Are you a small business owner or are you self-employed?  If you are, you probably have questions about taxes for your particular situation.  You can check out the IRS’s Small Business and Self-Employed Tax Center on the IRS website.

The IRS’s one-stop shop offers a variety of resources and online tools to help small businesses and self-employed individuals by providing resources such as:

• A-Z Index for Business, a fast way to find information
• Small business forms and publications
• Online applications for an Employer Identification Number
• Employment tax information – federal income tax, Social Security and Medicare taxes, FUTA and self-employment tax
• Tax-related news that could affect your business
• Small business educational events
• IRS videos for small businesses

Did you know that there is also a Tax Calendar for Small Business Taxpayers?  The Tax Calendar for Small Businesses and Self-Employed – Publication 1518 – is available online or as a printable PDF file. This 12-month calendar containts information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small-business owners, with room on each month to add notes, state tax dates or business appointments.  You can also download the tax events into your calendar or subscribe to the tax calendar events.  The calendar provides the small business owner with a ready resource for meeting their tax obligations.

If you have other questions about your tax obligations, you might want to contact a tax professional.

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Are you self-employed? Do you work as an independent contractor, or are you a sole proprietor of a business?

Self-employed individuals generally must pay self-employment taxes. Here are some facts that you should know about self-employment and the IRS:

1. Self-employment can be full-time or part-time. You may even have a regular full-time job and still be considered self-employed for the purposes of self-employment taxes.

2. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves, and you generally have to pay self-employment tax as well as income tax when you are self-employed.. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. When you file your Form 1040, you also file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business (also known as business expenses). These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. Business expenses must be both ordinary and necessary to be deductible. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information check out the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov. You can also call the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

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If you are self-employed, you most likely have to pay self-employment tax. Self-employment tax consists of Medicare and Social Security taxes for individuals who work for themselves and is similar to the Medicare and Social Security taxes that are withheld from the pay of most people who earn wages.

In order to figure self-employment tax, you should use Schedule SE (Form 1040).

You must pay self-employment tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. For church employees, your income needs to be $108.28 or more.

Generally, you must pay self-employment tax on net earnings from self-employment.  If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ to figure net earnings from self-employment.

If you have earnings subject to self-employment tax, use Schedule SE to figure your net earnings from self-employment.  Before you figure your net earnings, you generally need to figure your total earnings subject to self-employment tax.

Note: The self-employment tax rules apply no matter how old you are and even if you are already receiving Social Security or Medicare.

If you have questions about self-employment tax, consult with a tax professional.

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Taxes are generally held by employers and sent to the IRS as payroll taxes. For the self-employed, you have to make installment payments every quarter based on your estimated taxes. All taxpayers have to file a tax return by April 15^th, unless they file an extension. If they paid too little in taxes throughout the year, they will owe the IRS the balance at tax time and will have to pay those taxes when they file their taxes. If your payment is late, you will have to pay penalties and interest on what you owe. If you can’t afford to pay what you owe, you need to contact the IRS before they are due and make arrangements to make payments.

There are several ways you can arrange payment options with the IRS. Here are four options to pay your tax bill:

1. Mail a Check

Many taxpayers still send their tax payments by this method. You check must be sent before April 15^th. In reality, it must be postmarked by April 15^th. Your tax booklet will tell you where to send your check, or you can check the IRS website for the address in your region. The IRS recommends priority mail via U.S.P.S.

2. Use Your Credit Card/Debit Card

You can use your credit card to pay your taxes, however, it may end up costing you more in the long run with the interest rates your credit card company may charge. If you decide to go this route, you should know that the IRS has partnered with three companies that provide credit card services to help taxpayers make payments. The IRS website provides information about these companies.

3. Direct Deposit

You also have the option of agreeing to a direct deposit. This allows the IRS to take the taxes you owe from your bank account. This service is easy and free. If you are expecting a refund, choosing direct deposit could also get your refund to you much more quickly than if your refund check is mailed to you.

4. Electronic Federal Tax Payment System (EFTPS)

You may also use the EFTPS service when paying the taxes you owe. The IRS offers this service by allowing taxpayers to make regularly scheduled payments. It’s a free service and all individual taxpayers may use it. You can enroll for this service at www.irs.gov.

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For many taxpayers, tax time can be daunting and tedious. Most of us don’t really like doing our taxes, but there can be a silver lining when we find out we’re getting a big refund. Many taxpayers aren’t aware of the deductions they can take to save themselves a lot of money. Read on for a list of deductions that you can take.

