Tag Archives: taxes

10 Ways to Reduce Tax Burden for Your Small Business

An ideal lawyer will not just have a string of impressive credentials or gold lettering on his door. He or she will be caring, concerned, and devoted to their work. You need to think carefully before laying your trust in a lawyer after all in some cases your life, future, money, or property will be in his hands.

Apart from doing extensive research to short list possible lawyers you must ensure that there is not conflict of interest, that you understand everything the retainer agreement states, and that you have checked the references and details regarding the practice.

You will know the lawyer you have chosen is the perfect one if:

1.       He tries to spend time to understand your case himself. He will not assign a legal assistant to take facts of the case down.

2.       From experience and knowledge, he will know what is relevant and what is not. He will set aside and ignore irrelevant facts, opinions, and personal emotions that cloud the case on hand.

3.       He will insist that the footwork for the case be done thoroughly. All facts must be checked for accuracy and solid arguments jotted down with backing of earlier rulings.

4.       He will not just focus on the problem at hand but examine the problem from all sides. This will create a complete picture highlighting all factors of relevance and the different ways one can approach the case.

5.       He will use his foresight and anticipate moves by the opposition or opinions of the jury or judge and plan way ahead. Like a master chess player, he will plan the case not by the day but by many hearings ahead.

6.       He will not waste time beating around the bush or create verbose statements many words strung together which look impressive but mean nothing. He will insist that the case and its arguments be clearly stated.

7.       He will be self-disciplined, thorough, and self-confident. Courteous always he will respect you as well as all the staff who work for him.

8.       He is recommended by not just his friends and relatives but by other professionals of good standing and from his field.

9.       He will not just present to you his victories but be happy to tell you why and how he lost certain cases.

10.     He will lay the cards on the table and tell you clearly whether your case stands to win or lose. He will not claim that winning is guaranteed. He will be honest and upfront about his opinions and advice.

The bottom line is that the lawyer must be worthy of your trust. Use your inborn instincts and don’t go by the lawyer’s good looks or fancy car or office. After all it is competence in law and in court that is of essence to you.

Everyone worries about taxes and looks for ways and means of reducing the tax burden. When you have a small business of your own you must update your knowledge of tax laws that pertain to small businesses. As a business owner you must understand clearly about accounting systems and tax planning. Sit down with your accountant and plan on ways of maintaining business expenses, filing receipts, planning on tax saving investments, and a strategy for running the business in the most beneficial way.

Did you know that:

1.       According to law you can reduce your tax liability by hiring family members to carry out work in your business. Pay your children and spouse to perform assigned duties. This way you can shift from higher tax rates to lower ones.

2.       Consider hiring independent contractors instead of employees. You will save on payroll taxes. However, ensure that you meet the IRS criteria.

3.       Think about deferring income postpone receiving money to January instead of December. This means that payments received will be up for tax calculations a year away.  However, ask your accountants advice as the benefits are dependent on profit and losses for the year and your corporate legal structure.

4.       Take advantage of tax deductions allowed for charitable donations. Make donations in November or December instead of January so that you can include the donations for tax deductions in the current year.

5.       Maximize your expenditure on equipment and office supplies. Buy in advance for a quarter and use the tax deductions allowed in the current fiscal year.

6.       Include expenses of business-related travel in the current year.

7.       Pay all bills due before the end of the year. Payment to cell services, rent, insurance, and utilities related to the business can be included for accounting and applicable tax waivers.

8.       Plan a retirement plan and make payments before the end of the year. This will reduce your income for the year and proportionately the tax due. Be sure to check on the limits. Plan a feasible and beneficial strategy with your accountant.

9. Be sure to deduct from your taxable income money paid to licensing fees, businesses taxes, and annual memberships to businesses related organizations. Be sure to deduct interest paid on borrowings for running the business and related fees. Insurance premiums paid to ensure the business office and machinery are eligible for tax deductions. Make a list of your memberships and check which ones are eligible for tax deductions.

10.         Check whether you have deducted management and administration expenses as well as money spent on maintenance and repairs of equipment.

Decide whether a cash accounting system or accrual one will benefit your business. The tax deductions are different depending on the system you use. When setting up your small business take the advice of a tax and accounting professional as to which accounting system would be most suitable.

Side Hustlers: Are You Putting Enough Aside for Taxes?

When starting out, most freelancers have no idea that they can deduct their home office (even when it is not a separate room). They do not know that if they travel miles to see a client, that is a business expense. 

The IRS will never bother telling you when you miss deductions so you have to educate yourself.

Other than deductions, gig workers, self-employed people and independent contractors are at a risk of falling into other tax pitfalls. One of the biggest issues is not knowing what amount you should pay in taxes. 

What Kind of Taxes Do You Have to Pay as a Side Hustler?

