New Form for Employees Misclassified as Independent Contractors

In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.

Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.

Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to you social security records.

To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:

• You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
• You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
• You have received other correspondence from the IRS that states you are an employee.
• You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
• Your co-workers are performing similar services under similar direction and control and are treated as employees.
• Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
• You have filed Form SS-8 with the IRS and have not yet received a reply.

For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• Form 1099-MISC, Miscellaneous Income

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Tax Facts About Capital Games And Losses

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only capital losses on investment property, not personal property.

Here are a few tax facts about capital gains and losses:

• Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
• Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
• Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
• The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2007, the maximum capital gains rates are 5%, 15%, 25% or 28%.
• If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• Publication 17, Your Federal Income Tax (PDF 2015.9K)
• Publication 550, Investment Income and Expenses (PDF 516K)
• Publication 544, Sales and Other Dispositions of Assets (PDF 321K)
• Publication 505, Tax Withholding and Estimated Tax (PDF 367K)
• Publication 564, Mutual Fund Distributions (PDF 178K)
• Publication 547, Casualties, Disasters, and Thefts (PDF 133K)
• Publication 527, Residential Rental Property (Including Rental of Vacation Homes) (PDF 187K)

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Special Guidelines for Recipients of Certain Social Security, Veterans and Railroad Benefits

Special Guidelines for Recipients of Certain Social Security, Veterans and Railroad Benefits

Certain people who normally are not required to file but who are eligible for the stimulus payment will have to file a 2007 tax return. This includes low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. For taxpayers filing joint tax returns, only a total of $3,000 of qualifying income from both spouses is required to be eligible for a payment.

The special version of the Form 1040A unveiled today on IRS.gov shows taxpayers in these groups the specific sections of the form they need to fill out to qualify for the stimulus payment. The mock-up is designed to be used as a guide for filling out an actual Form 1040A.

“People who don’t normally need to file have a roadmap on how to fill out the Form 1040A quickly and easily,” Stiff said. “We encourage recipients of Social Security and veterans’ benefits who don’t normally need to file a tax return to use this mock-up of the form as a guide to help them get their stimulus payment.”

The Form 1040A illustration on IRS.gov shows the limited number of lines that will need to be filled out for recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits. A key line is reporting their 2007 benefits on Line 14a of Form 1040A. The IRS reminds taxpayers they can also use Line 20a on Form 1040 to report these same benefits.

In addition, taxpayers in these groups should write the words “Stimulus Payment” at the top of the 1040A or 1040.

For now, taxpayers in this group filing a tax return can only file a paper copy of the Form 1040 or Form 1040A. The IRS is working to update its systems to accept electronic versions of these limited-information returns for taxpayers who otherwise have no need to file a tax return. The IRS is also working with the software community to handle these returns electronically at a future date.

The IRS also reminded taxpayers with Social Security, Railroad Retirement or veterans’ benefits who have already filed but did not report their qualifying benefits on either Line 14a of Form 1040A or Line 20a of Form 1040 that they may need to file an amended return in some situations to receive a larger stimulus payment.

Taxpayers who already have filed but did not report these benefits can file an amended return by using Form 1040X, which can only be filed with a paper form.

The IRS reminded taxpayers who don’t have any other requirement to file a tax return that submitting a tax return to qualify for the economic stimulus payments does not create any additional tax or trigger a tax bill. In addition, the stimulus payments will not have any effect on eligibility for federal benefits.

The IRS is working with the Social Security Administration and Department of Veterans Affairs and other organizations to ensure that recipients are aware of the need to file a tax return to receive their stimulus payment in 2008.

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More Information on Stimulus Payments

WASHINGTON — The Internal Revenue Service released additional information today about the upcoming economic stimulus payments in a specially designed section for taxpayers on IRS.gov.

