Tax Tips for Summer Jobs from Georgen Scarborough

When you think of your summer job, or if you’re starting as an entrepreneur, taxes might not be at the top of your priority list, so here are tax tips that you need to keep in mind. This guide from Georgen Scarborough Associates, PC will help you to make the most out of your summer earnings without getting into hot water with the taxman.

Tax Tips for Summer Jobs and Entrepreneurs from Accounting Service Experts summer

Understand your type of income 

How your income is classified will have a significant effect on your taxes, so it is essential to understand whether you are self-employed, or if a business or company actually employs you. 

There are many forms of self-employment, including being an independent contract worker that performs services such as babysitting, cleaning services, dog walking and many more. Skilled workers such as writers, photographers and designers can also be self-employed as freelancers. The basic premise of self-employment is that you have the power to decide on work you accept, clients you want to work with and the terms of the contract. 

If you’re self-employed, your income will be reported on Schedule C or Schedule C-EZ (profit or loss from business). Self-employed taxpayers can claim business expenses that you may not even be aware of, and that differ from industry to industry. That is precisely why you need the services of a certified public accountant who knows the rules and understands the laws surrounding tax expenses and claims for different industries. 

If you are an employee of a business, your employer will deduct tax from your paycheck, instead of you having to pay estimated taxes to the IRS every year. 

Reporting Income 

Regardless of your employment status (whether you are self-employed, or employed by a company), you will have to report income from all sources on your tax return. There is a threshold for income that you need to cross before you start paying taxes, but even if you don’t cross the limit, you still need to file a tax return. When reporting your income, remember to include income from any side jobs, self-employment opportunities as well as formal employment. 

A source of income that is often overlooked is barter income. This is a form of income where you are paid in goods or services in exchange for the work that you do. For example, if you spend time teaching someone’s child to swim, and they give you a gift card to get your car washed at their car wash business, it is considered income from self-employment and needs to be reported. 

File your tax return 

You should always file a tax return, no matter your income. Sometimes, your income won’t exceed the minimum gross that is set for filing requirements, but even in such an event, you may still want to file if taxes have been withheld from your pay. Your tax return may entitle you to claim money back, or it generates a tax refund if you’re eligible for a refundable tax credit such as the Earned Income Tax Credit or the American Opportunity Tax Credit. 

Although you need not know all the tax rules, if you are self-employed or an independent contractor, you need to keep a record of your income and expenses such as mileage, and materials purchased to perform your job. To make it simple, use a service such as QuickBooks so your information can be exported at tax time.

For more tax tips and information on your summer job taxes, contact accounting service experts, Georgen Scarborough Associates, PC. today.

What are Estimated Tax Penalties and 
How Can I Avoid Them?

Individuals who are self-employed will be all too familiar with estimated tax penalties which may crop up in the instance that you have under-payed your tax obligation. The good news is that, in most cases, these estimated tax penalties can be easily avoided, even if you have severely underestimated the amount of money that you owe the IRS. Here is what you need to know.

avoid estimated tax penalties

How to avoid estimated tax and under-payment penalties

There are a handful of different ways to avoid having to pay any estimated tax and under-payment penalties. They are as follows:

You can avoid estimated tax penalties if you can prove that you were unable to make the required payment due to an extenuating circumstance over which you had no control. This circumstance could have been a “casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty”, according to the IRS.

You can avoid estimated tax penalties if you owe less than $1,000.

You can avoid estimated tax penalties as long as you pay a minimum of 90% of your tax obligation.

You can avoid estimated tax penalties if you pay at least 100% of the tax owed in the prior year.

You can avoid estimated tax penalties if you became disabled during the course of the current tax year or during the tax year before for which you should have made estimated payments.

Ultimately, the easiest way in which to avoid incurring estimated tax or under-payment penalties is to ensure that you make accurate estimated payments. While it is impossible to predict exactly what you will owe, it is possible to get a closer estimate. A good rule of thumb is to examine what you owed in tax payments in the previous tax year and make four equal payments which total at least 10% more than that amount.

Need help with your estimated payments or with filing your taxes? The CPA specialists at Georgen Scarborough Associates, PC are here to assist. Contact us today for further information regarding our services.

Tax Planning Tips for Small Businesses in the U.S.

Tax-preparation, CPA, tax advisor

Tax planning is essential for all businesses in the U.S. in order to ensure compliance and avoid hefty penalties. Remember, tax planning is not the same as tax-preparation (which is obviously just as important). Tax planning refers to the process of strategizing in terms of exactly what needs to be filed and which records need to be retained, as well as what deductions can be taken advantage of and which credits can be incurred. Tax-preparation, on the other hand, refers to the process of arranging your taxes for annual filings. 

With that in mind, here are a few helpful tax planning tips for small businesses, courtesy of Georgen Scarborough Associates. 

Seek out Assistance 

As the owner of a small business, you probably have a finger in every pie. In short, you have a lot on your plate and probably will not have enough time to dedicate toward the management of the financial aspect of your business. This is why it is strongly advised to partner with a tax advisor or CPA who can take over in this regard and assist in reducing the tax burden. 

Stay on Top of Deductions 

Make the most of the deductions available to you by ensuring that you keep detailed records of all related and relevant business expenses for audit purposes. You will need to hold on to the original vendor invoices and other receipts to prove that the expenses were made for business purposes, and not for personal gain. Bank statements will rarely suffice. 

Keep up to Date with Tax Law Changes

Tax laws are changing all the time! So, it is essential that small business owners keep abreast of how and when these changes are taking place – even if you work with a tax advisor. The IRS website is a wonderful resource for this kind of information. 

Looking for CPAs that you can count on for optimized tax planning? Look no further than the experts at Georgen Scarborough Associates. Contact us today. 

Tax Preparation Tips for Small Businesses

Tax tips for businesses

Do you own a small business? Trying to educate yourself in terms of how to prepare for the tax season? If so, you are also probably asking yourself a number of questions, such as whether or not you should try to handle all of your tax-related matters yourself as well as how can you reduce your company’s chances of being audited by the IRS? Here are some tax preparation tips for small businesses to help you on your way.

Make the Most of It

It is possible to really take advantage of your tax deductions and credits if you make the effort to keep track of them throughout the year. Deductions that you can take into account include items like business furniture, supplies for the office, and start-up expenses.

Invest

You will quickly come to find that keeping track of all the necessary numbers and information necessary for small business tax is time-consuming and demanding. This is why it can be a much better idea to invest in software to do it for you. There is also an array of useful apps available for a fraction of the cost, which can also help to streamline these processes.

Research the Forms

There are a lot of different tax-related forms that you should familiarize yourself with upon first starting your small business. Doing so will save you a lot of time in the future! Most importantly, you’ll want to know which ones are relevant to your business based on its type. For example, sole proprietors will need to attach a Schedule C to their personal income tax return, while corporations will need to use a Form 1120 or 1120S.

Looking for professional assistance when it comes to tax requirements for your small business? Look no further than the experts at Georgen Scarborough Associates PC. Contact us for more details today.

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It’s Time for a Mid-year Checkup!

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