The Small Business Tax Help Blog

Archive for June, 2008

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Question: What legal processes do I have to go through to start my online business?

I am starting my own online business. It is small, it will be run out of my house (in Los Angeles, CA), I will be the only person involved and I will be selling art pieces that I create myself. I have researched many websites including the tax franchise board, the IRS, the Small Business Association, but I find them all so overwhelming and confusing. Do I have to charge sales tax? Do I need a Federal Tax ID? Do I need a State Tax ID? Do I need a California Seller’s Permit? I can’t seem to find a place that narrows down the start-up requirements. Thanks!

Answer: visit http://net-new.blogspot.com and
also to visit http://netnew.spaces.live.com/ and search for

Technically Precious with Merv

Last week we delved into the uncertainties that face us and that make forecasting for 2010 problematical. Will the government actually increase taxes as much as they say, with unemployment still likely to be at 10%? Or will cooler heads prevail? Would such an increase cause a recession?

Obama: S-CHIP is a Down Payment on Universal Healthcare; Socialized Healthcare

Question: How much of your moving expenses are tax deductible?

And what is deductible? Gas, mileage, hotel, truck rental, supplies, food, airfare? I moved due to job relocation, however my employer did not help with the move. I’d like to claim the expenses on my taxes.

Answer: The actual costs of moving you and your belongings are fully deductible. This would include your airfare, truck rental or movers, moving supplies, etc. If you are driving the moving truck yourself (i.e. U-Haul), then the gas and mileage incurred on the rental would be fully deductible as expenses related to shipment of household goods. The hotel related to the move would also be deductible, but meals would not be. Also note, if you are moving by car (i.e. driving), you can either deduct actual auto expenses (gasoline and oil), but you cannot deduct any repairs or depreciation on the vehicle. You can opt to deduct a standard mileage rate as well, but this rate is lower than the standard mileage rate used for business use of a car.

Moving expenses are reported on Form 3903 and are deducted from your gross income as an adjustment for adjusted gross income. They are not deducted as an itemized deduction and as such, does not require that you itemize in order to get the tax benefit of it.

Dealing with storms' aftermath

What you need to know to handle storm damage, or to prevent it from happening in the first place.

Home Base Business Tax Deductions 100% Deductible Expenses

Question: Receive SSA benefit and am full retirement age. Continue working. Will SSA benefit increase above annual COLA?

Benefits have not been increased above annual COLA. Wondering why, since I continue to work and pay FICA and Self-employment taxes.

Answer: If you continue working after you start receiving Social Security, then your benefit is recalculated each year to take into account your earnings for the year. Depending on the complicated weighted averages for your income over your top 35 earning years, if your recalculated benefit is larger, then you will get the larger benefit.

This larger benefit would by default be more than you would get by not working and only getting COLA increases. So yes, what you are asking is possible.

Lower Taxes Are Always in Season

What you can do now to reduce your taxes.

Ch. 6 Workers Compensation Insurance

Question: Is it a law that you MUST file a 1099 for subcontractors?

My husband and I own a construction company and we use sub contractors. We do not take any taxes out of their checks .. I know you’re supposed to file a 1099 (and have in the past), but do you have to? Is it a law, or are they also supposed to keep track so they can put it on their taxes when filing and the 1099 is just to confirm? Please help ..

Answer: A 1099 is required by the tax code when you pay a non-corporate person or business $600 or more in a calendar year.

A few words of advice

Local experts and former officials offer suggestions on how Stephanie C. Rawlings-Blake should tackle the city's challenges Local experts and former officials offer suggestions on how Stephanie C. Rawlings-Blake should tackle the city's challenges when she becomes mayor on Feb. 4.

Contractor Insurances

Question: independent contractor taxes?

I worked as an independent contractor for a year in 2005 but failed to file taxes. The IRS recently contacted me and told me I owe a large sum. Are there anyways to reduce this amount or verify it is correct before paying it off? Thanks!
The job that employed me as an independent contractor did send me a W-2 so I figure they must have reported the income that I earned somehow.
Sorry I meant 1099 NOT W2

Answer: Hi: I have seen this before. It really is a shame. Unless you made a very low income and have a lot of deductions, you are going to owe a substantial amount of income tax. If your dependent is your child and is under age 17 as of December 31, 2007, you can receive up to a $1000 credit, called the Child Care Credit. It's too late for you to launch a business effective in 2007. If you wanted to do a fiscal year arrangement, the IRS would deny you permission or make you do a calendar year first. So you cannot take those deductions nor the large Section 179 deduction. The only thing you can do is start a traditional IRA by April 15. That you can do to blunt the impact of the awful tax bill. A Roth IRA is not tax deductible. If your employer refuses to take out tax, you should send in estimated tax on an IRS Form 1040-ES. You can do it electronically with the IRS. The IRS will allow you to slide for a quarter, but no more. For 2007, you can ask the IRS to forgive the penalty, but there's no chance. I think I saw one time where they forgave the interest, but it was not much interest. I've never seen the Agency forgive the penalty. Ask your employer to give you a W-2. If he refuses, ask if they are going to mail a 1099-MISC that has box "7" - Nonemployee income - filled in. That means you have to fill out a Schedule C. Go through your checkbook, your credit card bills, your total mileage for 2007, the miles you drove while you were on the job visiting those families, the equipment you had to buy, etc. What I am saying is that you need to obtain all the legal deductions you can. Begin saving ALL your receipts and keep a diary of your expenses. If you don't know the mileage you drove, look at the State inspection receipts. The mileage is there and you can interpolate. Think of work related cell phone calls, look at your bills, etc.
If you are sent a 1099-MISC with Box 7 filled in, you have to pay what the IRS calls Self-Employment tax. You have to fill out a Schedule SE-Form 1040 and eFile or mail along with the other income tax forms. This is actually social security tax and none of us can get out of that tax either, unless you register as a member of a "religious order", as the IRS calls it. If you live in one of the 43 States that have income tax, you have to pay State income tax, also. I know all this because I had clients in this very same situation. Don't give up. Get something to hold your receipts: a shoebox or anything to start. As the years go by, you will become better and better organized.

Complete an IRS Form SS-8 to get an official ruling on your status. This will help you get unemployment if your boss retaliates and tries to get you fired. When you file your income tax return, you can attach Form 8919 Uncollected Social Security and Medicare Tax on Wages and only pay the employee's half of social security. You will still have to cough up all the income tax. IRS and the states are stepping up enforcement as there is severe abuse.
These people are trying to get out of paying Workers Compensation premiums and their portion of the FICA tax. Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). The payroll taxes are sometimes even called "FICA taxes."

An employer has to insure employees against on the job injury by means of Workers Compensation insurance in every single state if he has more than two employees in most States.

The IRS is aware of this severe and growing problem and began cracking down on it hard about 3 years ago.

Bright co-sponsors act to remove small businesses' burdens in Health Care Bill

Congressman Bobby Bright recently co-sponsored the Small Business Paperwork Mandate Elimination Act, a bill designed to remove burdensome paperwork requirements for small businesses.

Independent Contractor Hearing: Bob Williams