Another tax rule, actually two years old but not commonly known, affects business owners who pay independent contractors or freelancers for services. You may need to complete a 1099-Misc. and provide this to people who have done work for you related to your business, rental property, farm or not-for-profit organization and to whom you paid a total of $600.00 or more during the year. This will apply to any entity that is not a corporation in order for you to claim the business expenses on your tax return. For instance if you paid $1000 to someone to build your web site, and this company is not incorporated (Google is incorporated, chances are your neighborhood web designer is not) you will have to provide this person with a 1099-misc. This takes some communication on your part; make sure that your contractor is aware that you will be providing this documentation because not only will your service provider receive this form but the IRS receives a copy of the form too.  You must get certain information from the provider such as name and address and Social Security Number or Employer ID Number to include on the form. I recommend that business owners ask anyone you contract with for work (if there is any possibility that it will add up to $600) to fill out a form W-9 (Request for Tax Identification Number) before you pay them, you will then have the information you need to complete the 1099 at the end of the year. Keep the W-9 on file in case you use this contractor again because you only need to request the information once. You must mail these 1099s no later than January 31. There are fines for those who do not provide 1099s and for those who refuse to provide Tax Identification Numbers, and of course, business owners want to claim all expenses allowed by law.

Business Tax Adjustments for 2013
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

I would like to help you get some credit for the donations that you often make without thinking of your own benefit. How often do you give gifts of used clothing, furniture small appliances and toys to the Goodwill, Salvation Army, Veterans and other such worthy organizations to help make life easier for those who don’t have enough? In order to take full advantage of the tax code to get a tax break for yourself, you must itemize on your tax return (file schedule A) and you must ITEMIZE your donations. Here are two links to valuation guides to help you put a value on each item that you give away.

Link to Salvation Army Guide.

Link to Goodwill Guide

Before you throw that bag into the donation bin, take it to your church, or leave it on the front porch for pick up, take a few minutes to write down what you are giving away and use these guides to assign a fair value to each.  Attach this to your receipt from the organization and save it in your “current tax year” file.  Next tax season you will be amazed at how generous you have been and what a difference it will make on your tax return.

Get Tax Credit for your Donations
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

Series I bonds are sold at face value (a $50 bond costs $50), in $50 increments and they earn interest for up to 30 years. They can be redeemed for principal and accrued earnings anytime after the first 12 months from when they are purchased. If a savings bond is redeemed within the first five years, the three most recent months’ interest will be forfeited. After five years, no interest forfeit penalty will apply when bonds are redeemed.

Series I Bonds pay interest based on a combination of a fixed rate (which remains the same throughout the life of the Savings Bond) and a semiannual inflation rate which is updated each May and November. Savings Bonds accrue interest until redeemed or until they reach their final maturity in 30 years.

You can now buy savings bonds for yourself as well as two other people, including children and grandchildren! Bonds purchased for others can be purchased for the other individual outright or as a co-owner or a beneficiary. Taxpayers who purchase Savings Bonds without a bank account may receive the remainder of their refund in the form of a paper check. It’s easy – just ask your tax preparer!

Use your Tax Refund to purchase US Savings Bonds!
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

Evidence of the degree of control and independence fall into three categories: the right to control behavior, financial aspects and the type of relationship between you and the firm.     

Behavior controls consist of who determines HOW the agreed upon work gets done. You are probably independent if you behave independently and determine when, where and how you do the work.

• You decide your own work hours
• You decide what tools and assistance you need to perform
• The instructions from the firm primarily explain the results desired, but allow you do get the job done in the way that most suits your expertise and work style
• Evaluation is based on results of your work not how you performed the work
• You bring your own training and methods to the activity you perform

Financial Controls consist of who is providing the financial investment to get the work done.  You are probably independent if you have a substantial financial investment in the work you do. 

