Summer is officially over. It’s back to school, back to work and for many of us, back to tax planning.
Did you have any of these comment events this past summer? If so, a little planning now will go a long way toward saving you taxes this year.
It’s very tempting to put off planning, but remember, the IRS waits for no one. Get your tax strategies in place before year end, or face a whole lot more taxes in 2020 when you file your tax return.
Over the next few days, we’re going to look at year-end planning to do now, in September. I’ve been a CPA, working in tax, for years, and the one thing I’ve seen year after year is the rush in December. Every appointment space I have will be filled with a waiting list. It happens every December.
The best time to get an appointment is now. And not only that, the price for consultations are lower now. They go up in price October 1st. If you want to save money on the consultation, PLUS make sure you have enough time to implement your planning, then book now.
Go to https://www.ustaxaid.com/consultation/ to book your appointment.
Act now! If you wait, the prices will be higher.
Here are some common summer time events that may impact your taxes. Are there any changes you need to make now?
Did you or your kids get a summer job? Part-time or seasonal work can be the hardest to gauge for withholding. The IRS and state withholding charts assume that the amount you make is what you’ll make all year and that it’s the only source of income.
If that’s not the case, you will end up paying way too much or way too little into tax withholding. The IRS has a withholding calculator you can use to see if you’ve got the right amount withheld. If you don’t, there is still time this year to either make an estimated tax payment or plan to pay more when you pay your taxes. Or, if you’ve been over-withheld, you can change your withholding to have less taken from your current job.
Your state also will most likely have a withholding calculator as well. Search for it online, using your state and “withholding calculator” or “withholding assessment”.
In the case of a child that is working a part time job, he or she may not even need to file a tax return. The rules follow.
If an individual has both earned and unearned income, he or she must file a tax return for 2019 if:
W-2 Worker or Self-Employed?
Part-time workers are often considered self-employed independent contractors, especially by small businesses. That’s because the paperwork and tax withholding will be simpler and cheaper for them. However, if you were treated this way it means some extra work for you.
If your net income is $400 or more, the IRS requires you to pay self-employment taxes. That’s an extra 15.3%. Please note that this is “net” income. It’s not the total gross you were paid, but is the total after you’ve taken all deductions against that income.
This is where you want to be diligent at finding deductions. Your work at the part-time, temporary job is considered a business for you. What business deductions do you have? That could include a cell phone, cell phone plan, computer, ISP, home office, meals related to business, travel related to business, and certain education, among other things.
If you receive cash tips as part of your job, these tips are considered part of your taxable income. The IRS requires you to report them on your tax return if tips total $20 or more.
If your child under the age of 18 works for your Schedule C (Sole Proprietorship) business, you may not need to collect federal payroll tax or self-employment tax. However, you will need to check to see what the state payroll tax laws are in your home state.
Remember that you get a deduction for the amount you pay your child for work he or she legitimately does for your business.
Check back tomorrow (9/28/19) for Part II of end-of-summer deductions.