Tax Regulations

IRS announced in IR-2020-4 that it launched the Gig Economy Tax Center on its website. The Center provides guidance for the people who earn income providing on-demand work, services or goods, often times though an app or website or other type of digital platform.

Example Of Gig Work

The most popular gig economy businesses are home rentals and ride-sharing, but there are many other types and the IRS website gives several examples (this list is not all inclusive):

• Drive a car for booked rides or deliveries
• Rent out property or part of it
• Run errands or complete tasks
• Sell goods online
• Rent equipment
• Provide creative or professional services
• Provide other temporary, on-demand or freelance work

What are Digital Platforms?

IRS defines digital platforms as “businesses that match workers’ services or goods with customers via apps or websites. This includes businesses that provide access to:

• Ridesharing services
• Delivery services
• Crafts and handmade item marketplaces
• On-demand labor and repair services
• Property and space rentals

with a note that the above list does not include all types of digital platforms. “

Taxes on Gig Work Income

You must pay taxes on the income you earn from your gig work, even if you don’t receive a 1099 form. You must maintain records and receipts during the year for the income and expenses you incur and pay estimated tax quarterly.

If you are self-employed and your earnings are over $400, you must file a tax return. You can reduce your taxes by claiming business expenses, like: supplies, office expenses, mileage, home office deduction, etc.
If you do gig work as an employee, your employer should withhold tax from your paycheck.

Other Considerations

If you sell goods or provide taxable services, you might be subject to state sales tax and you are required to get a sales tax permit and collect, pay and report sales tax.

In case you use subcontractors that you pay $600 or more during the year you need to file forms 1099-NEC.

And if you have employees you need to file payroll reports.

Let us help you with your tax needs. Give us a call or schedule an appointment online.

Today IRS announced that the 2019 tax filing season will start on January 27, 2020. On that date the IRS will begin accepting 2019 tax returns. In the meantime you can prepare the returns or employ the help of a tax professional to do that for you, but the returns won’t be able to be e-filed until January 27th.

As a reminder, the deadline to file the 2019 individual tax returns and corporation tax returns is April 15, 2020. For partnership and S corporation returns the due date is March 16, 2020. In addition, on January 15th is the due date for the fourth estimated tax payment for tax year 2019 and on April 15, 2020 is the due date for the first estimated tax payment for tax year 2020.

If you have a business you need to account for some additional deadlines:

• January 31, 2020, the due date for filing forms 1099-MISC for non-employee compensation;
• January 31,2020, the due date for payroll tax forms;
• March 31, 2020, the due date for filing forms 1099;
• April 1, 2020, the due date for the property rendition with Montgomery County.

We are here to help you with this incoming 2019 tax filing season. Give us a call or schedule a free 30 minutes consultation!

The U.S. Supreme Court’s decision in South Dakota v. Wayfair will allow states to mandate a sales tax for items purchased online from out-of-state sellers.

On June 21, 2018, the U.S. Supreme Court issued its opinion on South Dakota v. Wayfair. This case is a landmark nexus (sufficient physical presence) case for sales and use tax that will have implications for many online sellers and multi-state businesses.

In a 5-4 decision, the Court ruled that a state could require an out-of-state-seller to collect sales or use tax on sales to customers in that state, even though the seller lacks an in-state physical presence.

The Wayfair decision affects companies doing business in thousands of state and local tax-collecting jurisdictions across the country. The immediate impact will be on sellers with a significant virtual or economic presence in a state that asserts economic nexus.

Sellers delivering taxable products or services into a state with economic nexus will need to determine if they surpassed the dollar amount or transaction volume threshold for establishing nexus with that state. Sellers should be prepared for states to adopt and aggressively enforce expanded nexus provisions.

If you need help with your small business, please give us a call!

Giving your taxes your full attention just once a year isn’t the best business strategy. Experts suggest that a year-round approach is better for your finances. Click through to learn the best ways to evaluate the impact of taxes throughout the year.

Numerous tax experts agree that addressing your tax liability effectively requires tax planning throughout the year. Those business owners who reap the most benefits consider their taxes year-round, rather than waiting to focus on tax payments just a few weeks before the filing date.

A typical small business qualifies for roughly a dozen tax deductions. For example, you may be able to claim deductions on the following:

• Cars operated for business purposes
• Business-related travel and entertainment expenses
• Purchases of office supplies, furniture, equipment, and software programs
• Telephone expenses
• Contributions toward insurance policies, retirement plans, and pension funds

It’s surprising how many small businesses never take advantage of these deductions, mainly because they suffer from the “tax-planning-happens-but-once-a-year” syndrome. To fully benefit from these deductions, it’s important to maintain your expense records throughout the year.

