before so the IRS will know that something has changed.

Tax-Saving Secrets

New deductions and credits can slash your 2009 tax bill.

Loan Modification Tax Tip Video from Roni Deutch, A Professional Tax Corporation

Question: How can I find out how to report income not claimed on income taxes for the years 2002 and 2003?

I worked for a Real Estate Co. for 17 years, as an office manager and agent. Unintentionally a 1099 was forgotten to be made out for Sales income. I did receive a W-2 for regular income. I no longer work for this company, and my correspondance with them has been ignored. I owe taxes on income that was not reported, and would like to get this taken care of.

Answer: Billie, you need to file an amended return for years you under paid. you will have to pay penalty and interest in all likely hood. Jerry

Global High Income Fund Inc. – Reports Earnings

NEW YORK—-Global High Income Fund Inc. , a non-diversified, closed-end management investment company seeking high current income and secondarily, capital appreciation through investments primarily in debt securities of emerging market debt issuers, today announced its performance for the fiscal first quarter ended and fiscal year-to-date ended January 31, 2010.

Question: what is the effect of a 1099 tax form from a mortgage short sale in the state of california?

I am wondering about the impact on both federal and state taxes in the context of the current mortgage laws. does it count as income that you can be taxed on or does the current mortgage crisis bail out shenanigans protect one from it?

thanks!

Answer: A 1099C is treated as income to recipient.

If there is exception or exemption, then no 1099C is issued

A 1099A or 1099S have different results

Kenneth R. Harney:

The Nation s Housing: Real estate news from Washington

New Bill AB1779 – To Help Home Owners (Part 2)

Community Calendar

Franklin Park Herald-Journal with news of Northlake welcomes items for the Community Calendar as well as items for Business Briefs, Campus News, Community Briefs, School Digest and Newsmakers. Items must be received a minimum of 14 days prior to publication, but earlier is better. E-mail items to oakpark@pioneerlocal.com; fax to (708) 383-3678 or by mail to: Pioneer …