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A: Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards.
|Payment Period||Due Date|
|January 1 – March 31, 2015||April 15, 2015|
|April 1 – May 31, 2015||June 15, 2015|
|June 1 – August 31, 2015||September 15, 2015|
|September 1 – December 31, 2015||January 15, 2016|
A: The basic rule is that you must file a 1099-MISC whenever you pay an unincorporated independent contractor-that is, an independent contractor who is a sole proprietor or member of a partnership or LLC-$600 or more in a year for work done in the course of your trade or business.
If you’re a broker who employs independent contractor agents, you need to file 1099s for them, as well as any other contractor you paid at least $600 during the year.
Remember, however, that a 1099-MISC need be filed only when an independent contractors services are performed in the course of your trade or business. A trade or business is an activity carried on for gain or profit. You don’t have to file a 1099-MISC for payments for non-business related services. This includes payments you make to independent contractors for personal or household service-for example, payments to babysitters, gardeners, and housekeepers. Running your home is not a profit-making activity.
In addition, some business-related payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. These include:
- payments to corporations (except for incorporated lawyers)
- payments for merchandise, telephone, freight, storage, and similar items, and
- payments of rent to real estate agents (but the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner).
Form 1099-MISC is a multi-part form. Here are the parts of this form and where to send each:
- Copy B and Copy 2 are for the independent contractor and must be provided no later than January 31
- Copy A must be filed with the IRS no later than February 28, or March 31 if you file electronically,
- Copy 1 is for your state taxing authority if your state has a state income tax; the filing deadline for most states is February 28, but some states require earlier filings–check with your state tax department, and
- Copy C is for you to retain in your files.
A: When you are not able to file your tax return on the due date you can file an extension or a request for more time. The IRS will allow you to extend the filing of your tax return for six months if you file the correct form. The extension is for filing only and does not extend the time you have to pay your tax liability without penalty. You should include an estimate of your tax liablity amount with your extension form.
A: If you look for a new job in the same line of work, you may be able to deduct some of your job hunting costs.
Here are some key tax facts you should know about if you search for a new job:
- Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
- Résumé Costs. You can deduct the cost of preparing and mailing your résumé.
- Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
- Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
- First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.
- Work-Search Break. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
- Reimbursed Costs. Reimbursed expenses are not deductible.
A: Qualified expenses are amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution. You must pay the expenses for an academic period* that starts during the tax year or the first three months of the next tax year.
Eligible expenses also include student activity fees you are required to pay to enroll or attend the school. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities.
For the American Opportunity Tax Credit only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school. For example, the cost of a required course book bought from an off-campus bookstore is a qualified education expense.
A: If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. There are two basic requirements for your home to qualify as a deduction:
- Regular and Exclusive Use.
You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.
- Principal Place of Your Business.
You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:
- Your business use must be for the convenience of your employer, and
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
A: Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Used clothing: The fair market value of used clothing and other personal items is usually far less than the price you paid for them. There are no fixed formulas or methods for finding the value of items of clothing.
You should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops.
Household items: The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value.
You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. Do not include any of this evidence with your tax return.
Cars, boats, and airplanes: If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value.
Boats: Except for small, inexpensive boats, the valuation of boats should be based on an appraisal by a marine surveyor or appraiser because the physical condition is critical to the value.
Cars: Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. The guides may be published monthly or seasonally, and for different regions of the country. These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. The prices are not “official” and these publications are not considered an appraisal of any specific donated property. But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area.
These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. You can also find used car pricing information on the Internet.
To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car.
Certified Public Accountants (CPAs) act as advisers to individuals, businesses, financial institutions, nonprofit organizations and government agencies on a wide range of financial matters. Today, many individuals and businesses turn to CPAs for help with tax preparation, personal financial planning, auditing services, and advice on developing effective accounting systems.
CPAs are no longer just number crunchers and tax preparers. They are business and financial strategists who help chart the paths of businesses and individuals. Individuals turn to their CPAs for tax and financial planning services, investment advice, estate planning, and more.
Businesses are tapping CPAs to not only manage finances and taxes, but also to determine profitable new product lines, help diversify investments, and provide a variety of other consulting and business services.