The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:
Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Since income from the gig economy is taxable, it’s important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file.
An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
Gig economy workers who are not considered employees have two ways to cover their income taxes:
Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.
This article from Jason Gay of the Wall Street Journal is entertaining as well as informative. Are you a mask vigilante or flaunting your mask-lessness?
Either way – the article references 2 of my favorites: Michael Jordan & Darth Vader. Just like the debates over who was the greatest basketball player or villain – hopefully the debates on masking stay cordial instead of tragic.
Players on FC Erzgebirge Aue’s bench wore masks during a May 16 match.
PHOTO: ROBERT MICHAEL/ZUMA PRESS
By: Jason Gay May 18, 2020 9:07 am ET
I want to talk about masks, because it feels like a hot topic right now, and there aren’t a lot of hot topics in sports at the moment. I mean, I love Michael Jordan as much as anybody, but I’m bored of all these strained debates about Michael Jordan. He was a great basketball player, likely the greatest who ever was. Do we really have to argue this? It’s like listening to people argue about pizza, or sunshine. Jordan’s great! The end.
Back to the masks. Here’s my take: if Yogi Berra had to spend all those years behind the plate wearing a mask, and the sublime hockey goalie Ken Dryden wore a mask, and Darth Vader did, too, I can handle wearing a mask when I’m going to be out in public around other people, and especially when I’m shopping inside a store. It isn’t my favorite thing, but I can do it.
Do you think Darth Vader threw a fit when he got to Costco and they told him to keep his mask on? No, he did not. Darth got his two-pound jar of cheese puffs and left.
I agree that wearing a mask is strange. It was weird to see those photos of soccer players in masks on the bench this weekend. It isn’t my ideal scenario, either. Look at that adorable little drawing of me that runs with this Journal column. You think I enjoy covering up that handsome mug with a mask?
(I have not looked like that drawing in at least 10 years.)
I get it. Wearing a mask is awkward. It can feel restraining. Uncomfortable. If you have glasses, your glasses fog up. I still have no idea if I am putting it on correctly. Half the time I think I’m wearing it inside out. I also have a bandanna, which instantly turns me into the world’s most pathetic stagecoach robber. If I tried to rob a stagecoach right now, all the people in the stagecoach would just laugh and tell the horses to clip-clop away.
But now I have options. At this point, you can pretty much buy a mask with anything on it. Do you want a Pink Floyd “Dark Side of the Moon” mask? Those exist. You want a Georgia Bulldogs mask? You have many options. You want a mask that has cute little illustrations of baby goats on it? It’s a real thing. My 5-year-old has a pink mask with magic unicorns on it, and she loves it!
That’s a lie! She hates it, and I have to chase her around like a baby goat to get her to wear it.
Yes: It was confusing when the government first asked us not to wear masks, that they should be reserved for health-care professionals, then turned around and said: OK, wear ‘em. I know there are differing studies about how much masks help, and it would be silly to think they’re some kind of infallible barrier, but they seem like a reasonable precaution as ordinary life begins to re-open.
At the very least, you’re not touching your face and nose, which apparently we all unknowingly do 400 billion times a day. A mask also feels like good citizenry, especially when we’ve been asking essential workers to wear them for months. I know there are cranks who call mask-wearing “virtue signaling,” because everything has to be cornily politicized these days, but come on. A mask isn’t a podcast tote bag. Don’t be a cynical lame-o! Some signaling is indeed virtuous!
“When we’re out in the public [wearing a mask], we’re signaling this is a pandemic, we’re aware this is happening, and I’m doing my part,” Harvard T.H. Chan School of Public Health assistant professor Joe Allen told the Journal’s Sumathi Reddy last month.
No one’s saying this is fun, but if it helps get the country and economy up and running, I’m game. Think of your neighbors. The people who work in stores—do you think those folks want to be the mask police? No. They just want to get home safe. Same with strangers standing in line or walking past you on the sidewalk. You might not be concerned about your health, but they might be.
I don’t know who said it first, but it’s a smart line: Wearing a mask isn’t about you. It’s about everyone else.
With the filing season just around the corner, taxpayers should be aware of
the benefits of using direct deposit for refunds. It’s easy, secure and the
fastest way to get a tax refund.
Here are 10 quick facts about direct deposit.
It’s the best and fastest way for taxpayers to get their tax refund.
It’s free.
It’s secure.
Taxpayers can deposit their refund into not only one, but also two or three accounts.
