Tax Tips for the Self-Employed

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When you are self-employed, it typically means you work for yourself as an independent contractor, or you own your own business. Here are six key points the IRS would like you to know about self-employment and self-employment taxes:

  1. Self-employment income can include pay that you receive for part-time work you do out of your home. This could include income you earn in addition to your regular job.
  2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.
  3. If you are self-employed, you generally have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. You figure this tax using Schedule SE, Self-Employment Tax.
  4. If you are self-employed you may have to make estimated tax payments. People typically make estimated tax payments to pay taxes on income that is not subject to withholding. If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return. The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.
  5. When you file your tax return, you can deduct some business expenses for the costs you paid to run your trade or business. You can deduct most business expenses in full, but some costs must be ‘capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  6. You may deduct only the costs that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.

If you have any questions please call our office at 314-993-4285.

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Foreign bank account filing responsibility is a real thing!

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September 11, 2001 changed everything.

The Patriot Act changed everything.

What changed?  Among other things, foreign bank account reporting and failure to file penalty.  If you are a U.S. citizen, it is incredibly important for you to contact us immediately if you have a foreign bank account, regardless of the size of the account, and you have not disclosed this to us previously.

After years of penalty abatement the IRS stance for forgiveness is that they will not charge you with the felony or throw you in jail, both of which are allowed under the law.  The penalty is $10,000 per occurrence.

It’s simple.  Call us if you have a foreign bank account. 314-993-4285.

Moving Expenses Can Be Deductible

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Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. Here are the top tax tips for moving expenses.

In order to deduct moving expenses, your move must meet three requirements:

  1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov/forms anytime.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances. 

If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report. Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-20”

Five Tax Tips about Hobbies that Earn Income

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Hobby or business?  We’ve been disclosing the significant difference between a hobby or a business for many years.  If your “business” is running a consistent loss, please complete a self-assessment using the nine factors the IRS uses to determine if it is truly a business.  Keep us posted.

Millions of people enjoy hobbies. Hobbies can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income from hobbies is different from how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are five basic tax tips you should know if you get income from your hobby:

  1. Business versus Hobby. There are nine factors to consider to determine if you are conducting business or participating in a hobby. Make sure to base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses, to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.
  2. Allowable Hobby Deductions. You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.
  3. Limits on Expenses. As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.
  4. How to Deduct Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. See Publication 535 for how you should report them on Schedule A, Itemized Deductions.
  5. Use IRS Free File. Hobby rules can be complex. IRS Free File can make filing your tax return easier. IRS Free File is available until Oct. 17. If you make $62,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. You can only access Free File through IRS.gov.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-15”

Find Easy-to-Use Online Tools on IRS.gov

Don’t be afraid to visit IRS.gov, they won’t bite and they have some terrific tools to help you find your refund and the status of your return. Here’s a list of popular online, self-help tools offered for free use on IRS.gov:

  • IRS Free File.  Use IRS Free File to prepare and e-file your federal tax return at no cost. Free File will do much of the work for you with brand-name tax software or Fillable Forms. If you still need to file your 2015 tax return, Free File is available through Oct. 17. The only way to use IRS Free File is through IRS.gov.
  • Where’s My Refund?  Checking the status of your tax refund is easy with Where’s My Refund? You can also use this tool with the IRS2Go mobile app.
  • Direct Pay.  Use IRS Direct Pay to pay your taxes or pay your estimated tax directly from your checking or savings account. Direct Pay is safe, easy and free. This tool walks you through five simple steps to pay your tax in a single online session. You can also use Direct Pay with the IRS2Go mobile app.
  • Online Payment Agreement.  If you can’t pay your taxes in full, apply for an Online Payment Agreement. The Direct Debit payment plan option is a lower-cost, hassle-free way to make monthly payments.
  • Withholding Calculator.  Did you get a larger refund or owe more tax than you expected the last time you filed taxes? If so, you may want to change the amount of tax withheld from your paycheck. The Withholding Calculator tool can help you determine if you need to give your employer a new Form W-4, Employee’s Withholding Allowance Certificate and provide information that will help you fill out the form too. Give the new Form W-4 to your employer to make the change.
  • Interactive Tax Assistant.  The ITA tool is a tax-law resource that takes you through a series of questions and provides you with responses to tax law questions. For instance, you can find out if you may need to make an individual shared responsibility payment or if you are eligible for an exemption, when you file your taxes. You can also use the tool to find out if you may be eligible for the premium tax credit.
  • IRS Select Check.  If you want to deduct your gift to charity, donate to a qualified organization. Use the IRS Select Check tool to see if a charity is qualified.
  • Tax Map.  The IRS Tax Map offers tax law information by subject. It integrates web links, tax forms, instructions and publications related to your topic into one search result.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-17”

Understanding the “Nanny Tax” for your household employees.

Schedule H

If you employ a household employee, such as a maid, nanny, caretaker, yard worker, or driver, you could be subject to paying the “Nanny Tax”. This tax can encompass Social Security and Medicare (collectively known as FICA), FUTA, and SUI (state unemployment insurance tax).

The simplest way to pay these taxes is through filing a Schedule H at the end of the year and filing a quarterly Missouri Unemployment Tax.

Fortunately, you may not be required to pay all of these taxes – whether or not you have to pay these taxes depends on how much your household employee is earning….

If you do not exceed any of the thresholds set by the Federal and State laws, you will not pay any “Nanny Taxes”, and you will not have to file a Schedule H.

Understanding which thresholds you have exceeded can be complicated. The accountants at Hauk Kruse & Associates would like to simplify it for you:

Do I have to pay FICA?

