Tax Preparation Blog

Title: 

Which 1099 Tax Forms concern you?

Word Count:

835

Summary:

It is tax time again and you must be sure to receive all the necessary forms. What is a 1099 tax form and who gets one?   A Tax Form 1099 is used to report income other than wages, salaries and tips.  Here of late, this term is used more and more frequently as many employers are opting to use contract labor versus hiring employees, who can turn out to be quite expensive when you factor in the insurance, payroll taxes, and other possible liability.

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Article Body:

It is tax time again and you must be sure to receive all the necessary forms. What is a 1099 tax form and who gets one?   A Tax Form 1099 is used to report income other than wages, salaries and tips.  Here of late, this term is used more and more frequently as many employers are opting to use contract labor versus hiring employees, who can turn out to be quite expensive when you factor in the insurance, payroll taxes, and other possible liability.  If you had an independent contractor perform $600 more of services to you or your business, you are required by law to complete and deliver a 1099 form to that person or business.  This article will take a look at the different 1099 tax forms, their purpose, who can receive one, and why.

The 1099 tax forms, if you are the recipient, should be furnished to you by January 31, 2006, and must be furnished and filed by the company furnishing the form no later than February 28, 2006.  But which 1099 form will you receive?

If you are classified as an independent contractor (i.e. attorney, guest speaker, performer, physician, rent, etc.), or you receive income that is classified as non-employee income, or miscellaneous income (you were paid $600 or more) you will receive what is known as a 1099-Misc.; these are the information returns most often received for contract for-hire work, leased workers, or general contractor payments for which there is not a direct sale as a merchant to a consumer.

The other most often used 1099 tax form would come as a 1099-Int; this is a 1099 received for interest income purposes; whether the income be from a bank or any lending institution, or from the sale of a seller financed mortgage, the recipient of any income from interest will receive  a 1099-Int.  You would receive a statement that summarizes your interest income for that year.  This form is also used to report other tax items related to your interest income such as early withdrawal penalties, federal tax withheld and foreign tax paid.  A close relative of the 1009-Int is the 1099-OID. This is an information return provided when you receive an original issue discount, usually from transactions related to mortgages served by the Federal Housing Authority.  

The 1099-Div tax form is used often for investors.  This tax form is sent to investors by brokers, mutual funds or the investment company.  The form is a record of all taxable gains and dividends paid to an investor.  The amounts that are stated on the form represent amounts the fund companies are attributing to each investor’s investment return for the year.  The amounts on the 1099-Div could contain ordinary dividends, total capital gains, qualified dividends, foreign tax paid, federal income tax withheld and foreign source income.

Another 1099 can come as a 1099-B for barter exchange transactions.  What does this mean? It means that instead of monetary payment, you received a bartered form of payment, an exchange of something other than money, with value attached in order to pay for a service.  

Other less used 1099’s are 1099-A, 1099-C, 1099-CAP, 1099-LTC, 1099-Q, 1099-R, and 1099-SA; the R, Q and SA are for retirement and social security payments, and are received by many retired individuals.  The payments from IRAs, MSAs, and HSAs are reported on these 1099s.  The 1099-A is received is there has been an acquisition of secured property, or an abandonment of secured property.

1099-C is received if there is a cancellation of debt, as from a bankruptcy proceeding, credit card default, or other failure of a maker to make good on a debt that the lender or seller can use as a tax deduction.  The 1099-CAP is a 1099 used to report significant changes in corporate control and capital structure.  What does this mean in laymen’s terms?  If you and several other individuals are in business together, as an incorporated entity, and 3 of you buyout another individual, you will be required to furnish that individual with a 1099CAP so that the individual reports any income or gain from the capital sale of stock.

A 1099 tax form that we have not seen very much until recently, but one that I am sure we will see much more of in the not too distant future is the 1099-LTC.  Long-term care and accelerated death benefits are filed on this 1099; with a larger segment of our population aging, this segment also known as the ‘baby boomers’ will make more use of long-term care insurance and payouts, and many of them will receive these types of 1099s.

Although these are most often forms of taxable income to the recipient, this is not always a steadfast rule.  For many of the older citizens, for individuals receiving the tax returns as part of a discounted program through the government, and for certain other situations, these are only information tax returns that do not result in added income tax liability.  For the rest of us, however, a 1099 tax form usually means we have increased our income tax liability.

Title: 

When Do You File a Tax Return?