Combining direct deposit with IRS e-file is the fastest way for taxpayers to receive their refund.
When using direct deposit, there’s no risk of having a paper check stolen or lost.
The IRS uses the same system to deposit tax refunds that Social Security and Veterans Affairs use to deposit benefits into millions of accounts.
It’s easy. Just follow the instructions in the tax software or on the tax form.
Taxpayers can use direct deposit even if they are filing by paper.
Direct deposit saves taxpayers money. It costs the IRS more than $1 for every paper refund check issued, but only a dime for each direct deposit made.
It’s a good idea for people to find out if they should file using the
standard deduction or itemize their deductions. Deductions reduce the amount of
taxable income when filing a federal income tax return. In other words, they
can reduce the amount of tax someone owes.
Individuals should understand they have a choice of either taking a standard
deduction or itemizing their deductions. Taxpayers can use the method that gives
them the lower tax. Due to tax law changes in the last couple years, people who
itemized in the past might not want to continue to do so, so it’s important for
all taxpayers to look into which deduction to take.
Here are some details about the two methods to help people understand which
they should use:
Standard deduction
The standard deduction amount adjusts every year and can vary by filing status.
The standard deduction amount depends on the taxpayer’s filing status, whether
they are 65 or older or blind, and whether another taxpayer can claim them as a
dependent. Taxpayers who are age 65 or older on the last day of the year and
don’t itemize deductions are entitled to a higher standard deduction.
Taxpayers who can’t use the standard deduction include:
A married individual filing as married filing
separately whose spouse itemizes deductions.
An individual who files a tax return for a period of
less than 12 months. This could be due to a change in their annual
accounting period.
An individual who was a nonresident alien or a
dual-status alien during the year. However, nonresident aliens who are
married to a U.S. citizen or resident alien can take the standard
deduction in certain
situations.
Itemized deductions
Taxpayers may need to itemize deductions because they can’t use the standard
deduction. They may also itemize deductions when this amount is greater than
their standard deduction.
As taxpayers are getting ready to file their taxes, one of the first things
they’ll do is gather their records. To avoid refund delays, taxpayers should
gather all year-end income documents before filing a 2019 tax return.
It’s important for folks to have all the needed documents on hand before
starting to prepare their return. Doing so helps them file a complete and
accurate tax return. Here are some things taxpayers need to have before they
begin doing their taxes.
Social Security numbers of everyone listed on the tax return. Many taxpayers have these number memorized. Still, it’s a good idea to have them on hand to double check that the number on the tax return is correct. An SSN with one number wrong or two numbers switched will cause processing delays.
Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.
Any documents that show income, including income from virtual currency transactions. Taxpayers should keep records showing receipts, sales, exchanges or deposits of virtual currency and the fair market value of the virtual currency.
Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.
The taxpayer’s adjusted gross income from their last year’s tax return. People using a software product for the first time will need their 2018 AGI to sign their tax return. Those using the same tax software they used last year won’t need to enter their prior year information to electronically sign their 2019 tax return.
Forms usually start arriving by mail or are available online from employers
and financial institutions in January. Taxpayers should review them carefully.
If any information shown on the forms is inaccurate, the taxpayer should
contact the payer ASAP for a correction.
Share this tip on social media — #IRSTaxTip:
Gathering records before preparing tax return makes filing go smoother. https://go.usa.gov/xdKB6
Many
companies will be asking you to complete a new revised W4. While we were confused about the complexity
of the old form, we can be more confused with the simplicity of the new form.
Especially when our federal withholding goes down.
The
new form incorporates more of a strategy of filing status and dependents
against income using the new TCJA (Tax Cut and Jobs Act) tax rules. The TCJA eliminated a lot of Itemized Filing
(Schedule A) for taxpayers by raising the standard deduction.
This
change made the tax withholding calculation tables become more skewed for
employees working part-time or more than 1 job.
This is because the tables are estimating the earnings for each payroll
as the earnings for the entire year.
Generally, working a part-time or second job the hours works are not
enough to trigger federal withholding.
Because
of this, you should review your withholding early and use the IRS Tax
Withholding Estimator to determine how much withholding you should have. There
is even a new feature allowing you to even customize the refund amount you want
to receive.
If
you need help with your W4 or to have a tax planning and withholding review,
please call or email my office.
WASHINGTON
— The Internal Revenue Service has launched a new and improved Tax Withholding Estimator,
designed to help workers target the refund they want by having the right amount
of federal income tax taken out of their pay.