Common Tax Deductions

1. Deductible Taxes: You can take deductions on your state and local income taxes, foreign income taxes, real estate taxes, and property taxes. For taxpayers who sold their home and purchased a new one last year, they can deduct the property taxes on both homes for a larger deduction. They can also claim pre-paid property taxes.

2. Deductible Interest and Points: Mortgage interest, home equity loans and student loan interest can be deducted. Any discount points that resulted in a smaller interest rate on your mortgage can be deducted, as well. Certain refinancing fees may be deducted, as well. Pre-payment penalties, pro-rated interest and pre-paid interest on your mortgage can be deducted.

3. Charitable Contributions: Included in these deductions are cash and non-cash donation to non-profits. You will need to keep your receipts. For non-cash donations, you can deduct the “fair market value” of the item you donated.

4.  Business Use of Home and Car: For the self-employed, you can take a deduction on anything that is used exclusively for your business. Office supplies, any memberships, gas, and mileage can be deducted. Part of your mortgage, property tax, and certain utility bills, such as internet and telephone, can also be deducted. You will have to keep your receipts and keep records of your travel expenses if it is part of your business.

5. Other Deductions: The following deductions can’t be placed in the above categories, but they can save you money. You can claim the child tax credit if you have qualifying dependents. You may also claim retirement savings and medical costs that were paid out-of-pocket. You can claim some educational costs like tuition and books. If you have property loss that wasn’t covered by your insurance that was due to fire or weather damage, you can claim those expenses. If you move more than 50 miles from home for a new job, you can deduct those expenses. The entire move isn’t deductible, but some expenses are.

Although this isn’t a complete list of deductions you take or credits you can claim, it’s a good starting point. Consult with a tax professional for more deductions and credits to get the maximum amount you’re entitled to.

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For the first time, the IRS allowed self-employed seniors to deduct Medicare Part B premiums for the 2010 tax season. Before the 2010 tax year, the IRS didn’t allow premiums to be deducted. This new rule was set in early 2011, but it was not widely publicized. It was just included on the 1040 for tax season. The new rule contradicts the “Business Expenses Publication 535″, which states that deducting Medicare Part B premium payments is not allowed. But a statement released by the IRS requested that taxpayers ignore the statement on Publication 535 and go ahead and the deductions on the new 1040. Self-employment health insurance includes all of the insurance premiums paid for owners of sole-proprietorships, partnerships, S-type corporations, and limited liability companies (LLC).

How To Take The Deduction

The deduction is located on Line 29 of the 1040, “Standard Tax Form”. The deduction is on the first page of the tax form, so you don’t need to claim it as an itemized deduction.

Welcome Addition

Small-business owners feel this inclusion on the 1040 is a huge savings, because Medicare for self-employed seniors costs about $4,500.00. If your spouse and family are included, the costs could become very expensive. Consequently, many individuals who qualify see this as a good deal.

The Healthcare is Deducted Twice

You can deduct this premium cost twice. Because healthcare costs are an allowable expense for businesses, it means you can deduct this expense in your taxable business income. The expense is removed before including the income on your tax return. As an added tax benefit, the same premium cost is deducted again on Line 29 of the Standard Tax Form. The IRS has actually allowed  the deduction twice.

What about Medicare Part C and Part D?

Since there was no announcement about the inclusion of Part B premium deductions, the IRS is still not giving the deductions for Part C or Part D premiums. Part C is for self-employment premiums for Medicare Advantage HMO insurance and Part D is prescription drug coverage for the self-employed. There has been no mention of the Medicare Supplemental Insurance products, or Medigap, either. As the IRS releases more information about this inclusion in the 1040, there will be clear rules about how to handle all of the self-employment healthcare plans.

On the IRS website, they have given a clear description of the Part B deduction, which is noted below.

Medicare Part B:

Medicare Part B is a supplemental medical insurance. Premiums you pay for Medicare Part B are a medical expense. If you applied for it at age 65 or after you became disabled, you can include in medical expenses the monthly premiums you paid. If you were over age 65 or disabled when you first enrolled, check the information you received from the Social Security Administration to find out your premium.

Please contact a tax professional if you would like more information about this deduction.

