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Posts Tagged ‘federal income tax’

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: Small LLC business – need help with International sub-contractor?

My husband has a small LLC business where he sub-contracts out some of his work. He has one international sub-contractor.
We have asked a CPA and a store-front tax place about how to report what we paid to an international sub-contractor and got different answers. We also couldn’t find any clear answers on the IRS website.
In particular, we are trying to find out if we need to fill out a 1099 and report it on a 1096 (by Feb 28th).
If you have an answer, could you also provide a link to the documentation about it. Thank you!
Thank you for your response.

(I’m new to Yahoo Answers so I didn’t know how to respond again to my own post. I apologize.)

We paid a company in Australia (Internet consultants), not an individual.

Do we still document it on a 1096 as money paid out, or leave it up to an Accountant to somehow include it as money paid out on our tax filing?

Answer: You don’t report money paid to a foreign individual or firm on Form 1099. They don’t have a US TIN and cannot be compelled to get one. You will need to document that the payments were made to a foreign person, so you’ll need their full name and home address in the foreign country in your records.

If the person has a beneficial interest in the income from your business you must have them will out a From W-8BEN and include any national tax number from their home country. If they refuse to file a W-8BEN with you, you must withhold Federal income tax at 30% and pay that over to the IRS.

LMP Corporate Loan Fund Inc. (”TLI”) Announces Distribution for the Month of January 2010

NEW YORK—-LMP Corporate Loan Fund Inc., which is listed on the New York Stock Exchange under the symbol “TLI”, announced today a monthly distribution of $0.0400 per common share for January 2010.

Ch. 4 LLC & Self Employment Tax

Question: I received a payout from a 401k and I have a 1099-R?

How do I file this?

I have read through some of the forms online and the task seems quite daunting.

It was a payout of the entire balance, but it was only $210. It had taxes withheld from it also. Do I file Form 4972? And which line should I include it in on the 1040-A?

Any assistance is much appreciated.

Answer: If you are under age 59-1/2 you’ll owe a 10% penalty on the withdrawal and will have to file a 1040, not a 1040A. The amount withdrawn goes on line 16B, the 10% penalty goes on line 60. Whatever was withheld will add into line 64.

Start your federal tax return earlier to cash in on 2009 changes

(ARA) – About 71 million American households (47 percent) will owe no federal income tax for 2009 thanks, in part, to the American Recovery and Reinvestment Act (ARRA), according to estimates by the nonpartisan Tax Policy Center. The other 53 percent of us will have to pay.

How To: Check Your 2009 Tax Withholding September 2009

Know Where You Are…To See Where You’re Going

Logo #6 is more subtle and will probably look better in situ but in the final analysis it will also depend on the overall color scheme of the page.

Excel Busn Math 42: Federal Income Tax Payroll Deduction

Buy Federal Income Tax: Examples and Explanations