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Employee or Independent Contractor? Know the Rules

The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor.

An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors.

Here are two key points for small business owners to keep in mind when it comes to classifying workers:

  1. Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes:
  • The extent of the worker’s investment in the facilities or tools used in performing services
  • The extent to which the worker makes his or her services available to the relevant market
  • How the business pays the worker, and
  • The extent to which the worker can realize a profit or incur a loss

2) Relationship. How the employer and worker perceive their relationship is also important for determining worker status. Key topics to think about include:

  • Written contracts describing the relationship the parties intended to create
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay
  • The permanency of the relationship, and
  • The extent to which services performed by the worker are a key aspect of the regular business of the company
  • The extent to which the worker has unreimbursed business expenses

The IRS can help employers determine the status of their workers by using form Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. IRS Publication 15-A, Employer’s Supplemental Tax Guide, is also an excellent resource.

For help with your tax return or with any questions, please call our office:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

 

IRS Offers Tips to Help You Prepare for Hurricanes, Natural Disasters

With hurricane season underway, the IRS offers advice to those impacted by storms and other natural disasters. Here are some tips to help you prepare for such events:

  • Use Electronic Records. You may have access to bank and other financial statements online. If so, your statements are already securely stored there. You can also keep an additional set of records electronically. One way is to scan tax records and insurance policies onto an electronic format. You may want to download important records to an external hard drive, USB flash drive or burn them onto CD or DVD. Be sure you keep duplicates of your records in a safe place. For example, store them in a waterproof container away from the originals. If a disaster strikes your home, it may also affect a wide area. If that happens, you may not be able to retrieve the records that are stored in that area.
  • Document Valuables. Take photos or videos of the contents of your home or business. These visual records can help you prove the value of your lost items. They may help with insurance claims or casualty loss deductions on your tax return. You should also store these in a safe place. For example, you might store them with a friend or relative who lives out of the area.
  • Count on the IRS for Help. If you fall victim to a disaster, know that the IRS stands ready to help. You can call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues.
  • Get Copies of Prior Year Tax Records. If you need a copy of your tax return, you should file Form 4506, Request for Copy of Tax Return. The usual fee per copy is $50. However, the IRS will waive this fee if you are a victim of a federally declared disaster. If you just need information that shows most line items from your tax return, you can request a free transcript. The quickest way to get a copy of your tax transcript is to use the Get Transcript application. You can also get it if you call 1-800-908-9946. Two other options are to file Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, or Form 4506-T, Request for Transcript of Tax Return.

For help with your taxes, please call one of our offices:

Plymouth 734.454.4100,    Allen Park 313.388.7180,

Grayling 989.348.4055,     Livonia 734-462-6161,

Royal Oak 248.399.7331, or    St. Clair Shores 313.371.6600

Tax Tips for Students Working this Summer

Tax Tips for Students Working this Summer

Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs:

  1. Withholding and Estimated Tax. If you are an employee, your employer normally withholds tax from your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works.
  2. New Employees. When you get a new job, you need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
  3. Self-Employment. Money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay.
  4. Tip Income. All tip income is taxable. Keep a daily log to report your tips. You must report $20 or more in cash tips received in any single month to your employer. And you must report all of your yearly tips on your tax return.
  5. Payroll Taxes. You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
  6. Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from Social Security and Medicare taxes.
  7. ROTC Pay. If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. Other allowances you may receive may not be taxable, see Publication 3 for details.

For help with your tax return or with any questions, please call our office:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Don’t be Fooled; IRS Scams Continue to Pose Serious Threat

The Internal Revenue Service has some advice for taxpayers that  may prevent them from being the victim of a tax scam: Don’t be fooled by scammers. Stay safe and be informed. Here are some of the most recent IRS-related scams to be on the lookout for:

Telephone Scams. Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.

Note that the IRS will never:

  • Call to demand immediate payment over the phone or call about taxes owed without first having mailed you a bill.
  • Threaten to immediately bring in local police or other law enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone or threaten to bring in local police or other law enforcement groups to have you arrested for not paying.

Scammers Change Tactics. The IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone. The latest variation on this scam uses the current tax filing season as a hook. Scam artists call saying they are from the IRS and have received your tax return, and they just need to verify a few details to process it. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

Tax Refund Scam Artists Posing as TAP. In this new email scam targeting taxpayers, people are receiving emails that appear to come from the Taxpayer Advocacy Panel, a volunteer board that advises the IRS on issues affecting taxpayers. They try to trick you into providing personal and financial information. Do not respond or click the links in these emails. If you receive an email that appears to be from TAP regarding your personal tax information, forward it to phishing@irs.gov.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Amending Your Tax Return: Ten Tips

You can fix mistakes or omissions on your tax return by filing an amended tax return. If you need to file one, these tips can help.