Word Count:

610

Summary:

Every year, millions of Americans get ready to pay up to Uncle Sam, or get ready to collect from Uncle Sam; when did this become the great day that it is for taxpayers, and when are we actually required to file a tax return?  Let us take a look at the beginnings of the tax date of April 15 and why it was chosen?

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Article Body:

The first known income tax that Americans were legally required to pay was enacted during the 1860s, and the Presidency of Abraham Lincoln.  The Civil War was proving very costly to fund, and the President and Congress created the Commissioner of Revenue and enacted a law requiring citizens to pay income tax.

Originally, the deadline for completing and filing your individual income tax was not April 15th.  In the beginning, it was first set for March 1st.  Then, during 1918, Congress pushed the date out to March 15th.  Then, in the great overhaul of 1954, the date was once again moved forward to April 15th, and this is where it remains today.  But, it has only been set this way for a little over 50 years.  That is not very long, in historical terms, and it could possibly be changed again.

If you are an individual tax payer, you are required to file either a return or an extension of time to file (Form 4868) by April 15th.  Corporate and other legal entities are required to file their tax return by March 15th, and if not, they also must file an extension of time to file.  What this extension does not do, is to extend the amount of time you have to pay any taxes due the government.  So, if you are unable to ready your personal or business financial information in a timely manner, and have no reasonable estimate as to the amount of tax you may owe, you can expect to pay some form of penalty.

In the years following WWII, the burden of tax responsibility was shared fairly equally by the corporate world and the individual tax payer.  Today, however, the shift has been toward more responsibility on the part of the individual, and less on the business backs.  To demonstrate how special interests have begun to overtake American politics, during 1867, public opinion was so strong, and the outcry of the general public so loud, that the President and Congress repealed the income tax law, and from 1868 until 1913 almost all of the revenue for government operation came from the sale of liquor, beer, wine, and tobacco.  

An interesting time during the formation and eventual taxation of America occurred during 1918.  Until that point in time, the vast majority of revenue for government funding came from alcoholic beverage sales.  In 1919, Congress passed an amendment to the Constitution that made it illegal to manufacture or sell alcohol; what would replace the revenue?  American income tax was the proposed solution, and we have been paying since.  Although during the great years known as Prohibition, many ‘revenue agents’ spent their days tracking down ‘moon shiners’ not tax evaders, the American citizen, the individual taxpayer took on the heavy burden of supporting government revenue, and it has become heavier with each passing year.

Then, during 1942, the Revenue Act of 1942 was passed and the ‘New Deal’ era was begun.  Since that point in time, government control, power, and expenditures has continued to increase at a phenomenal rate, and today the American taxpayer supports a trillion dollar giant known as the United States government.  This ravenous beast consumes more than 10% of our earned income each year, and if the Social Security Administration has their way, will continue to consumer even more of our weekly earnings.  We can foresee no other relief in sight.

Currently, all the tax regulations for this country are the responsibility of the Internal Revenue Service, and there are four major divisions of this government office: the Wage and Investment, Small/Business Self-Employed, the Large and Midsize Business and the Tax Exempt and Government Entities.  Each division has responsibilities as they pertain to their individual specialty.

Title: 

What Your Tax Dollars Do For You

Word Count:

355

Summary:

In this article, we will take a look at the influence the government exerts over our daily lives through our taxation, and the good and bad aspects of that influence.

Through direct spending, the U.S. government controls approximately 43-45% of the economy. Today, government spending accounts for almost as much of the economy as spending in the private sector. After the passage of the New Deal legislation, during the late 1930s, the private sector controlled almost 90% of ...

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Article Body:

In this article, we will take a look at the influence the government exerts over our daily lives through our taxation, and the good and bad aspects of that influence.

Through direct spending, the U.S. government controls approximately 43-45% of the economy. Today, government spending accounts for almost as much of the economy as spending in the private sector. After the passage of the New Deal legislation, during the late 1930s, the private sector controlled almost 90% of the economy. We have experienced quite a huge change in the last 2 generations. The average American remits about 5.3 months of his or her work year in order to support government spending.

The American economy is separated into two sectors: there is one that is dependent upon federal, state, and local government spending, known as the public sector; all others known as the private sector. The private business sector is funded by tax dollars collected from Americans. What the government decides to spend and allocate is primarily funded by our tax dollars.

