Tax Goddess Newsletter – December 2015
THANK YOU, ALL!
The holiday season is almost with us, and it always reminds me of my love for my family, my friends, and my clients. I feel so blessed to be working with you all as clients, vendors, friends, and family. I feel so honored that we were able to help small businesses like yours grow, expand, and conquer your dreams this year, and hopefully for many years in the future!
BEST HOLIDAYS WISHES to you all!
Shauna, your Tax Goddess
What do you need to know before 2015 comes to an end?
As the end of the year is upon us, there are several items you want to be aware of and act accordingly, especially if you own or manage a business. There is important news related to:
- New depreciation rules are expected before year-end,
- Depreciation limits
- Limits on expensing items
- IRS penalties
- Arizona credits and ‘free money’
Let’s take a quick look at each one…
Raise your hands if you’re sick of discussing The Affordable Care Act (ACA) yet! (Me! Me!) Unfortunately, it’s one of those necessary evils that we need to be paying close attention to. Small employers that provide certain “self-insured” heath care arrangements may be required to file new forms. It’s important that you check whether or not your insurance carrier will be filing this for you. Because this relates to the new ACA rules, the IRS is going to be cracking down on businesses that do not have this covered. We don’t want to see penalties in your future, and we’re sure you don’t either, so please make sure you’ve checked into this before it’s too late!
Since 2009, the IRS has filed extender laws every year. Current law allows a Section 179 deduction of up to $25,000 – however – given the yearly changes in the past, we expect that this is highly likely to change soon – possibly even before the end of the year – so stay tuned for notices from us, and as we’ll be sure to let you know if/when this happens!
De Minimis Rules:
Do you know which of these items can be written off to your business?
In 2014, you would have had to look at all purchases to determine whether or not they were applicable to your business. If the item was over $500, you would have to capitalize it. For 2015, that amount has now been raised to $2500. This means that smaller purchases can now be written off all in the year of purchase (great news for small businesses everywhere)!
Yes, the IRS is broke! Uh oh! But what does this mean for you? This means that they will be looking for new, fun, and exciting ways they can to get more money out of your pocket. Hence, penalties for failure to file certain forms (like the 1099), as well as late fee penalties, are increasing dramatically. Be on high alert to ensure that you are filing all the necessary forms, on time, and in the correct manner.
AZ Credits & FREE MONEY:
Who doesn’t like free money?! The state of Arizona offers dollar-4-dollar credits for things such as private and public school credits, foster care credits, and working poor credits. The Feds (if you itemize) will ALSO give you a deduction at your tax bracket – therefore FREE MONEY BACK! Not only is this a chance to do some good, you have the opportunity to earn some spare cash! It’s a win-win! Check out our AZ Credits page & our Tax Goddess Scholarship Fund page for websites and links to authorized charities for these donations.
Want to learn more?
Watch Shauna, The Tax Goddess, explain all this and more in our special year-end webinar:
Top 5 Things you NEED TO KNOW Before 12/31 and Before 2016!
Tax Goddess Payroll Services – Now Better Than Ever
We all love improvements. And what could be more exciting than the kind that adds more value, and doesn’t cost more? That’s right, the Tax Goddess has improved our payroll services, and we’re unleashing all this goodness for you in the next month.
When It’ll Happen
Starting January 1, 2016, we will be offering this amazing new payroll service—without a new price tag! For the same investment, you’ll receive oh-so-much-more value, and we’re positive you’ll be as excited about these new features as we are.
Why It’s So Cool
Since everything is easier on the cloud, this new solution will take advantage of 21st-century technologies for paperless payroll processing. And because payroll is part and parcel of HR, you’ll also enjoy some super-awesome HR benefits that we haven’t been able to offer in the past. You’ll be the first on this bandwagon, so hold on to the reins!
How Things Will Change
What can you expect on this new payroll / HR buffet? Here’s just a taste of the menu:
- Easy-to-run payroll, even when you’re on the go
- All payroll taxes (local, state, and federal) automatically paid and filed
- Access to a payroll expert by phone, email, or live chat
- Comprehensive online reports available 24/7
- HR labor posters, business forms, and how-to guides at no charge (that’s free, folks!)
- Secure online employee access to individual pay stubs and payroll history
If you’re already a payroll client with the Tax Goddess, your transition will be simple and easy. We’ll be in touch with you with more information to keep you in the loop and help you assimilate. You’ll soon be basking in the ease of a cloud-based payroll solution.
Who Wants In?
If you’re not a payroll client now and you want to be, just give us a buzz at 602-362-7939 and we’ll get you started. You have nothing to lose but the headache of managing payroll by yourself!
New and improved looks good on us, we must say, and we know it’ll look great on you too.
W-2 or 1099?-Characteristics of the Common Law Employee versus an Independent Contractor
As an employer, it’s not always easy to know when a person who is hired to help with some aspect of your business should be classified as a common law employee or an independent contractor. To help demonstrate the difference between the two, let’s begin with a short story…
Busy Barney went into business for himself just six months ago, and business is booming! In fact, things have gotten so busy that Barney can no longer keep up with the workload by himself. As such, Barney decides to hire Amazing Annie to work as his administrative assistant. Upon offering her the job, Barney tells Annie that she will be paid $16 an hour, work Monday thru Friday, from 9am to 5pm, and that she will be responsible for answering the phones, handling the bookkeeping, and greeting customers according to company policy. She will also receive a benefits package including health insurance and a 401K benefit plan, will sign a contract in writing as a condition of employment, and will provide such services solely to Barney. Furthermore, if Annie needs specific supplies in her workspace, she can purchase them herself, and Barney will reimburse her once she provides him with the receipt.
