The Small Business Tax Help Blog

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Question: I am self employed in Massachusetts earning less than $400 per week?

Do I need to pay the 15% self employment tax? I read somewhere that earning less than $400 exempted the self employment tax, however it did not specify if that was a weekly net income or yearly.

Answer: Double FICA, double Social Security and double Medicare; pay these quarterly.

Keep records of all expenses, as they are deductible at the end of the year and you will have to prove the amount if you are ever audited by ths IRS.

You are not exempt.

The IRS has free phamphlets, covering self-emloyment.

Don’t forget about us, says university students

By Low Wei Xiang Singaporeans might have plenty to cheer with the government’s announcement of price hikes and changes in the primary school balloting system to enhance the privileges of citizens, but they could be losing sight of the big picture. Last week, the government announced that PRs and foreigners will pay higher fees to study in [...]

Milton Friedman - Free to Choose 1990 - 1of 5 The Power of the Market PL 2/5

Question: Does it make sense to get an EIN for a sole proprietorship?

Will the IRS even issue one for a sole prop.?

I want to keep my SS# as private as possible to help prevent Identity theft.

Will getting an EIN mean that I have to file 941s quarterly?
It would keep my SS# private from banks, credit card companies, etc.

Answer: I agree with Overtaxed, but I have these extra points. The definition of a sole proprietorship is an individual or a married couple (filing jointly) who operate as a business entity. This is not a partnership, a corporation or a Limited Liability Company.

You probably are filing with the IRS on a Schedule C-EZ or a full Schedule C, which is attached to your personal tax return. So, the IRS is going to see your personal SS# no matter what.

It costs nothing to get an EIN. You do not have to file quarterly 941s if you are not paying anyone payroll and are not having an independent contractor (Form 1099 in this case) do part time work. So, my question is: What is the purpose of having the additional Employer Identification Number (EIN)? You want to keep your SS# private, but private from whom? If it's a credit card company or auto leasing company they will ask for your SS# as backup identification (and claim it's federal law to ask).

Health Care Reform's Terrible, Tiny Tax

A friend who, like me, is in an industry where contract and freelance workers are prevalent, just shared his dismay over the new rules for income reporting that were passed as part of health care reform.

GTA: Vice City Walkthrough #00 - Opening Credits / Intro / Ein alter Freund

Question: What is the difference between the Foreign Earned Income Exclusion and the Foreign Tax Credit?

I am a US Citizens living abroad. I am in the process of filing tax return for 2008 for foreign earned income based on IRS’ publication 54. Our earned income has already been taxed once by the country we live in.
I see that there are two ways to avoid double taxation on your income -the foreign earned income exclusion and the foreign tax credit.
Can somebody please explain the difference between the two and point out advantages to use one over another?

Answer: The foreign earned income exclusion allows you to exclude from tax a certain amount ($87,600 in 2008) of your foreign earned income (wages and self-employment earnings). You claim the exclusion on form 2555 and must reside outside the US and meet certain other requirements. If your income is above the exclusion amount you can still take a foreign tax credit for taxes paid on the the income in excess of $87,600, and this calculation is quite complicated.

The foreign tax credit is available to avoid double taxation of foreign income. The credit is claimed on form 1116 and must be calculated separately for certain defined categories of income. That is, one credit for general limitation income (wages, etc.), one credit for passive income (interest, dividends, rents, etc), and so on. In calculating the credit, deductions claimed on your tax return must be allocated to both foreign and non-foreign income.

If you don't want to take the credit, you can instead take any foreign taxes paid as an itemized deduction on Schedule A, if you itemize. Most of the time, this is the least attractive alternative, but not always.

Usually if your foreign earned income is under the exclusion amount and you do not have lots of other income, then the foreign earned income exclusion is the simplest and preferred option, if you qualify to use it. However, if you still owe US taxes after using the exclusion, a detailed calculation of your tax liability using the foreign tax credit is necessary to know which leads to the lower tax.