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It’s summer and school is out, which means plenty of students will be out looking for summer jobs. Keep in mind, though, that the IRS wants you to remember that you won’t be keeping all of the money you will make from that summer job. You will have taxes withheld from your pay check.

There are six IRS tips to keep in mind when you start your summer job.

1. On your first day of your new job, you will be required to fill out a W-4, Employee’s Withholding Allowance. Your employer will use this form to determine how much tax will be taken out each pay period. If you have more than one summer job, you will fill out a W-4 for each job. To make sure the correct amount is being taken out, you can check the Withholding Calculator on the IRS website.

2. Depending on the type of summer job you get, you might get tips as part of your income. All tips are taxable and you must account for that at tax time. 

3. A lot of students take on odd jobs during the summer to make some extra money, and any income your receive, from either baby-sitting or mowing lawns, is taxable.

4. If you earn $400 or more from those odd jobs, you will also end up having to pay self-employment taxes, because you are, basically, self-employed. These taxes pay for your Social Security and Medicare benefits. Social Security and Medicare are for the self-employed as well as those who work for someone else, for when you retire. Your self-employment tax is calculated on the 1040 Form, Schedule SE.

5. If you are in the ROTC program for advanced training, your food and lodging allowances are not taxable. But active duty pay, the pay you get for summer ROTC, is subject to tax withholding.

6. There are special rules that apply if you are a newspaper carrier. You are considered a “direct seller” and are self-employed as far as your taxes are concerned, if you meet the following conditions:

-Your job involves delivering newspapers.
-All of your pay comes from sales instead of the hours you work.
-You are under contract as a newspaper delivery service worker that states you are not an employee and must withhold your own taxes.

Keep these simple tips in mind when looking for your summer job and you will not be penalized for not withholding enough in taxes come tax time.

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Sub-contractors and real estate and insurance agents are just a few occupations that receive a 1099-MISC. These people are independent contractors and are considered self-employed. They are responsible for paying their own taxes. Taxes are not taken out through the year. They have to make sure they withhold enough every time they are paid for their work.

For self-employed people who have some knowledge of taxes, or have retained the services of a tax professional, using the 1099 can be a good thing. If they are newly self-employed, however, there could be some major issues come tax time.

Regular employees have federal, state and payroll taxes taken out of their net wages every pay day. These employees are not completely responsible for their taxes, but someone who is considered and independent contractor is. Every quarter, an independent contractor needs to pay into their taxes. The way to figure your taxes is either 100% of last year’s tax liability or 90% of this year’s tax liability. If you don’t pay enough throughout the year, you will end up owing at tax time.

Another important factor about being an independent contractor is to keep track of ALL of your expenses through the year. Those who receive 1099′s can deduct expenses like a business owner can. Many small business owners and independent contractors use the same Schedule C to report their income.

Auto expenses and mileage are the most important expenses an independent contractor needs to keep detailed records of. The IRS allows for 50 cents for every mile driven for business purposes, plus gas, repairs, depreciation, and insurance. You will have to decide if you want to take the actual expense deduction or the standard mileage rate.

You must also take into consideration the actual definition of business miles. You cannot claim all miles you have driven, only those miles that are used for business purposes. Miles driven from your office to, say, appointments, are considered business miles. Miles driven while not working cannot be deducted.

If you choose to use the actual expense method, you can figure your deductions by totalling your auto expenses and multiplying that number by how many miles driven.

Some other expenses you can deduct as an independent contractor are:

~ Advertising expenses
~ Office supplies
~ Cost of uniforms/Equipment
~ Utilities
~ Insurance
~ Interest paid
~ Legal/professional services
~ Meals and Entertainment Expenses
~ Lodging expenses

The last issue an independent contractor needs to be aware of it the home office deduction. If you use part of your home strictly for the use of your business, you can take a deduction. It offers the ability to deduct part of your living expenses, which include rent or mortgage, insurance, taxes, and utilities. This deduction will also let you use some of your commuting miles into business miles.

If you have two offices or work locations (one outside the home and one in your home), you can use commuting miles as business miles. In addition to the Schedule C, you will have to file an 8832 form to take the home office deduction.

An independent contractor and self-employed person needs to understand what they are able to deduct in order to save money on your taxes. Purchasing tax software with expense and deduction spreadsheets or hiring a tax professional are two ways to help you save as much money on your taxes and may keep you from owing the IRS at tax time.