The new information includes an extensive set of Frequently Asked Questions about the stimulus payments, with a special emphasis on recipients of Social Security and certain veterans’ benefits. Millions of people in this group who normally don’t file a tax return will need to do so this year in order to receive a stimulus payment.

For recipients of Social Security and certain veterans’ benefits and low-income workers who don’t normally need to file, the IRS also released a special version of a Form 1040A that highlights the simple, specific sections of the return that can be filled out by people in these categories to qualify for a stimulus payment.

“Most taxpayers just need to file a 2007 tax return in order to automatically receive the stimulus payment,” said Acting IRS Commissioner Linda Stiff. “But we are especially concerned about recipients of Social Security and veterans’ benefits who may need to take special steps this year to file a tax return in order to obtain a stimulus payment. IRS.gov will help taxpayers get what they need.”

The Frequently Asked Questions section – accessible through the front page of IRS.gov -- includes an extensive set of information for all taxpayers with questions about the stimulus payments, commonly referred to as rebates. The questions and answers include important information for low-income workers and certain recipients of Social Security, Railroad Retirement benefits and veterans’ benefits.

The special IRS.gov section also features extensive examples of how much taxpayers can expect to receive in stimulus payments. The page includes more than two-dozen payment scenarios affecting different types of taxpayers.

IRS.gov will be updated frequently to provide taxpayers with all they need to understand the stimulus payments.

The IRS will begin sending taxpayers their economic stimulus payments in early May after the current tax season concludes. In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for married couples who file a joint return). Payments to more than 130 million households will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future on IRS.gov.

The IRS reminds taxpayers when they file their 2007 tax return to use direct deposit, which is the fastest way to get both regular refunds and stimulus payments. However, taxpayers who use Refund Anticipation Loans (RALs) or enter into any other loan or financial agreement with their tax professional cannot receive their stimulus payments by direct deposit and instead will get a paper check.

The only way to receive a stimulus payment in 2008 is to file a 2007 tax return. The vast majority of taxpayers must take no extra steps to receive their stimulus payment beyond the routine filing of their tax return. No other action, extra form or call is necessary.

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IRS Successfully Processing Tax Forms Affected by AMT Legislation

The Internal Revenue Service is now processing five tax forms affected by legislation involving the Alternative Minimum Tax (AMT).

On Monday, IRS systems began to accept and process returns that include the five affected forms. After several days of processing, the IRS has confirmed all systems are working properly.

In late December, the IRS announced it would delay processing of several tax forms. For the vast majority of taxpayers, the filing season this year began on time. But for any taxpayer whose return included any of the five affected forms, filing opened on Feb. 11.

Taxpayers who use the five forms can now file their tax returns as normal.

The affected forms are:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers;
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Approximately 13.5 million taxpayers will use these forms this year. Altogether, the IRS expects to receive nearly 140 million individual tax return submissions this year.

The IRS has worked closely with the software industry and tax practitioners during the reprogramming process to minimize disruptions for taxpayers and the tax community.
For more information, see Alternative Minimum Tax –– How It Affects Filing Season 2008.

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Can You Use Schedule C-EZ?

Want to save time and trouble when filing taxes for your small business? You may be eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business income and expenses on your 2007 Form 1040 federal income tax return. The maximum deductible business expense threshold for filing Schedule C-EZ is $5,000.

Schedule C-EZ, Net Profit from Business (Sole Proprietorship), is the simplified version of Schedule C, Profit or Loss from Business (Sole Proprietorship).

Schedule C-EZ:

• Has an instruction page and a one-page form with three short parts — General Information, Figure Your Net Profit, and Information on Your Vehicle.
• Includes a simple worksheet for figuring the amount of deductible expenses. If that amount does not exceed $5,000, and if your business did not have a net loss, you may be able to use the C-EZ instead of Schedule C. (Other restrictions apply; be sure to read the instructions carefully.

