The Small Business Tax Help Blog

Posts Tagged ‘calculator’

Question: Do I claim this income as hobby or business?

I have done a little software development work on the side. I really enjoy writing software, and because I write less and less for my job, I feel enthusiastic about writing for pleasure, plus working on different types of development is enjoyable. I have roughly brought in $15k (~270 hours of work). I have no deductions as I did this from my home using my laptop. Also this is the first year that I have done this.

I used H&R block tax estimator calculator. I put in my regular job information plus this income as a hobby and I get back money. When I put the same numbers in as a business I owe.

Do I claim this income as hobby or business?

Answer: It is self-employment income. The main issue is whether you are trying to make a profit through your work, which is a goal of businesses but typically not of hobbyists. So, if someone asked you to code for free, would you do it? Have you done it? These are the things the IRS will look at in determining if you have a hobby or a business.

If it is a business, you owe self-employement tax (15.3% for social security and medicare). If it is a hobby, you don't owe that tax... that's why you get a refund if it's hobby income and owe taxes if it is self-employement income.

I hope that helps.

IRS Tax Tips for the 2010 filing season - #9

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Contractor Calculator -- Net 85% of your income

Question: Why is my federal withholding so low?

My 2008 income is approx. $150,000. I have filed as single with 1 exemption. When I go to the IRS website and complete the tax calculator my estimated 2008 tax is approx. $28,000. This calculation includes itemized deductions and 401K contributions. Based on this amount, I would expect to see a bi-monthly withholding of approx. $1,167. Yet, my paycheck has a federal withholding of only $600. I spoke with the payroll person internally and even with ADP, who processes our payroll, and they were unable to explain the discrepency, saying the system is connected to the IRS and the $600 amount is correct. How can this be accurate? Do I need to have addtional $ taken out of my check or am I missing something?

Answer: Unless you put something wrong on your W-4 or they transcribed it wrong, there is definitely something wrong with your withholding.

The tables are in IRS Publication 15 - you can download that at irs.gov - look at page 36-38. Your biweekly gross, even after allowing for all the deductions for pre-tax items and for your exemption, is most likely still around $5000 or more, and that would have a lot larger amount taken out than $600. It sounds like maybe something is coded wrong and they're not using the biweekly chart or something. If your biweekly pay is a lot less than that and a large amount of the $150K was in some sort of one-time payment, then their calculation might be right though. But in that case 25% should have been withheld from the one time payment, so even though that wouldn't have been quite enough your total withholding would at least be in range of what you owe.

All that said, if they did this all of 2007, then you are going to owe a ton of money when you file. Didn't you think it was a little strange that they were taking out so little?

Good luck.

Credit to hit some in pocketbook

A program launched by the federal government in 2009 to put a little more money into people's pockets during tough economic times will continue this year, and like last year, some taxpayers might find that less tax is being withheld than they prefer, according to the Internal Revenue Service.

Tax Tips: Withholding Calculator- General- January 2010 (ASL, Captions & Voice Over)

Question: Which of these is an example of a payroll tax?

Which of these is an example of a payroll tax?

A. Road usage tax
B. Social Security tax
C. State sales tax
D. Paycheck withholding

Answer: d? maybe b

2010 Payroll Software Adds New Features For Small Businesses, Accountants and Payroll Service Providers

Payroll Mate, the affordable payroll software by Real Business Solutions, adds new features for Businesses doing Payroll in 2010. The popular payroll software now includes the ability to export payroll data to general ledger and Quicken software.

National Payroll Week - Making Work Pay - NAPS-TV

Sorting out tax fight myths

Most people don’t mind taxes, as long as someone else pays them. That’s the theory being tested in Measures 66 and 67, which would raise taxes on prosperous Oregonians and a relatively small proportion of businesses operating here. Here is some hard data and other insights that might …

Obama Taxes; “Capture Some Revenue”