Your goal should be to reduce your tax liabilities by retaining records of your purchases. By monitoring your expenses closely all year, you can analyze each expense for its tax impact as it’s made. Additionally, smart business owners should contemplate three key steps to tax planning:

1. Invest in a record-keeping tool for your business. Whether it’s spending roughly $30 on journals and tax books with a set of refill sheets costing less than $10 to do manual bookkeeping or investing up to $2,000 on the latest online accounting software, you will benefit from more rigorous and accurate record-keeping. Excel spreadsheets, Quickbooks Desktop, QuickBooks Online are some of the more popular options.

2. Determine when you need professional tips and tax planning advice. At times you will be able to justify paying for professional tax services, particularly if you need advice on unclear requirements in tax laws that could be in your favor. To prevent unnecessary complications and aggravations, you must avoid violating tax laws that may be applicable to your small business and having professional advice when needed, can help you keep your taxes under control.

3. Establish year-round tax planning goals. A good tax-planning strategy will help you accomplish some of these goals:

• Reduce the amount of taxable income
• Claim any available tax credits
• Lower your tax rate
• Control the time when taxes must be paid
• Avoid the most common tax-planning mistakes

Give us a call to see how can we help you and your business staying on top of your tax bill!

Victims of Imelda Storm Get More Time To File

A couple of days ago, on October 7th, IRS announced it is offering relief for victims of the tropical storm Imelda. The storm caused devastating flooding in southeast Texas.

The relief postpones the filing and payment requirements that occurred starting September 17th. The new deadline is January 31, 2020.

Thus taxpayers in Harris County, Montgomery County and several others (for complete list click here) that filed for an extension of time to file their individual returns, now have until January 31, 2020.

You must be careful, as the relief doesn’t provide more time to pay the tax due. The amounts due will still accrue interest and late payment penalties. If you think you might owe, but you need more time to file, it is best to make a payment toward 2018 taxes as soon as possible, as to minimize penalties and interest. You can pay online on the IRS website.

If you need help with 2018 tax return preparation give us a call or schedule an appointment online.

Sooner or later, you may decide to sell property you inherited from a parent or other loved one. Whether the property is an investment, an antique, land, or something else, the sale may result in a taxable gain or loss. But how you calculate that gain or loss may surprise you.

Your Basis

When you sell property you purchased, you generally figure gain or loss by comparing the amount you receive in the sale transaction with your cost basis (as adjusted for certain items, such as depreciation, improvements and other items). You treat inherited property differently. Instead of cost, your basis in inherited property is generally its fair market value on the date of death or an alternate valuation date elected by the estate’s executor, generally six months after the date of death.

There are situations where special rules apply. For example if you inherited property from someone who died in 2010 or if you or your spouse gave the property to the decedent within one year before the decedent’s death, or if the inherited property was a farm or a closely held business. See Publication 551 for the complete rules regarding the basis for inherited property.

You should contact the executor of the estate or the personal representative of the estate to obtain the basis information.

The general basis rules for inherited property can greatly simplify matters, since old cost information can be difficult, if not impossible, to track down. Perhaps even more important, the ability to substitute a “stepped up” basis for the property’s cost can save you federal income taxes. Why? Because any increase in the property’s value that occurred before the date of death won’t be subject to capital gains tax.

For example: Assume your father left you stock he bought in 1990 for $10,000. At the time of his death, the shares were worth $50,000, and you recently sold them for $65,000. Your basis for purposes of calculating your capital gain is stepped up to $50,000. Because of the step-up, your capital gain on the sale is just $15,000 ($65,000 sale proceeds less $50,000 basis). The $40,000 increase in the value of the shares during your father’s lifetime is not subject to capital gains tax.

What happens if a property’s value on the date of death is less than its original purchase price? The basis must be lowered to the date-of-death value.

Holding Period For Inherited Property

Capital gains or losses resulting from the disposition of inherited property automatically are considered long-term, regardless of how long you or the decedent owned the property (see Publication 559). This presents a potential income tax advantage, since long-term capital gain is taxed at a lower rate than short-term capital gain.

You can find more details about the tax rules for the sale of inherited property on the IRS website.

If you have tax questions or need help with the preparation of your return give us a call!