People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.
Different types of businesses need different types of licenses. It can get pretty complicated, so Washington State has created an online tool that will help you create a personalized Business Licensing Guide based on your answers to a few questions.
To give it a try, click here…
Then leave a comment to let us know what you think.
Going from “employee” to being your own boss brings some significant changes professionally and personally. One of the most significant to become accustomed to is no longer having certain taxes neatly taken from your paycheck from your employer.
As a self-employed individual, not only are you responsible for directly submitting the income tax you owe to the federal, state, and local governments, you’re also responsible for paying self-employment tax.
According to IRS.gov, “Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.” Continue reading
Except in a few cases, the law does not require any specific kind of records. However, you may want to include all of these items, no matter what process of recordkeeping is chosen:
- Business checkbook
- Daily summary of cash receipts
- Monthly summary of cash receipts
- Check disbursements journal
- Depreciation worksheet
- Employee compensation record
- Any financial statements
Also, be diligent in keeping these records as well, whether it be the original source documents OR electronic copies:
- Gross receipts
- Travel, transportation, entertainment & gift expenses
- Employment taxes
- Cancelled checks
The Wage and Hour Division of the U.S. Department of Labor is tackling employee misclassification because so much depends upon the answer to that question.
Imagine working as a drywall installer building houses as an employee one day, but the next day, while performing the same work on the same site for the same company, you’re told you are now considered an independent contractor. You didn’t suddenly open a business of your own. Nothing about your work changed. But now, you’re told that since you’re no longer an employee, you’re no longer eligible for overtime pay, unemployment insurance, worker’s compensation or a host of other benefits that come with employee status.
That really happened to a group of workers recently, who we discovered were owed back wages after conducting an investigation. And unfortunately, this situation is all too common − with terrible consequences. Misclassified employees are often denied access to the critical benefits and protections they are entitled. Misclassification also generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It forces workers to pay the entirety of their payroll (FICA) tax. It also tips the scales against all of the employers who play by the rules and undermines the economy. Continue reading
Yeah! Tax season ended almost 5 weeks ago. We can breathe again, but we can’t throw away that big box of receipts and stuff just yet. From the TurboTax blog…
The tax deadline has come and gone – time to breathe a sigh of relief. But before you throw all of your tax documents up in the air to celebrate the occasion, we need to discuss just how long you should keep that info in a safe and secure place.
That’s right, you should store your tax information and documentation, including a copy of your tax return, for safe keeping – just in case you need to reference back to it. But for how long?
When we talk about tax documents, we’re talking about a copy of the return that you filed, along with W2s, logs for mileage, 1099s, receipts, or any paperwork that will support your tax deductions or credits that you may have claimed. This includes anything that you used to prove the state of your finances on your tax return.
As a generic rule across the board, you should keep your tax records for at least 3 years after the date in which you filed – according to the statute of limitations outlined by the IRS. For example, if you filed this year on April 15, 2015, you should keep your 2014 tax return documentation until April 15, 2018. Simple math.
This time frame was put in place to benefit both you and the IRS. You can benefit from this 3-year timetable because you have a set amount of time to claim any tax refund that is owed to you. On the flip side, the IRS has three years to levy another tax if you made a mistake while reporting your income.
But wait, there’s more. Read it here.