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

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Question: Sony HDR-CX7 END OF LIFE *************?

Thanks to the technology which gave HD. My house is with full of HD gadgets.

We are expecting our first child in 5 weeks and i thought of upgrading my Camcorder to a solid state HD Camcorder.

After reviewing lots of reviews and of course i link “Sony”, i got convinced with Sony HDR-CX7 camcorder.

Visited the 8th best Sony outlet in north America (95051) to buy, unfortunately i got disappointed with a shocking news
from the store rep saying “this Sony HDR-CX7 model is EOL, and do not know when and what is the next model from Sony on solid state HD next gen camcorder”.
In this visit, this Sony store had this camera on sale for $799.00. And now it is $1099.

Is this the best time to buy this camera?????

or any body know what’s next model from Sony, when is it available and what will be the price.

Thanks in advance.

Answer: I’m not sure you’d want to buy that camera Beck its using memory chips that are expensive to upgrade and i always suggest people always wait until a product is on market for awhile first. One reason is cost goes down another is they get the bugs out of stuff when its on the market awhile. Like my Sony camcorder its only 8mm but when it first came out it was 899 but i bought mine refurbished for 200. Id look into the camera that use Cd’s to record with but their only down fall is they don’t record for long and the Cd’s are expensive. Be careful with the hd products Bec their soon to become obsolete

Question: At the end of the year, do I have to enter unused scholarships on my 1099-misc?

This December, I anticipate $3000 of my scholarships will go to my savings account, gas fund, etc….

Answer: Any scholarship money you receive over and above the cost of tuition, fees and books (and some supplies) will need to be reported on your tax form for that year. Check out the IRS publication 970 and publication 17. Or go to: http://www.finaid.org/scholarships/taxability.phtml which is a great site that summarized the taxibility of scholarships.

Question: Can I still draw unemployment compensation if I am an independent contractor(1099) until I start making money?

There are not any salary + commission sales jobs out there right now. I have been looking for 4 months. I want to go back to work and have seen what look like good opportunities, some will take as long as 90 to 120 days to start making money. I am a single dad and have no savings to hold us over for that long. I only receive $200 per month in child support. I want to get off unemployment and be productive again.

Answer: As an independant you are not eligible for unemployment compensation as you have not paid into the fund

Area Events calendar

Registration for Stamford Babe Ruth Fall Baseball is underway. The season runs from Sept. 11-Nov. 7. The cost per player is $125. All players must be Stamford residents. Spots are available in the 12/13 year old division as well as 14 and under division.

It’s A Home Based Business World

Question: Will taking a short term part time job affect my unemployment benefits in CA?

I live in California, lost my job last Fall and have been receiving unemployment since then. I just started a “gig” type of job (aprox 12 hours a month, $10/hour) for a little extra cash. I interviewed today for another short term job… this would be 15 hours a week for about 2 or 3 weeks, $10/hour.

Both jobs require that IRS form 1099 be filled out.

If I take this second job, would my CA unemployment benefits be in jeopardy? Right now the benefits I am receiveing are just barely covering my rent and utilities… without them I’m in major trouble. The two side jobs by themselves are not enough to make rent, let alone pay for food or anything else.

Thank you!

Answer: You should probably go to the unemployment website for CA.
I’m sure they have a FAQ section.

I know in MO, you can work P/T job and rec’v benefits but of course its not the full amount. I did it for 6 months, as long as you report to unemployment how much you’re making at the P/T jobs.