Schedule C:

• Is two pages long and is divided into five parts — Income, Expenses, Cost of Goods Sold, Information on Your Vehicle, and Other Expenses.
• Requires more detailed information than the C-EZ. The instruction package is 10 pages long.
• Must be used when deductible business expenses exceed $5,000 or when a business has a net loss.

Using Schedule C-EZ can save time and reduce paperwork burden for eligible businesses. More information about Schedule C-EZ and reporting net profit for sole proprietorships can be found on the IRS Web site at IRS.gov.

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Link – Publication 334, Tax Guide for Small Business (PDF 407K)

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Mortgage Workouts, Now Tax-Free for Many Homeowners

Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form

WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.

“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”

The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home (Box 7).

Related Items:

• Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
• 1099-C

Guidelines For Roth IRA Contributions

From the IRS:

Although Roth IRAs are popular retirement arrangements, some taxpayers may be confused about whether they can contribute to a Roth IRA. Here are some helpful guidelines:

• Income Limits To contribute to a Roth IRA, you must have taxable compensation (e.g., wages, salary, tips, professional fees, bonuses). These limits vary depending on your filing status.
• Age There is no age limitation for Roth IRA contributions.
• Contribution Limits In general, if your only IRA is a Roth IRA, the maximum 2007 contribution limit is the lesser of your taxable compensation or $4,000 ($5,000 if age 50 or older). The maximum contribution limit phases out depending on your modified adjusted gross income.
• Spousal Roth IRA You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.

Time Contributions to a Roth IRA can be made at any time during the year or by the due date of your return for that year (not including extensions).

Roth IRA contributions are not tax deductible and are not reported on your tax return. On the other hand, you do not have to pay tax on any qualified distributions, distributions that are a return of your regular Roth IRA contributions, or distributions that are rolled over into another Roth IRA.

For complete information and definitions of terms, get Publication 590,

Individual Retirement Arrangements. Visit the IRS Web site at IRS.gov, or call 800-TAX-FORM (800-829-3676) to request a free copy of the publication.

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• Publication 590, Individual Retirement Arrangements (PDF 461K)

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e-file – A Smart Way To Do Your Taxes

The IRS is again offering eligible taxpayers the opportunity to electronically prepare and file their tax returns for free through Free File, a program offered in partnership between the IRS and private-sector software companies. For information on taxpayer eligibility, access the Free File Web page at IRS.gov.

For more information on e-file, check the IRS Web site at www.irs.gov/efile. You will also find a withholding calculator and worksheet, along with Form W-4, Employee’s Withholding Allowance Certificate, on the Web site. You may also get Form W-4 from your employer or by calling the IRS at 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

• E-file
• Free File
• Form W-4, Employee's Withholding Allowance Certificate (PDF 31K)
• Withholding calculator
• Electronic Federal Tax Payment System

Tax Time Tips For Mortgage Holders

It's that time of year again when numbers such as 1040, W-2 and INT-1099 become all too familiar to millions of people. One of the benefits of holding a mortgage on your house is the ability to claim certain deductions that can assist you in offsetting some of your tax burden. As you prepare to file your yearly taxes let's look at a few areas where you can take advantage of tax deductions and keep a little more green in your pocket this tax season.

The most obvious deduction that many tax filers take advantage of is the interest paid on the mortgage for their primary residence. For those of us with a mortgage balance of less than $1 million dollars (and hopefully that is the majority of us!) you can fill out Schedule A, also known as "itemized deductions", and claim all the interest paid in the previous year on your mortgage. Keep in mind this is for your primary residence (where you live) only and does not include other properties and houses you may own for rental purposes, etc. If you paid off your mortgage this year and were slapped with a pre-payment penalty you can also use Schedule A to take a deduction on those fees as well.
Taxes paid to local governments, known as real estate or property taxes, are also tax deductible. If your mortgage company pays your taxes for you through an escrow account you can find the deductible amount listed there - else check your assessment notice sent to you by your local taxing authority.