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It’s almost summer, which means vacation time for most people. Wouldn’t it be great if everyone could take a deduction for vacation expenses? Well, if you are a small business owner, you can. It’s absolutely legal to deduct your vacation. Below are examples of how to do it (but remember to contact your tax professional to get the most complete information). 

To qualify for this deduction, you have to meet the following criteria:

1. If you are self-employed or own a small business
2. If, on your next trip, you combine business with personal.

In terms of a  small business, this includes any type of self-employment, full or part-time, home-based or bricks and mortar. The deduction refers to any type of small business: sole proprietorships, partnerships, corporations, and limited liability companies.

To deduct a U.S. trip, you are allowed to combine business with personal, but the main reason for the trip must be business related. The IRS defines a trip taken for business purposes as the number of business days must be more than the number of personal days. Also, time of travel is considered part of the business days.

If the number of business days are more than 50% of the total vacation days, then  you can take the deduction. This is what you are allowed to deduct: 100% of your transportation expenses and 100% of the expenses for your days on the road, including hotel, cab fares, rental car, business related fees, dry cleaning, laundry and meals.

Meal expenses are subject to the 50% rule. When 100% of your on-the-road expenses, including meals, are for the business days, they are deductible, and the actual amount of the meal deduction will be 50% of the meals cost. Basically, you are only allowed to deduct 50% off of your meal expenses.

Transportation expenses include air fare to and from, if you take a plane. If you drive, you are able to deduct the actual cost of gas or take the deduction that is the current IRS-approved mileage rate.

The IRS has made a list of all of the allowed deductions on their website. Below is an example of what is and isn’t deductible.

Trip Primarily for Business:  See the IRS website for full details at irs.gov. 

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

To make sure you get the maximum amount of deductions on your vacation, and so you take the correct deductions, please consult with a tax professional for help.

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You might be impacted by the Affordable Care Act tax provisions, whether you are a small business owner or an individual.

President Obama signed The Affordable Care Act into law on March 23, 2010. The goal of the health reform is to guarantee that all Americans have access to affordable health insurance. The law will affect nearly every American, including those who are on government run health insurance, people who pay for their own insurance, small businesses, seniors on or eligible for Medicare, and large employers who offer medical coverage.

The Affordable Care Act contains several tax provisions that will begin as different areas of the health reform legislation are put into action. Action on the health reform law is the duty of the Department of Health and Human Services. The purchase of health insurance is included in many worker’s jobs and tax-related benefits. Almost all of the new regulations involve the involvement of the Department of Labor and the IRS.

Below is a list of some of the tax-related effects of the Affordable Care Act that have been decided. For the complete list, please visit www.irs.gov.

Employer-Provided Health Coverage is not taxable
Starting in the 2011 tax year, the Affordable Care Act requires your employer to report your health insurance coverage on your W-2. This is only for your information. It is there to let you know the value of your health care benefits. The amount doesn’t affect your tax liability because the cost of your employer’s contribution will not be included in your income and is not taxable.

Small Business Health Care Tax Credit
If you own a small business, this credit will help you to afford coverage of your employees. It is for businesses with low to moderate income workers. The credit encourages small business employers to offer health insurance coverage for the first time or keep coverage it may already have. The credit is available to small business employers that pay at least half the cost of coverage for their employees.

To qualify for the small business tax credit you must meet the following eligibility rules:
-Provide health care coverage: You must cover the cost of at least 50% of health care coverage for some of your workers based on the single rate.
-Company size: You must have fewer than 25 full time employees. An employer with fewer than 50 part time employees may be eligible.
-Average annual wage: You must pay an average annual wage of less than $50,000.

If you are eligible, the credit is worth up to 35% of your premium costs. This rate increases to 50% (35% for tax-exempt employers) on January 1, 2014. The credit decreases slowly for companies with average wages between $25,000 and $50,000, and for companies with 10 to 25 full time employees.

Health Coverage for Older Children
Health care coverage for your children under the age of 27 is now tax-free. It applies to a variety of work place and retiree health plans. This change became effective in September of 2010 and allows employers with cafeteria plans to allow employees to make pre-tax contributions to pay for this benefit. This tax benefit also applies to people who are self-employed to also qualify for the self employed health insurance deduction on their federal income tax return.

If you are uncertain about any details of the Affordable Care Act tax, it is a good idea to talk to a tax professional. He or she can assist you in determining which one will bring the most tax benefits for you.

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