If your employee is not

  • your spouse,
  • your child (under 21 years old),
  • your parent,
  • or under the age of 18

and you pay them more than $1,900 in a year, you DO have to pay FICA.

If you have to pay FICA, you pay a one-time amount at the end of the tax year and you will be responsible for paying a total of 7.65% of your employee’s wages. This includes the 6.2% for Social Security and the 1.45% for Medicare.

You are also responsible for making the payment for your employee’s portion of the FICA. You can do this two ways: by either withholding 7.65% from each of their paychecks or simply by adding it to your balance due on your Schedule H.

Do I have to pay FUTA?

If you employee is not

  • your spouse,
  • your child (under 21 years old),
  • or you parent

and you pay them more than $1,000 in a quarter, you DO have to pay FUTA. Once one quarter passes this threshold, all wages are subject for the entire tax year.

If you have to pay FUTA, you pay a one-time amount at the end of the tax year and you will be responsible for paying 0.6% of up to $7,000 in your household employee’s wages.

Your household employee will not have any withholdings on their paycheck in regards to FUTA.

Do I have to pay the SUI?

If you live in MISSOURI, you become liable for state unemployment when you meet any of the following requirements:

  • you pay your employee $1,000 in cash wages in a calendar quarter
  • you become liable under FUTA
  • you are determined to be a successor to a liable Missouri employer by DES staff

Unlike FICA or FUTA, the Missouri Unemployment Insurance Tax is filed and paid quarterly on MODES-4-7.

If you are required to pay the Missouri Unemployment Insurance Tax, you will pay quarterly and you will be responsible for paying 3.51% of up to $13,000 in your household employee’s wages.

Your household employee will not have any withholdings on their paycheck in regards to the Missouri Unemployment Insurance Tax.

If you live in a state other than Missouri and would like to know if you are required to pay your state’s SUI, please call our office at 314-993-4285.

If you have household employees and would like help filing your tax forms or understanding the “Nanny Tax”, please contact us at 314-993-4285 or at office@hkaglobal.com.


You must file all tax forms using an EIN. If you do not have one, you can apply for one online or we can file for one on your behalf.

3 Tips Regarding Cyber Security!

Cyber SecurityRecently a major news story has been circulating about Dropbox being hacked. With this story there have been many ups and downs: first it was stated that Dropbox WAS hacked and then Dropbox came back declaring they WEREN’T hacked, but outside servers were hacked and the passwords/usernames from those servers were used to log in to many websites, including Dropbox’s site.

While this story has created major panic, speculation, and confusion, we believe that it can be used as an educational experience in cyber security.

If thought about logically, it makes sense that hackers would grab usernames and passwords from one site and use them across the board. According to a 2013 study by Ofcom, the UK’s communications regulator, 55% of online users use the same password for every website!

Therefore, we have 3 tips on how to keep your important* websites and information safe:

  1. Never use the same password on more than one website at a time.
  2. Much like the security measurements used on the HKA website, make sure your passwords include at least: one uppercase letter, one lowercase letter, one number, and one special character (if permitted).
  3. Change your passwords at least once every quarter.

Of course, this creates the question: “How do you remember all of these passwords and keep them safe?” Stay tuned for our next blog for 3 tips from the experts.


 

* When it comes to social media sites like Facebook and Twitter, many people believe that their security is not as important. We disagree! Social media websites may not contain secure documents, but they do include something important: your reputation. And in today’s world, online reputation is an important aspect of your professional reputation!

 

With our new website, you will always have your legal documents on hand!

legal docsHave you ever needed your legal documents, such as your medical power of attorney, will, or trust, but they were left at home in your safe or filing cabinet?

Most people don’t carry their important legal documents with them: not only are they bulky, but they also contain confidential information which would make losing them a nightmare!

With our new website, your legal documents will never be left at home again. After uploading them to the new “legal documents” section in your private web account, you will be able to access them anywhere that has internet access!

If you would like to find out more about how this amazing new feature will benefit you, please call our office at 314-993-4285.

The Hauk Kruse & Associates website will be under construction on September 17th.
Check out the new website on September 18th at http://www.hkaglobal.com!

Identity Theft and Tax Returns

Identity thieves have been using people’s social  security numbers and personal information to file fraudulent tax returns for the past few years, and it is becoming an increasingly large problem. Statistics show that the IRS investigations of tax-related identity theft is up more than 60% since 2012. If an identity thief beats you to the filing of your tax return, your return will be delayed, sometimes for more than a year which can be devastating to those who were counting on their refund.

 

If you find yourself to be a victim of identity on your tax return we can help you take the necessary steps to resolve the issue. First, you will need to file your return by mail with Form 14039 Identity Theft Affidavit which shows the IRS that you are aware of the problem and are the correct taxpayer. Second, you will want to contact the FTC to file an identity theft report and make sure all of your credit cards are secured. Third, contact your local police department so that they may investigate the matter further.

 

To protect yourself, make sure you keep all of your documents in a secure place, shred all documents when disposing of them, never carry your social security card in your wallet/purse, and beware of any scams asking for your social security number or other sensitive information over the phone.

 

Please feel free to give us a call if you suspect your identity may have been used to fraudulently file a tax return, 314-993-4285

 

Relevant links:

http://www.consumer.ftc.gov/features/feature-0014-identity-theft

 

http://www.irs.gov/uac/Newsroom/Tips-for-Taxpayers,-Victims-about-Identity-Theft-and-Tax-Returns-2014