Unlike employed people, gig workers do not receive their paycheck with the taxes already deducted. They are the ones that decide how much they will pay to the IRS.

The self-employment tax (Medicare and Social Security taxes combined) is fixed at 15.3%. If you look at an employee’s paycheck, you will see that they pay almost half of this—it is because their employers pay half of it for them. Being both the employee and the employer, you have to take care of the amount all by yourself.

On to federal income tax. The amount you pay in taxes depends on what you make annually. See the 2018 single filer tax brackets:

  • 10% (earning $1 – $9525)
  • 12% ($9526 – $38700)
  • 22% ($38701 – $82500)
  • 24% (82,501 – $157,500)
  • 32% ($157,501 – $200,000)
  • 35% ($200,001 – $500,000)
  • 37% (Over $500,000)

These rates apply to your taxable income (after factoring in deductions, eligible tax credits and self-employment tax). 

Unfortunately, there are still more taxes that you have to pay as a side hustler apart from those mentioned above. In some states, you will be required to pay state income tax. There are some areas where you have to pay local income tax too. Check the tax rate of your state.

What Does the New Tax Cuts and Jobs Act Mean for Side Gigs?

The 2017 Tax Cuts and Jobs Act offers freelancers additional deductions to take advantage of. You can check them out on the IRS website.

How Much Money Should You Set Aside for Taxes?

For every dollar you earn, save 30%. It is better to overpay and get a refund than have to pay more. 

Do You Need to Pay Estimated Quarterly Taxes?

Self-employment taxes and federal income taxes are on a “pay-as-you-go” basis. Pay quarterly if you expect to owe $1000+ in annual taxes. 

Here are the quarterly taxes due dates:

  • April 15 for January 1 to March 31
  • June 15 for April 1 to May 31
  • September 15 for June 1 to August 31
  • January 15 for September 1 to December 31

What Forms Should You File for Your Freelance Taxes?

The IRS considers you self-employed. 

You will need the following forms:

  • Form 1040
  • Schedule C
  • Schedule SE
  • Form 1040-ES

Always monitor the expenses that you can deduct.

This Place Lets You Pay Your Taxes In Bitcoin

The Swiss municipality of Chiasso is going to let residents pay their taxes in bitcoin, its mayor has announced.

The community, on Switzerland’s southern border with Italy, is vying with Zug to be the country’s cryptocurrency hub. Zug, which styles itself as “Crypto Valley,” launched a pilot last year in which it started accepting bitcoin payments for municipal services. The pilot was apparently a success, so Zug has kept the program running.

 

Chiasso—sorry, “CryptoPolis”—is going one further by accepting bitcoin for small tax payments, up to a value of 250 Swiss francs ($261).

“Chiasso is recognised internationally as an epicentre of a growing technological and economic growth for both the canton and in Switzerland,” Mayor Bruno Arrigoni said, according to local media. The move is apparently part of Chiasso’s drive to make up for contraction of the traditional financial sector after the financial crisis.

Zug’s scheme also caps bitcoin payments fairly low, only accepting them for a value of up to 200 Swiss francs. At the time of writing, one bitcoin is worth 4122.94 Swiss francs (and $4306.01).

While there may be something for these towns to gain by enticing cryptocurrency fans to set up shop on their turf, their caution makes a lot of sense too.

The value of bitcoin, along with other virtual currencies, has been particularly volatile in recent weeks, largely because of China’s cracking down on initial coin offerings (ICOs)—a trendy but risky form of fundraising that involves issuing new types of tokens—and possibly banning bitcoin exchanges altogether.

Source:

http://fortune.com/2017/09/12/switzerland-chiasso-bitcoin-tax-zug/

Lyft has stopped deducting phantom taxes from drivers’ pay, labor group says

Lyft has ceased deducting taxes from drivers’ pay that didn’t need to be collected in the first place, the Independent Drivers Guild (IDG) said Tuesday.

With Labor Day 2017 just barely in the books, the IDG characterized the development as a victory – and proof that collective action works – by Lyft’s decision to cease deducting sales tax on rides that it wasn’t required to pay taxes on.

Lyft had a different perspective on the change in rates.

“Recent changes to our rate structure in New York had been planned for months,” Lyft spokesman Adrian Durbin said in a written statement. “IDG’s charges are baseless and played no role in our decision. We have always abided by our driver agreement, which clearly states commissions and fees.”

In June, the IDG raised a ruckus over Lyft’s pocketing the sales tax on both in-state and interstate trips when the tax is only supposed to apply to interstate trips. The group called the  practice a form of wage theft. Yet Uber, the embattled pioneer of ride-hailing, also started improperly collecting the tax like Lyft, the IDG says.

Source:

https://www.washingtonpost.com/news/tripping/wp/2017/09/05/lyft-has-stopped-deducting-phantom-taxes-from-drivers-pay-labor-group-says/?utm_term=.5261e416f088