If you decided to spruce up your home and took out a home equity loan you may also be eligible to take a deduction for the interest of the home equity loan. One thing to keep in mind though is if the home equity loan plus your mortgage amount puts you over the real value of your home in total amount owed there are limits to what you may deduct.

Points of all types are usually tax deductible as well. If you refinanced in the past year any points you paid to buy down the mortgage rate can be written off proportionately over the life of the loan. This means that if you have a 20 year mortgage, you get to deduct 1/20th of the points each year. An added bonus comes if you refinanced in a prior year and then refinanced against in the past year and ended up paying off the first refinance. Any points you had not deducted from that first loan now become eligible for write off in their entirety.
If you took out your mortgage in the past year, any points that you paid on the purchase are fully deductible if the mortgage was for your primary residence and you paid an amount down at least equal to the points you were charged. This one can be tricky, so be sure to consult your tax prepared for more information.

This tax season make sure you are taking advantage of every deduction you can; part of owning a home and having a mortgage means that you get to reap some of the benefits of that ownership through the tax system. Don't let the IRS keep the money that you can use to help pay off that mortgage faster!

By: ratetake

Article Directory: http://www.articledashboard.com

Susan Duey represents, Best Low Mortgage Refinance offers low mortgage refinance rate marketplace which connects consumers with multiple companies that compete for their business. For more information please visit Tax Time Tips for Mortgage Holders

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Do I Have to Pay Taxes on My Google Adsense Earnings?

Do I Have to Pay Taxes on My Google Adsense Earnings?

Google Adsense is required to collect tax information from those who participate in the program. If you’re a business, you’ll need to put your EIN number on your application. If you’re an individual, all you’ll need is your social security number. If you don’t have that information when you initially sign up, you can still apply for the Google Adsense program. But be advised that Google Adsense will withhold payments to you until they receive your tax information.

While Google does not withhold taxes or provide any tax advice, they will send you a 1099 once your earnings reach a certain amount. Of course, if you are a Non-US business and have no activity in the United States, you will not need to provide this information. For more tax information regarding the Google Adsense program, visit the Google Adsense Support site. For other tax-related questions or concerns, you can log onto www.irs.gov.

If you use a separate room of your house just to make money on the internet, and it is used for that purpose only, or is considered a home office, some tax deductions you can take are the cost of your internet, your phone, your computer, fax machine and copier. You can take the section 179 deduction or depreciate the equipment. Software you buy for your business and the cost of ads you place across the Internet are also tax deductible. Just make sure you have accurate records.

Tim
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U.S. Master Tax Guide!!

Tax Withholding And W-4's

Withholding taxes and W-4's for your federal income taxes.

If you are an employee, generally your employer will withhold income tax from your paycheck. Taxes can also be withheld from other income, such as bonuses, gambling winnings, commissions, unemployment compensation and pensions.

Two things determine the amount of tax withheld from your pay, the amount you earn and the information you gave your employer on your form W-4. There are 3 types of information your employer uses to determine the amount withheld: To withhold at the single rate or the lower married rate, how many withholding allowances you claim, and if you want to withhold any additional tax. You can change your W-4 information at anytime, like if you want to change your withholding allowances. If you are married and get divorced, or if there is an event that decreases your withholding allowances, you have 10 days to file a new W-4 with your employer.

If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Then split your allowances between the Forms W-4 for each job. You cannot claim the same allowances with more than one employer at the same time. You can claim all your allowances with one employer and none with the other(s), or divide them any other way.

If you do not give your employer a completed W-4, they must withhold your tax at the higher rate.

This has just touched on the basics of federal tax withholding and W-4's. If you need more information, leave a message or contact your tax preparer or tax attorney, or see Publication 505 or 919

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Tim Watson is a tax preparer during the tax season. Do you need to learn even more about taxes? Here is a great guide U.S. Master Tax Guide . Need a break? Take a look at my Christmas Page . You may use this as is provided the resource box stays intact.