Gig Workers and Taxes

Tax Day is fast approaching

If 2021 was your first year in the gig economy then tax time will be full of surprises for you.
Most likely not very pleasant surprises either
Higher than expected tax liabilities
Even some penalties

Not much fun dealing with all of that.

What to do now?
Get some strong coffee (or your favorite give-me-energy drink)
And start on your paperwork.

Process your paperwork (get help, if necessary).
And file your taxes.

Tax time it’s a stressful time for many.

Now it’s the best time to start thinking, and planning, for next year
Think about how to make it easier on yourself when next tax filing comes around

Here are three things to get you started on the right track:

  1. Income
    Keep track of your income.
    Make sure to keep good records.
    The companies you work with will issue you 1099-NEC and other 1099s
    Do remember:
    The companies will also send copies of these forms to IRS
  2. Expenses
    Keep track of work-related expenses: car maintenance and repairs, work supplies, etc.
    These expenses will help lower your tax bill
  3. Taxes
    Put aside ~20% of your income. Save that money for taxes.
    (If necessary, and to avoid penalties, you may want to make estimated payments.)

That’s it!
Develop a system when you se aside time (weekly or monthly ) and do these.
And I promise you:
Consistently doing these 3 things will make tax time much less stressful.

Wishing you success in all you do

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IRS Performing a Ministerial


I know many of you who have had interactions with IRS in the past two years.
And feeling frustrated by the whole process.

IRS has a backlog of millions of unprocessed 2020 returns.
Their automated system sent out many erroneous notices.
Not a lot of fun — to put it mildly.

Still, some of you choose to see the funny side of things.
Like one of my friends who sent me this email:

> > > > > >

So I’m on the internet, looking up some tax information.
And I’m reading this:
“All or part of any interest you were charged can be forgiven if the interest is due to an unreasonable error or delay by an officer or employee of the IRS in performing a ministerial…”

IRS in performing a ministerial?!
WHAT?!

Now I’m thinking:
“Did I accidentally go to a religious site!?
But it clearly says ‘IRS’

> > > > > >

Love my friends.
And their sense of humor.

On a more serious note, do remember:
You don’t need to pay the interest you were charged due to an IRS employee’s instructions/action.
Or as they said, that interest can be forgiven.

Forgiven
Yes, I know what you’re thinking — that’s another word closely related to ministerial 😊

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What gets Small Town, USA on the World Map?

Jackson, Wyoming
Population: 10,553 (2019)

A small town.
In a sparsely populated state.

Simple country life style.
Small town not many people know about it, right?

Wrong.

Russian billionaires know about it.
And so do wealthy people from Argentina, India, Italy, Venezuela.

Why?

Two words:
Tax haven

Yes, the rich of the world are moving their wealth to Jackson, Wyoming.
The millionaires and billionaires have their attorneys set up trusts.

Washington Post article:
“Wyoming trust and layers of private companies with concealed ownership – allow the world’s wealthy to move and spend money in extraordinary secrecy, protected by some of the strongest privacy laws in the country and, in some cases, without even the cursory oversight performed by regulators in other states.”

Incidentally, they call this “The Cowboy Cocktail.”
So would you like one?

Better question — can you afford it?

How much money are we talking about?

Washington Post:
“Trust companies in Wyoming now manage at least $31.5 billion in assets, according to the state.”

That’s right.

Law professor Allison Tait, a trust and estate expert, regarding the anonymity/privacy of these trusts:
“It’s like a wrapped gift inside a wrapped gift,” she said. “The more wrapping you put on, the harder it is to figure out if there has been tax avoidance or evasion or even financial crime. Very few people know what you’re doing, basically.”

How is this possible?

It began with a 1977 law.
The brain child of an oil company.

As the years passed the lawmakers “improved” the law. And made it easier for company owners to hide their identities.

Adam Hofri-Winogradow, a law professor and trust expert:
“Wyoming is now among the 10 least restrictive, most customer-friendly trust jurisdictions in the world.”

In the WORLD!
Got that!?

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Charity, worker classification, and other tax stuff


* Charity
* Employees vs independent contractors
* Automation and tax collection

FEELING CHARITABLE?
Corporate charitable giving limit has been increased this year
(25% of taxable income).

Individuals
For those of you who itemize, the tax laws now allow an “increased individual limit” up to 100% of your AGI. This is cash contributions made during the calendar-year 2021.
(Contributions made to qualifying charitable organizations.)

Another change for individuals:
Even if you don’t itemize, you can still give and claim a charitable deduction

EMPLOYEES OR INDEPENDENT CONTRACTORS?
IRS reminds business owners (again!) how important is to correctly classify the people they work with.

Missclassifying employees as independent contractors can be costly.
You and/or your company will be held liable for employment taxes, including Social Security, Medicare, and other taxes.

A good starting point (to determine the correct classification):
1. WHAT service will be done, and
2. HOW the work will be done.

If you, the business owner, can control/direct both (what and how) then that worker is generally an employee.

AUTOMATION AND TAX COLLECTION
It happened again!!
Don’t panic if you received a collection letter from the IRS
You are not alone
Almost 90,000 taxpayers (who filed their taxes timely) received these erroneous collection notices

If you received one don’t stress
There’s no action needed on your part

The lesson in this:
It appears that automation and tax collection still haven’t learned to work well together 🙂

 

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Possible tax law changes on the horizon

Investing in infrastructure
Helping families with education, child care and paid family leave

These are topics at the top of the agenda in Washington.

