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March 2019

Self-Employed Tax Tips You Should Keep in Mind

There are still a couple of weeks left to file our income tax report on time and avoid interests and fines. Thus, if we haven’t had the chance to get around it, we still have some time left to take care of such an important matter. However, if we are freelancers or entrepreneurs working on our own company, this might be of great help. We are putting together three useful self-employed tax tips you should keep in mind before filing your income tax report this year.   

We have talked about many different tax credits and deductions available for tax payers, but these are some particularly interesting self-employed tax tips for solopreneurs. For example, deducting house expenses that result from home office activity. Also, health insurance expenses might also be deductible in some cases. Lastly, any education or training expenses that help us develop our current skills can be deductible too.   

Home Office Deduction  

Being self-employed and running your own business is not a difficult task. There are many challenges and situations one must face and overcome, including finding the right location. For many freelancers, working from home is the best way to start a business and keep it running without worrying about having to pay for rent. As a result, you might be able to get a tax break for home office expenses.   

In order to deduct these expenses, you need to calculate the percentage of your home and services that you use exclusively for your business. So, if your home office takes 10% of your house’s square footage, that is the percentage you can deduct. This deduction applies for rent, utilities, insurance, and any other expense that results from working at home.   

Health Insurance  

You might be eligible for a health insurance self-employed deduction, but only in some cases. So, if you signed up for an insurance policy that would cover you, your spouse, and any children younger than 27, this might work for you. This deduction can also apply for dental insurance if you got that too.  

Since this one works as an adjustment to income, there is no need to itemize our income report. However, we might not be eligible in some particular scenarios we should keep in mind. For example, if our spouse already had some kind of coverage plan and we didn’t enroll on it, we could lose this deduction. Especially if their plan was more expensive than the one we got. Therefore, we need to consult with a professional to see if we qualify or not.   

Education Expenses  

It takes a lot of training and preparation to successfully run a business, especially when we are self-employed. Thankfully, we can deduct the expenses of qualifying work-related education and up training. These expenses include tuition, books, lab fees, supplies, transportation, and any other class expenses.   

In order to be eligible for this deduction, this education or uptraining must help us maintain or improve any skills we need in our current job. So, if we are studying to change careers or only to satisfy the minimum level of education required in a job or industry, we might not be eligible for this deduction.   

Remember that the end of tax season is almost here, so if you have any questions about these self-employed tax tips, or any other step of the process, don’t hesitate and get in touch with us.   

Passport and Serious Tax Debt: What You Should Know

There are many consequences we can face if we fail to file our taxes or pay our due balance. These consequences can come in the form of interests and fines, for example. However, another consequence that can come as a result of serious tax debt is the revocation or denial of our passport. Even when this has been in the books for some time, the IRS has been trying to inform and educate taxpayers about the possibility. 

Facing the revocation or denial of our passport isn’t a very common situation. This could only happen when we accrue a seriously delinquent tax debt. Nevertheless, there are different payment plans and programs we can look for. There plans could help us manage our tax debt better. Besides, there are other options available that can help us out, too.  

Revocation or Denial of Passport due to Serious Tax Debt 

Whenever we find ourselves with a seriously delinquent tax debt, the IRS can revoke or deny a passport request. However, we must keep in mind they are not directly in charge of doing so. What happens is that the IRS notifies the State Department of such a debt. Then, the State Department is responsible for the revocation or denial of a passport.  

This is not a very common scenario, though. A tax debt must be of more than $52,000 in order for it to be considered a seriously delinquent tax debt. This balance includes penalties and interests, of course. IF such was the case, the IRS should notify any taxpayer by sending the notice CP508C.  

Payment Programs and Alternatives for Tax Debt 

The IRS offers many different payment programs and plans that can help us pay off any serious tax debt. Frequently, though. Most tax payers qualify for either a payment agreement or an offer in compromise. If we request a payment agreement, we can divide our balance into installments to cover every month.  

However, there are some taxpayers that might qualify for an offer in compromise. This means that we could reach an agreement between the IRS and ourselves in order to cover any serious tax pay. The advantage of an offer in compromise is that we can settle liability for an amount below the current tax amount we owe.  

Other Options Available for You 

If we cannot qualify for a payment arrangement or an offer in compromise, there are still other options out there. For example, the IRS cannot certify any taxpayers as seriously delinquent if the taxpayer has filed for bankruptcy. If you suffered from identity theft or are currently going through a financial hardship, such tax debt doesn’t count, either.  

Negotiating an installment with the IRS could be an option, even when we don’t qualify for an actual payment program. This way, we can reduce the debt and keep it from becoming seriously delinquent. Becoming a permanent resident of a foreign country could be another way to avoid falling such a debt status.  