• You provide your own tools, supplies and equipment
• You have expenses for which you will not be reimbursed by this firm
• You have the potential to make a profit or a loss
• You advertise and seek other opportunities to provide your services to the market
• You are being paid a fee for the project you are working on

Type of Relationship refers to the perception of the relationship between you and the business. You are probably independent if your relationship is different from employees in the firm and is temporary.

• You have a contract that specifically delineates your activities
• You do not receive benefits that are typical for employees in the firm
• There is a pre-determined end time for your services
• The services you provide are not the same as those provided by employees

The IRS has no cut and dry rules for determining the status of a worker as employee or independent contractor, factors which are relevant in one situation may not be relevant in another. However, it is critical that your status is determined correctly because this has a HUGE impact on the way income, Social Security and Medicare taxes are paid and withheld. 

Generally, a business must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. The business generally does not have to withhold or pay any taxes on payments to an independent contractor; these taxes are the responsibility of the independent contractor. 

A worker can request that the determination be made about their own status, or a firm can ask for a determination to be made by the IRS for a class of worker. Both use SS-8 for that purpose.

Are you an Employee or an Independent Contractor?
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

FMV Tax Professionals

Despite being a tax professional for more than two decades, Fran Vaughan is far from your average tax accountant.

Early in her career, Vaughan, who specializes in tax preparation for individuals, businesses and tax exempt organizations, volunteered as a tax preparer for the IRS, preparing returns for military families living overseas. Then, after arriving in Western New York, she taught aspiring tax preparers how to prepare tax returns. And she didn’t stop there. Her next endeavor was fund raising for non-profit organizations. Put all of that together and it is clear why she now has her own company, FMV Tax Professionals.

Vaughan has a unique ability to combine her not-for-profit expertise with her tax expertise to provide personal services for tax-exempt organizations. She has the experience to help them prepare and file 990 informational returns, as well as applications for tax exempt status. Vaughan has clients throughout the country, but predominantly in Western New York. “My ideal customers,” she says, “are individuals, businesses and tax-exempt organizations who are looking for an efficient, personal tax preparer and advisor who will mind their tax business so they can mind their fundamental business.” She says that she enjoys working with people to make the tax reporting process more manageable. “My favorite part of this business is helping people save money during the tax planning and preparation process,” Vaughan says. “I have their best interests in mind, so clients can sleep well at night knowing that I will always help them find as many deductions as they are allowed while assuring that all rules are followed.”
For more information about Vaughan’s business, and to seek answers to many tax preparation questions, check out her website at fmvtax.com.

To See the whole article check out Insty-Prints Featured Customer of the Month: FMV Tax Professionals.

FMV Tax Favorite Christmas Present
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

Energy Efficient Home Tax Credits
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

To claim a tax deduction:

• you must give to a qualified organization (no deductions for contributions made to specific individuals, political organizations or candidates)
• you must file Form 1040 and itemize the deduction on Schedule A
• If you receive a benefit in connection with your contribution (dinner, tickets to a game or other goods or services) you can only deduct the amount that exceeds the amount of the benefit you received.  For contributions over $75 the orgnaization should let you know what the deductible amount is.
• Regardless of the amount, to deduct a contribution you must maintain:
1. a bank record,
2. payroll deduction records, or
3. a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.
4. If the donation is made by a text message, a telephone bill will meet the recordkeeping requirement as long as it shows the name of the receiving organization, the date of the contribution and the amount given.

Charitable Contributions May Lower Tax Bill
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as PIN numbers, from taxpayers.

Most of the scams that impersonate the IRS are identity theft scams. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as tax refund, inherited funds or IRS notice. Find out more about IRS-impersonation phishing scams and how to recognize and report them to the IRS.

Protect Your Personal Information
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations

UPDATE: Joyce and Richard Delong at Insty-Prints gave us our favorite Christmas present this year. It happened to be a great introduction for this blog. Check out Insty-Prints Featured Customer of the Month: FMV Tax Professionals to see the whole article.

FMV Tax: Here to Help!
FMV Tax Professionals - Tax preparation for Individuals, Businesses and Charitable Organizations