Where do the funds come from?
Tax increases.

Possible tax law changes on the horizon
Congress is discussing proposals and (possible) changes to tax laws.
Estate and gift taxation, FICA, and eliminating the $10,000 limit on SALT taxes — these are some of the tax proposals Congress is considering making changes to.

On the personal level, whether these changes affect you (or not) depends on your income bracket.

Those who will be mostly impacted by these changes include taxpayers with a household income over $400,000, who itemize, and make (or receive) annual gifts.

The big question is whether some of these changes will be made retroactively.
And the effects on individuals and businesses.

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IRS and Virtual Currency

At any time during the year
“Did you receive, sell, send, exchange, or otherwise
acquire any financial interest in any virtual currency?”

This question is on the first page of your tax form (US).
And you need to answer it.

Globally, many tax authorities are not sure how to tax cryptocurrency.
We don’t have that problem here.
It’s classified as property.

Cryptocurrency transactions (related to tax evasion and dark web):
IRS (through its Criminal Investigation unit) is using #dataanalytics and #artificialintelligence to address both.
Transactions are traced across borders.
(Obviously these guys don’t believe in border walls 🤣 )

To accomplish this IRS works through groups such as J5 and others.

The goal?
Improved tax compliance.
Globally.

(IRS is hiring tech experts: data scientists and behavioral scientists.
And individuals with significant cryptocurrency knowledge)

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Tax Talk

Tax information for
* S Corp filers.
* Corporate givers.
* MNEs

First, you the S Corp filers
IRS has released the 2020 Form 1120-S
Changes include the payroll tax credit.
Make sure to claim it — if you qualify for the credit, of course.
(A portion of it may be refundable.)

/ / / / / / / /

Reminder for the corporate givers:
February 25th is the deadline for your “qualified disaster relief contributions.”
Charitable contributions deductible up to 100% of taxable income.
(Previously capped at 10%)

/ / / / / / / / /

What’s new for MNEs
(Multinational enterprises)

US and Argentina signed an agreement to share information on MNEs
Areas of interest include high-level transfer pricing.
The agreement takes effect beginning with the FY 2018.

What does it mean for you, the US parent of an MNE?
It means that you continue reporting to the IRS on Form 8975.
AND
Know that your CbC Report is shared with Argentina’s Tax Authority.

These governments — so “curious” aren’t they? 🙂

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PPP Loans for Small Businesses

This is the second round of PPP loans for small businesses

The small business community has been hit really hard this past year.
And that has prompted #Congress to pass the second round of Payroll Protection Program (PPP) loans package.

The “window” to apply for a second #PPP loan will close on March 31, 2021.
(Earlier if the funds run out.)

Business owners need to get busy.

Start getting together the necessary #documentation.
The #requirements to qualify for a PPP loan include:

* 25% (or more) reduction in gross receipts (2020 compared to 2019)
The drop can be annual; or for any 2020 quarter compared with same quarter in 2019

* The business has 300 #employees or less

* The #business is operational
(You can get the PPP loan even if you had to temporarily close.
Key word here: temporarily. Not permanently.)

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IRS — the good guy

When you hear “IRS” – what is the first thing that comes to mind?
For many just a brief mention of the word is enough to get them think (and growl) about taxes.
Either thinking of filing; or how much they owe.

IRS the good guy
IRS the “good guy” doesn’t usually comes to minds.
But it should.

This year, mid August, IRS Criminal Investigation (along with the FBI and Homeland Security) were successful in breaking up three terrorist financed campaigns.
(Cyber-enabled campaigns.)

U.S authorities seized:

  • Cryptocurrency accounts (over 300).
  • Millions of dollars.
  • Plus websites and Facebook pages.

All related to the terrorism activities.

The criminals employed sophisticated cyber-tools.
And donations were coming in from around the world.

ISIS was in charge of one of these terrorist campaigns: selling protective equipment for COVID-19 was part of their arsenal.
They were selling N95 respirator masks (not FDA approved).
Targeted for use by hospitals, nursing homes, and fire departments.

“While these individuals believe they operate anonymously in the digital space, we have the skill and resolve to find, fix and prosecute these actors under the full extent of the law.”

– says United States Attorney Michael R. Sherwin.

This seizure – the largest seizure of cryptocurrency (terrorism related) – is a victory for the good guys.
And IRS CI played a significant part in this operation.
IRS — the good guy.

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Do my taxes start with a wine? Or two?

“Feel like I’m gonna puke
’cause my taxes are due”

No, this is not one of my clients talking.

This is borrowed from AJR’s hit song Bang!
I listened to it when I went walking the other day
(Yes, I know. Me, being so active!
I surprised myself too.)

Bang – fun song to listen to!

(As for taxes, in case you need a reminder:
If you’ve filed an extension
Taxes are due in 15 days.)

Back to the song.
“Feel like I’m gonna puke
’cause my taxes are due
Do my password begin with
a one or a two? “

Ok, #AJR
There’s room for improvement here.

Imagine how much better would sound
if you change the password line with this:

“Do I start my taxes with a wine?
Or two?”

We’re not gonna worry about grammar here.
Obviously.

After all we are working on taxes.
And wine.
At the same time

(Multitasking at its best?)

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