Because Barney has a say over what Annie does, how and when she performs her work, and provides her with a compensation package that includes hourly pay and fringe benefits, Annie is considered a common law employee. Along with signing an employment contract in writing, Annie will also need to complete a Form W-4 upon hire. At the end of the tax year, Annie will receive a Form W-2 from Barney, which she will subsequently use when preparing her personal tax return.
Having fully trained Annie in her new role as administrative assistant, Barney decides he is in a good position to take on more clients. Thus far, Barney has earned the majority of his business through word-of-mouth, and decides the next best step is to begin advertising his NO CLUE about how to even begin setting up a website, so he contracts with Creative Callie to tackle the job. Barney informs Callie that he wants her to services on a website. Barney has absolutely design a website that will “knock the socks off the competition”, and Callie has quite a few ideas about how she can do just that! As a condition of the contract, Callie will not receive payment from Barney until she completes the website, which he expects to be up-and-running two weeks from now. Callie is currently providing website design services to several other businesses, and knows she will have to work day and night in order to meet Barney’s deadline. She also knows that no matter how tirelessly she works, she won’t be receiving a penny more than the agreed upon amount in the project contract.
Callie is considered an independent contractor for several reasons. First, she is able to work on Barney’s website whenever she chooses, so long as the website is completed by the specified date. Second, Callie knows that the website needs to be a cut above the competition, and it’s up to her how to make this happen. In addition, Annie will not get paid until she completes the project, and once the website is up and running she will not be obligated to provide additional services to Barney. Callie is free to provide website design services to as many businesses as she chooses, and the work she provides to each business generally covers a finite period of time. As an independent contractor, Callie will need to complete a Form W-9 upon entering a project contract with Barney. At the end of the tax year, assuming Barney paid Callie more than $600 to design the website, Callie will receive a Form 1099-MISC from Barney, which she will use when reporting income on her personal tax return.
For additional information about how to distinguish between a common law employee versus an independent contractor, click on the link below:
Independent Contractor (Self-Employed) or Employee?
It’s the end of the year, and business is booming! During the year, you recall having paid $300 to a handyman to paint the walls of your office, $1000 to a website designer to create a state-of-the -art website for your business, and $15,000 in rental expense for your office space. Needless to say, you’re a bit confused about exactly who your company will need to file a Form 1099-MISC information return for.
Thankfully, your accounting department requires everyone they pay, excluding employees, to complete a Form W-9 prior to remitting payment to them. Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, needs to be completed by anyone your company pays (other than as an employee on your company’s payroll). The form includes spaces for information related to the name of the payee (individual and/or business) you will be remitting payment to, the payee’s federal tax classification as an individual/sole proprietor, C Corporation, S Corporation, partnership, trust/estate, or limited liability company, any applicable entity exemptions, along with the payee’s address, social security number or employer identification number, signature and date.
At the end of the year, your company will need to file a Form 1099-MISC information return for any individual listed in your W-9 records showing reportable payments of $600 or more. This also applies to certain partnerships and corporations (refer to Form 1099 instructions for exceptions).
According to the instructions for Form 1099-MISC on the IRS’s website, a Form 1099-MISC information return must be filed for anyone who has received payment from you amounting to:
At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
At least $600 in:
- services performed by someone who is not your employee (including parts and materials)
- prizes and awards
- other income payments
- medical and health care payments
- crop insurance proceeds
- cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney; or
- Any fishing boat proceeds
Returning to the payments listed in the first paragraph, the painter did not get paid enough to warrant the issuance of a Form 1099-MISC information return. However, both the website designer and landlord received more than $600 as payment for their services/rental space, and are therefore required to have returns filed for the tax year just ended.
That said, it’s important to understand the deadlines and potential penalties associated with filing or failing to correctly file Form 1099-MISC information returns. For example, any individual/entity you are filing a return for must have a payee statement in their hands no later than January 31, with few exceptions. Failure to comply with this deadline will result in a penalty, the amount of which will depend on when the payee statements are actually furnished.
Paper copies of Form 1099-MISC information returns must be filed with the IRS by February 29th, 2016, while electronic copies may be submitted anytime up until March 31, 2016. It is worth noting that you must file electronically if you have at least 250 information returns to file. According to the IRS’ 2015 General Instructions for Certain Information Returns, failure to file correct information returns by the due date could lead to penalties ranging from $30 to $500 per return, with maximum penalties in excess of $1 million, depending on the size of the company.
For additional details, please refer to the following websites:
If you do not have the following capitalization policy on file, please print out the attached document and get it into your files before December 31st.
The Tax Goddess office will be closed December 19th – January 3rd.
We will reopen on January 4th.
See you in 2016, everyone!
Happy Holidays from all of us here at Tax Goddess!