The Tax
Withholding Estimator, now available on IRS.gov, incorporates the changes from
the redesigned Form W-4, Employee’s
Withholding Certificate, that employees can fill
out and give to their employers this year.
The IRS
urges everyone to see if they need to adjust their withholding by using the Tax
Withholding Estimator to perform a Paycheck Checkup. If an adjustment is
needed, the Tax Withholding Estimator gives specific recommendations on how to
fill out their employer’s online Form W-4 or provides the PDF form with key
parts filled out.
To help
workers more effectively adjust their withholding, the improved Tax Withholding
Estimator features a customized refund slider that allows users to choose the
refund amount they prefer from a range of different refund amounts. The exact
refund range shown is customized based on the tax information entered by that
user.
Based on
the refund amount selected, the Tax Withholding Estimator will give the worker
specific recommendations on how to fill out their W-4. This new feature allows
users who seek either larger refunds at the end of the year or more money on
their paychecks throughout the year to have just the right amount withheld to
meet their preference.
The new
Tax Withholding Estimator also features several other enhancements, including
one allowing anyone who expects to receive a bonus to indicate whether tax will
be withheld. In addition, improvements added last summer continue to be
available, including mobile-friendly design, handling of pension income, Social
Security benefits and self-employment tax.
Starting
in 2020, income tax withholding is no longer based on an employee’s marital
status and withholding allowances, tied to the value of the personal exemption.
Instead, income tax withholding is generally based on the worker’s expected
filing status and standard deduction for the year. In addition, workers can
choose to have itemized deductions, the Child Tax Credit and other tax benefits
reflected in their withholding for the year.
It is
important for people with more than one job at a time (including families in
which both spouses work) to adjust their withholding to avoid having too little
withheld. Using the Tax Withholding Estimator is the most accurate way to do
this. As in the past, employees can also choose to have an employer withhold an
additional flat-dollar amount each pay period to cover, for example, income
they receive from the gig economy, self-employment, or other sources that is
not subject to withholding.
For more information about
the updated Tax Withholding Estimator and the redesigned 2020 Form W-4, visit
IRS.gov.
The IRS has issues guidance on Educational Institutions that
went bankrupt and that they should not issue 1099-C for Cancellation of Debt or
Student Loan Forgiveness.
So what do you do if you get a 1099-C…be sure to get all the
facts on why it was issues and refer to the information below. It helps to talk openly with your tax advisor
and make sure they have all the information correct to determine if you have to
report this on your tax return or not.
Revenue Procedure 2020-11 provides relief to additional
taxpayers who took out federal or private student loans to finance attendance
at a nonprofit or for-profit school. The IRS will not assert that
taxpayers within the scope of the revenue procedure must recognize gross income
as a result of the discharge of their student loans. Additionally, the
IRS will not assert that a creditor must file information returns and furnish
payee statements for the discharge of any indebtedness within the scope of the
revenue procedure. To avoid confusion, the IRS strongly recommends that
these creditors not furnish students nor the IRS with a Form 1099-C.
Revenue Procedure 2020-11 will be in IRB 2020-6, dated February 3, 2020.
Changes To Using Per Diem Reimbursements To Employees For Expenses
This is important for the many employees in many industries where travel
requiring Hotel, Meals & Incidental expenses to be paid for the benefit of
the employer. With the suspension of
Miscellaneous itemized deductions for unreimbursed business expenses from 2018
– 2026, an employer and the employees should get to know the rules for proper
reimbursement and documentation.
Per diem rates cover Hotel/Meals/Incidental Expense or only Meals/Incidental
Expenses. There are also special rules for transportation industry workers and
high-cost localities.
Here is the excerpt on the new Revenue Procedure 2019-48:
Rev. Proc. 2019-48 provides the rules for using per diem rates, rather than actual expenses, to substantiate the amount of expenses for lodging, meals, and incidental expenses for travel away from home. Use of a per diem substantiation method is not mandatory. Taxpayers who use per diem rates to substantiate the amount of travel expenses under Rev. Proc. 2019-48 may use the federal per diem rates published annually by the General Services Administration. Rev. Proc. 2019-48 allows certain taxpayers to use a special transportation industry rate or to use rates under a high-low substantiation method for certain high-cost localities. The IRS announces these rates and the rate for the incidental expenses only deduction in an annual notice. Rev. Proc. 2019-48 will be in IRB: 2019-51, dated December 16, 2019.