Regardless of the situation, always remember to consult with a tax professional. They will be able to provide you with the required assistance and guidance in this kind of problems with the IRS. 

Convenient Tax Payment Options to Cover Your Balance

Even when most of us are expecting a tax refund, getting an unexpectedly high bill from the IRS is possible. Since we might be receiving an unpleasant surprise, thinking of convenient tax payment options to cover our balance is essential. This way, we’ll make sure we’re taking care of any possible debt with the IRS beforehand. If we don’t, we might find ourselves subject to different interests and fines.  

Some of us might have enough in our savings to cover our IRS balance, yet there are other convenient tax payment options we can take advantage of. The most common one would be using our credit card to make the payment. If we don’t have one, though, applying for a credit card or personal loan can be another option. We can also ask for an installment plan with the IRS so we can cover our tax balance.   

Use Your Credit Card  

One of the most convenient tax payment options to cover our balance is using our credit card instead of cash. This gives us the opportunity to have some extra time to cover our balance. We all know credit cards can be really helpful yet dangerous if we’re not careful. If we decide to pay the IRS with our credit card, we must remember to pay the card’s bill entirely. Otherwise, we would start accruing interests and even late fees if we forget to pay on time.   

Apply for A Credit Card with 0% Interest  

If we have been thinking about getting a credit card, this might be the perfect time to apply. As we mentioned above, credit card payments can be quite convenient tax payment options as they give us some extra time to actually cover the given amount. Getting a card that offers an introductory 0% interest rate sounds too good to be true. However, some banks tend to have this kind of specials available every once in a while.   

Get A Personal Loan  

Another way to get funds and pay our tax balance is through a personal loan. Depending on our debt to the IRS is the type and amount of the loan we will ask for. We should also keep in mind that, if we don’t pay it on time, we will be subject to interests and some other fees. This is the opposite of what we want, so we must remain careful and consider our expenses.   

Work an Installment Plan with the IRS  

Last but not least, the IRS has many payment options and installment plans available for taxpayers. These installment plans are offered in order to help us avoid interest charges and monthly late fees. If we fail to file our taxes on time or pay the balance we owe by the due date, we are subject to such charges. Thus, the IRS designed payment plans for both individuals and businesses. You can see if you are eligible or not directly through their website.   

4 Tax Scams of 2019 You Must Avoid

With a bit more than a month left to finish our income tax return, scammers and fraudsters are a real danger. Every year, new reports and articles are posted in an attempt to inform and warn unsuspicious tax payers. Therefore, we are listing four of the most common tax scams of 2019 so you can identify them and avoid them before it is too late. This will help us keep our personal information safe and our record with the IRS clean. 

Tax fraudsters and scammers try to use different methods to steal people’s information. Some of these include email phishing, fake refund scams, phone calls pretending to be the IRS, and impersonating tax preparers. So, the best way to avoid falling for these tax scams of 2019 is being informed and paying attention to any suspicious call or email we receive.  

Email Phishing Scams 

Receiving phishing emails has become an everyday part of the digital life. However, when it comes to tax scams, identifying a threat can be trickier than we think. This year, many companies have reported receiving this kind of emails in order to provide sensitive information of their employees. Fraudsters are sending phishing emails to HR and other staff members of companies pretending to be CEOs or Head directors. Through these emails, they try to get employees’ sensitive information to either commit fraud, to steal their identity, or sell the data online.  

Fake Refund Scams 

Scammers are also contacting unsuspicious taxpayers to inform them of an “uncollected refund” check. Then, they ask their victims to provide them with their Social Security Number and bank account info so that they can receive the refund as a deposit. Scammers trick their victims into giving this information by impersonating IRS representatives only to later steal their information. Therefore, we must remain alert and never provide sensitive information by email or phone.  

IRS Phone Call Scams 

One of the most common tax scams of 2019, just as every other year, is receiving a phone call from the “IRS”. What fraudsters do is contact taxpayers and inform them of a tax bill they must pay as soon as possible. In order to convince them of paying, callers threat their victims with being subject to fines and even facing arrest. However, we must remember that the IRS never calls or requests money over the phone, as they only use regular mail to contact taxpayers.  

Fraud Tax Preparers 

Recently, there have been many reports about scammers and fraudsters pretending to be professional tax preparers. This allows them to collect information they can use to either sell online, commit other fraud, or snatch tax refunds. In order to avoid falling for these tax scams, always remember to research a tax preparer beforehand. Also, remember that any tax preparer must have a PTIN, or Preparer Tax Identification Number assigned by the IRS. Besides, their agency should be able to provide you with records that prove they are qualified.