The new standard deductions are:
On Jan. 25, in a 3-1 ruling, the National Labor Relations Board (NLRB) returned to its long-standing independent-contractor standard—essentially reversing an Obama-era decision that made it harder for employers to classify workers as independent contractors, and reaffirmed the NLRB’s adherence to the traditional common-law test. In the ruling, titled SuperShuttle DFW, Inc., NLRB effectively overturned its 2014 decision in FedEx Home Delivery, holding that members of a group of franchisee shared-ride van drivers are independent contractors.
The NLRB’s Republican majority wrote that the Obama-era FedEx case “significantly limited the importance of entrepreneurial opportunity by creating a new factor (‘rendering services as part of an independent business’) and then making entrepreneurial opportunity merely ‘one aspect’ of that factor.” Instead, the board reverted to an earlier common-law test that weighs, among other factors, the length of time a person is employed, the skills required to do the job and whether the contracted work is part of the company’s regular business.
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We will Resume Operations tomorrow on 01/22/2019. Enjoy this Day!
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New deduction for individuals who have qualified business income.
(QBI) — Effective Jan. 1, 2018, through Dec. 31, 2025, there is a potential 20% deduction for individuals who have qualified business income (QBI) from a partnership, S corporation or sole proprietorship. This deduction also applies to REIT dividends, qualified cooperative dividends and qualified publicly traded partnership income.
We are here to help you navigate through and to this deduction.
The IRS announced on Monday evening that it is prepared to start processing 2018 tax returns on Jan. 28 and that it will pay tax refunds despite the partial shutdown of the federal government. The agency has been operating under a contingency plan that has furloughed 88% of the IRS’s workforce. It says it will recall “a significant portion” of its furloughed staff for tax season. The agency also says it will issue an updated contingency plan in the next few days.
Visit our Blog Often, especially during tax season! We will keep you posted on the latest tax updates and we have some exciting things coming this tax season!
In the past, taxpayers received an exemption for themselves, their spouse and each of the eligible dependents that they claimed on their tax return. The TCJA eliminated these exemptions through Dec. 31, 2025.
Please call our office today at 262-358-8297 to set up a tax preparation appointment.
The TCJA increased the child credit for children under age 17 to $2,000 and also introduced a new $500 credit for a taxpayer’s dependents who are not their qualifying children. In addition, the phase-out limits for these credits have increased to $400,000 for joint filers ($200,000 for others), so that more individuals will be able to take advantage of this credit.
Please call our office at your earliest convenience to schedule an appointment. 262-358-8297
The IRS has released their contingency plan for fiscal year 2019, In the event of a long-drawn-out shutdown of the federal government. Loaded with valuable information that affects you, but guaranteed to put you to sleep. We can help you through this government shutdown! See Document below.
There are many sources of income that must be included on your individual income tax return such as wages, interest, dividends, self-employment, rental income, pensions, IRA’s, etc. Some of the non-traditional income sources that the IRS is targeting includes income from the following: Lyft or Uber drivers, home rentals through Airbnb or VRBO, GoFundMe or Kickstarter campaigns, and virtual currency (or cryptocurrency) such as Bitcoin.
As a driver for Uber or Lyft you are considered an independent contractor and all income derived is reported on Schedule C, Profit or Loss From Business (Sole Proprietorship).
Drivers are described as self-employed “partners” and are subject to the Form 1099 tax rules. This includes a combination of the Form 1099-K, Payment Card and Third Party Network Transactions for payments processed through credit cards and Form 1099-MISC, Miscellaneous Income, for other payments received such as referral fees, bonuses, etc.
As an independent contractor, you are considered self-employed responsible for your own taxes with no benefits such as health insurance or vacations. You pay your own Social Security and Medicare Taxes (aka FICA taxes) on the net profit earned from your ridesharing business.
If your net earnings (gross income less associated business expenses) are greater than $400 you are required to file a tax return and report your self-employment activities.