Advice was prepared based upon understanding of the tax law in effect at the time it was written and the facts and circumstances described. See my profile for more information.

IRS five tax tips for New Jerseyans

MOUNTAINSIDE NJ - While the tax filing deadline is about three months away, it always seems to be here before you know it. Here are the Internal Revenue Service’s top 5 tips that will help your tax filing process run smoother than ever this year.

Question: Should we pay the childcare costs of low income families?

Should we be funding childcare costs so that benefit claimants or those on a low wage can work.?

http://uk.answers.yahoo.com/question/index;_ylt=AnslN9YUTqi9eoLayHmfDNchBgx.;_ylv=3?qid=20080511130533AAcMwwt&show=7#profile-info-5FmwFWlvaa

Please read link above.

Initially I was going to answer the question but think I may be a Tory now……..I feel very distressed at the thought of this.

When they dont earn enough money to pay their childcare costs we pay for them and refund the money back in benefits/credits, Blaire no dount decided it was a good idea but it leads to unhappy kids and parents and a 2 parent family have no help with childcare costs normally.

Surely that is discrimination, and another penalty on married couples.

I know I don’t support labour and never considered myself a Tory. No dount I need the services of a good Councellor.

Answer: Dont panic if you are frightened about being a Tory, you can agree with some options that other parties have without having to vote for them, so you will get over this without the need of a councillor.

You need to look at the longterm in an issue like this, and getting people off their backside and into work means they will lose the dependency on benefits that is the real curse of UK society.

Yes they may only earn a small income and need help with childcare but it removes them from the "single parent" claimant list which Mr Blair feels are more important that a family with 2 parents in it.

I dont think it was meant to be that way but whichever way you cut it someone is going to feel left out.

I dont agree that children should be dumped in nurseries but that's my view and I am married too, and dont feel I am a Tory either.

Gordon Brown has been discussing the time bomb of care for the elderly in the news today, which is a similar problem as its all to do with funding and how unfair it is to those who have saved and bought a home and free to those who spent and are not home owners.

You give with one hand and take away with the other, someone will lose out no matter what Politicians do.

HAFB tax center to open in February

HOLLOMAN AIR FORCE BASE Filing federal income taxes can be intimidating, but just like in the past, volunteers from the Holloman community will be assisting airmen and their families in filing this year.

Earned Income Tax Credit Information

Question: Will I be eligible for the Earned Income Credit?

I am probably going to be selling my house this year. This has been my primary residence for the past 2.5 years. It will probably sell for around $20k more than I paid for it. I see that the maximum investment income is around $2,800 or less to still qualify for the EIC. I beleive the sale of my home would be considered capital gains and would be included in investement income.
However I know that there are other tax laws that come into play since I’ve been in my home for 2 of the past 5 years and may not have to pay capital gains on it. Does it make it somehow exempt from being counted as interest income for EIC eligibility?
Please only respond if you really do know what you’re talking about! Thanks in advancd!
My question refers to EIC eligibility for 2007, not 2006. So the sale of my home will be in 07, and I want to know if that will disqualify me from the EIC that would be recieved at the end of 07/begining of 08.

Answer: Since you lived in the home as your primary residence for over two of the last five years, and I assumed owned it that same time, your gain on the house sale won't be taxable, and won't have to be reported on your tax form since the gain will be well under the amount you can exclude. So the sale of your home shouldn't affect your eligibility for EIC.

Your family may qualify for free VITA tax help

You could owe less in taxes and get cash back from the IRS. The Earned Income Tax Credit (EITC) is a federal tax benefit for working people with low or moderate incomes. It can offset some or all of the taxes workers must pay and can help cover any federal income tax workers may still owe at tax time. You may also get cash back through an EITC refund. The EITC can be worth up to $5,567 for ...

Cathie Mahon discusses NYC's EITC outreach efforts