Government spending controls $5.4 trillion dollars of the total spending, and when you figure in the $1.4 trillion government-forced spending, the government actually controls somewhere near 58% of the economy’s national income. That is a 3.5 times increase from a hundred years ago. And the economy has been in a steady decline. The ability of private sector growth to increase has been reduced over time, thanks to the fact that the government largely governs even private sector business.

Increased government control gets a big boost from the special interest groups, and the capability of big corporate entities to lobby Congress for programs and funding, as well as changes in tax laws that benefit them alone. In addition, government-funded welfare and public assistance programs are a major contributor to the government spending programs.

The problems with government spending are not going to end anytime soon. This is not what our forefathers had it in mind when they broke free of oppressive British rule and penned the Declaration of Independence. Without major reforms, in the near future, we will see our children paying $25,000 each year to support an overburdened and imperious government.

Title: 

What to Look for in Online Tax Prep and Filing Software

Word Count:

498

Summary:

You may have a less taxing time this April if you let computer software do much of the hard work filing with the IRS.

Keywords:

#Arlington_Tax_Preparation, #Tax_Preparation, #Tx_Tax_prep, #Texas_Tax_Preparation, #Arlington_Tax_Prep, #Arlington_TX, #Tax_Prep, #DFW_Tax_Prep, #Tax_Filing, #Taxes, #Lewisville_Tax_Prep, #Lewisville_Tax_Preparation, #DFW_Tax_Preparation, #Arlington, #Tarrant_County, #Reduce_Taxes, #Tax_Refunds, #Pay_Taxes, #Tax_Help, #Bookkeeping, #DFW_Bookkeeping, #Investing, #tax_bookkeeping, #DFW, #Texas, #North_Texas, #Filing_Taxes

Article Body:

You may have a less taxing time this April if you let computer software do much of the hard work filing with the IRS.

You won't be alone. According to IRS data, more than 68 million tax returns were filed electronically last year, with more than 17 million taxpayers filing their own returns online. 

"There are a number of benefits that online tax prep and e-filing offer but you should do a little bit of homework first to get the greatest value for your dollar," said Debra Gray, tax software manager for CCH.

According to Gray, some of the questions you should look to answer are: 

Is the software easy and secure?

Online software can save time because you don't have to download it to your computer. Make sure, however, the program is easy to navigate, helps you organize your information and provides the support resources you need to complete your return, as well as encrypting your data using recognized security standards.

Can you work at your own pace?

Online tax preparation sites let you password protect your work, logging back in as often as you need. Make certain the program also automatically checks for errors or oversights and provides links to the problems for quick correction of potentially costly mistakes. 

What becomes of your return after you file? 

Make sure the program maintains a record of your prior year's return, so you can roll over basic information from one year to the next.

Does it clearly show the cost of preparing and filing your returns?

Navigating the add-on pricing structure used by some tax software providers can be taxing in itself, with some promoting a federal price or free federal filing but not clearly indicating added costs for completing a state tax return. According to Gray, most do-it-yourself taxpayers should be able to find a good tax program for under $40, including costs for preparing both a federal and state return and e-filing the returns.

What are the payment and refund options? 

Many sites let you deduct the cost of using their program from your expected tax refund and allow direct deposit of your refund into your bank account, for even faster access to your refund. 

What are the help and support options? 

Ideally, the program should be straightforward but you will want this safety net, so make sure the tax program offers support features via e-mail or live online chat. 

"Taxpayers who have been trying to complete their returns using pencil and paper or have been frustrated by the tax software programs they've used in the past, really owe it to themselves to take a look at the features available in online tax software this year," said Gray. "Preparing taxes isn't how most people want to spend their time, but if they're using the right tools, they can save time completing their returns online. As an added bonus, they will likely learn a few things that can help them save even more on their taxes this year and beyond."

Title: 

Write-Off Bad Business Debts On Your Taxes

Word Count:

381

Summary:

Practically every small business has receivables that it cannot obtain from clients. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Keywords:

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Article Body:

Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction. 

Bad Debt Tax Deduction

A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:  

A. The existence of a legal relationship between the small business and debtor;

B. The receivables are worthless; and 

C. The small business suffered an actual loss.

Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest requirement to meet, the issue is a bit more complicated. The Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic example of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can show a real loss if the retailer files bankruptcy.

Unfortunately, there is almost no way to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not consider the expenditure of time and effort to be a sustained economic loss. 

Small businesses suffer all to often from uncollected receivables. If you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.