Eligible expenses may include the following:
Home Rental Income
If you rent out your home for short-term rentals (less than 14 days per year) the income is not taxable regardless of how much you earn. Your rental income is tax-free if you rent out your home for 14 days or less, and the home is used personally for more than 14 days, or more than 10% of the total days it is rented out to others at a fair market rental price.
If you rent out your home for more than 14 days then you are subject to tax on income that exceeds your expenses. The rental income and expenses are reported on Schedule E, Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.)for each property that you list on the rental sites.
You can deduct 100% of any direct rental expenses, and a portion of the general or shared expenses. These are allocated based on the amount of time the property serves as a rental, compared to the total time it is used during the year for both personal and rental use.
EXAMPLE: Timothy lives in his Coronado condo for 300 days during the year and rents it out for 65 days. The property was used as a rental 18% of the time (65/365 = 18%). Paul can, therefore, deduct 18% of his general expenses up to the amount of the rental income earned during the year.
In some cases, renting out all or part of your house or apartment can be classified as the equivalent of running a bed and breakfast for tax purposes. If you dedicate a room or rooms for the use of paying customers and provide substantial services such as regular cleaning, changing linen or daily maid service. In this situation, your rental activity would be considered a business for tax purposes and reported on Schedule C, Profit or Loss from Business.
The treatment of funds that are received through sources such as GoFundMe or Kickstarter are determined on a case-by-case basis.
Generally, funds received through a GoFundMe account are considered a gift and as such not a tax deduction for the person making the payment and not income for the person receiving it. Those payments are generally defined as made out of a detached generosity with no expectation of ‘quid pro quo.”
Funds received through a Kickstarter campaign are generally includable in income unless they are classified as a loan that must be repaid or a capital contribution to an entity in exchange for an equity interest.
Virtual currency, the most popularly known is Bitcoin, are either ordinary income or a capital asset depending on the facts and circumstances.
EXAMPLE:Elaine’s business accepts payment in Bitcoin for consulting services. When Bitcoin has a value of $100, she charges $500 for her services and receives 5 Bitcoin. Several months later she purchases a $3,000 computer system from Dell for her business when Bitcoin has a value of $1,000 each. She uses 3 of her Bitcoins for the computer and has a short-term capital gain of $2,700 ($3,000 disposition price less $300 basis). She then uses the remaining 2 Bitcoin for a vacation rental and has a short-term gain of $1,800 ($2,000 disposition price less $200 basis). The Dell computer is a business asset which she can capitalize and depreciate, the vacation home is a personal expense. With this simple example, Elaine has ordinary income to her business of $500; $4,500 of short-term capital gain; a business asset worth $3,000 and personal expense of $2,000.
It is important that you accurately record your virtual currency transactions. For tax purposes we need to know when the virtual currencies were purchased, the value on the date of purchase, when the currencies were traded or used, and the value on the date of disposition. In addition, if you are involved in the global market and are trading in foreign currencies we will also need to determine the value of your transactions in U.S. dollars.
Contact our office if you have any questions regarding funds received and the potential tax liability.
We have been stressing that the winners with the new Tax Law are C- Corps, however the next best thing are S-Corps. If you feel you can comply with all the laws of a C-Corp you may want to look into terminating your S Corp Election.
Tax reform may have you thinking of changing your S corporation to a C corporation, partnership, or sole proprietorship.
With such a switch, you need to consider:
If you want to turn your S corporation into a C corporation, you file an S corporation election revocation statement with the IRS. Your corporation is then a C corporation for federal tax purposes.
If you don’t want your business to be either an S or a C corporation, you liquidate the S corporation and contribute the assets to a new business entity.
If you chose S corporation taxation for your limited liability company (LLC), changing that election is a little more complicated.
First, you must file the S corporation election revocation statement with the IRS. The tax law then treats your LLC as a C corporation for federal tax purposes.
If that’s what you want, stop there.
If you want a disregarded entity (single-member LLC) or a partnership (multi-member LLC), you also need to file Form 8832, Entity Classification Election, to revoke the C corporation election.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.