Please check with your employer or financial advisor on the
applicability of how to properly report to avoid having any excess amounts
charged to income & subject to taxes or not be deductible for the employer.
With the new rules from the Tax Cuts and Jobs Act (TCJA) it is in the
employee’s best interest to utilize an employer reimbursement plan effectively.
Here’s what to know about the amount of a tax refund
After filing their tax return, a taxpayer
will know whether they are receiving a refund. Sometimes, however, a taxpayer’s
refund will be for a different amount than they expect.
Here are some reasons a taxpayer’s refund
might be less than they thought it would be:
Financial transactions happening late in the year can have an unexpected tax impact if a taxpayer’s 2019 federal income tax withholding unexpectedly falls short of their tax liability for the year. Certain transactions can affect 2019 tax withholding and influence the taxpayer’s anticipated refund next year. This includes things like:
o Year-end and holiday bonuses. o Stock dividends. o Capital gain distributions from mutual funds and stocks. o Real estate or other property sold at a profit.
If this happens, taxpayers can still make a quarterly estimated tax payment directly to the IRS for tax year 2019. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020. Form 1040-ES includes a worksheet to help taxpayers figure the right amount of estimated taxes to pay.
A taxpayer’s refund can be used to pay other debts a taxpayer owes. All or part of a refund can go to pay a taxpayer’s:
o Past-due federal tax. o State income tax. o State unemployment compensation debts. o Child and spousal support. o Other federal nontax debts, such as student loans.
A taxpayer receives a notice if their debt meets the criteria for an offset. The IRS issues any remaining refund in a check or direct deposit as the taxpayer originally requested on the return.
Today is another “Day”, but unlike the prior days (Black Friday, Small Business Saturday, CyberMonday) which focused on buying STUFF (or selling for the commercial business)…we change our focus to generosity.
What
and When was this Created
Giving Tuesday was created in 2012 as a simple idea: a day
that encourages people to do good. Over
the past seven years, this idea has grown into a global movement that inspires
hundreds of millions of people to give, collaborate, and celebrate generosity.
In 2018 US donations on Giving Tuesday surpassed $400million from over
3.6million donations. (source https://www.givingtuesday.org)
Tax
Exemption Status
As with any day there are things to be aware of when
contributing to charities. Many people
want their donation to be “tax deductible”.
Below is an IRS Tip and tool for determining if your charity is tax
exempt.
Are
My Donations Helping
Another concern with donating to a charity is how
“efficient” your charity is, meaning how much is spent on Programs &
Services that you are donating to. 1 out of 10 charities spends less than 65%
of their donations on Programs & Services. On a positive note 7 of 10 spend
more than 75% on their Programs & Services. Many charities do not live up
to their reputations and executive compensation or other expenses are
unreasonable. This information can be
found on the public Form 990 Tax Return and there are rating organizations such
as www.charitynavigator.org.
Two of My Favorite Charitable Organizations
MidAmerica
Nazarene University & Foundation – www.mnu.edu – my alma mater where I
decided to pursue a career in accounting and become a CPA. MNU was founded in
1966 as the Pioneers when the campus in Olathe a small town south of metro
Kansas City was farmland. Since that time the University has graduated
thousands of students with their three enduring values of Pioneering Spirit,
Purposeful Lives and Passion to Serve. Donate to MNU to help with student
financial aid and support their mission of helping reduce the burden of student
debt.
KC Pet Project – www.kcpetproject.org – we are Foster Parents for this organization providing temporary shelter to “senior” dogs not doing well in the shelter. Many senior dogs get dumped at the shelter when their owners are tired of taking care of them or their medical needs during their final years. Donate to KC Pet Project with money, supplies or time (as a foster or dog walker) or ADOPT a new pet. We highly recommend seniors that are less hyper and are already potty trained!
IRS Issue Number: Tax Tip 2019-165
How taxpayers can make sure their donations
are tax deductible
It’s that time of year when taxpayers are thinking about how they want to
give back, and many taxpayers will want to donate to a charity that means
something to them. The IRS has a tool that may help them make sure their donations
are as beneficial as possible.
Tax Exempt Organization Search on IRS.gov is a tool that
allows users to search for tax-exempt charities. Taxpayers can use this tool to
determine if donations they make to an organization are tax-deductible
charitable contributions.
Here are some things to know about the TEOS tool:
It provides information about an organization’s federal tax status and filings.
It’s mobile device friendly.
Donors can use it to confirm that an organization is tax-exempt and eligible to receive tax-deductible charitable contributions.