  1. Must be filed on paper. Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct your tax return. It can’t be e-filed. You can get the form on IRS.gov/forms at any time. See the Form 1040X instructions for the address where you should mail your form.
  2. Amend to correct errors. File an amended tax return to correct errors or make changes to your original tax return. For example, you should amend to change your filing status, or to correct your income, deductions or credits.
  3. Don’t amend for math errors, missing forms.  You normally don’t need to file an amended return to correct math errors on your original return. The IRS will automatically correct those for you. Also, do not file an amended return if you forgot to attach tax forms, such as a Form W-2 or a schedule. The IRS will mail you a request for them in most cases.
  4. Form 1095-A, Health Insurance Marketplace Statement, errors. Some taxpayers may receive a second Form 1095-A  because the information on their initial form was incorrect or incomplete. If you filed a 2016 tax return based on the initial Form 1095-A and claimed the premium tax credit using incorrect information from either the federally-facilitated or a state-based Health Insurance Marketplace, you should determine the effect the changes to your form might have on your return. Comparing the two Forms 1095-A can help you assess whether you should file an amended tax return, Form 1040X.
  5. Three-year time limit. You usually have three years from the date you filed your original tax return to file Form 1040X to claim a refund. You can file it within two years from the date you paid the tax, if that date is later. That means the last day for most people to file a 2013 claim for a refund was April 18, 2017. See the Form 1040X instructions for special rules that apply to some claims.
  6. Separate forms for each year. If you are amending more than one tax return, prepare a 1040X for each year. You should mail each year in separate envelopes. Note the tax year of the return you are amending at the top of Form 1040X. Check the form’s instructions for where to mail your return.
  7. Attach other forms with changes. If you use other IRS forms or schedules to make changes, make sure to attach them to your Form 1040X.
  8. When to file for corrected refund. If you are due a refund from your original return, wait to get it before filing Form 1040X to claim an additional refund. Amended returns take up to 16 weeks to process.
  9. Pay additional tax. If you owe more tax, file your Form 1040X and pay the tax as soon as you can to avoid possible penalties and interest from being added to your account. Use IRS Direct Pay to pay your tax directly from your checking or savings account.
  10. Track your amended return. You can track the status of your amended tax return three weeks after you file with ‘Where’s My Amended Return?’ It is available in English, Spanish, Chinese, Vietnamese and Russian. The tool can track the status of an amended return for the current year and up to three years back. If you have filed amended returns for multiple years, you can check each year, one at a time.

For help amending your tax return or with any questions, please call or office:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

How a Summer Wedding Can Affect Your Taxes

With all the planning and preparation that goes into a wedding, taxes may not be high on your summer wedding checklist. However, you should be aware of the tax issues that come along with marriage. Here are some basic tips to help with your planning:

  • Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.
  • Change tax withholding. A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket or you may be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • Changes in circumstances. If you or your spouse purchased a Health Insurance Marketplace plan and receive advance payments of the premium tax credit in 2016, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace when they happen. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance credit payments are paid directly to your insurance company on your behalf to lower the out-of-pocket cost you pay for your health insurance premiums. Reporting changes now will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance, which may affect your refund or balance due when you file your tax return.
  • Address change. Let the IRS know if your address changes. To do that, send the IRS Form 8822, Change of Address. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office. You should also notify your Health Insurance  Marketplace when you move out of the area covered by your current  health care plan.
  • Tax filing status. If you’re married as of Dec. 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.
  • Select the right tax form. Choosing the right income tax form can help save money. Newly married taxpayers may find that they now have enough deductions to itemize on their tax returns. You must claim itemized deductions on a Form 1040, not a Form 1040A or Form 1040EZ.

For help with life changes and your taxes, please call one of our offices:

Plymouth 734.454.4100,    Allen Park 313.388.7180,

Grayling 989.348.4055,     Livonia 734-462-6161,

Royal Oak 248.399.7331, or    St. Clair Shores 313.371.6600

 

What You Need to Know if You Get a Letter in the Mail from the IRS

Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from us:

  1. Don’t panic. You can usually deal with a notice simply by responding to it.
  2. Most IRS notices are about federal tax returns or tax accounts. Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.
  3. Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.
  4. If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return.
  5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.
  6. If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree, and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.
  7. For most notices, you won’t need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call.
  8. Always keep copies of any notices you receive with your tax records.
  9. Be alert for tax scams. The IRS sends letters and notices by mail. We don’t contact people by email or social media to ask for personal or financial information. If you owe tax, you have several payment options. The IRS won’t demand that you pay a certain way, such as prepaid debit or credit card.
  10. For more on this topic, visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov/forms at any time.

For help with any income tax question, please call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

 

Tax Saving Tips You Can Use All Year Round

You can use tax credits and deductions to lower your tax liability, but you can also lower your taxes by using tax tips throughout the year. Here are a few:

Contribute more to your retirement savings – A good way to lower your tax bill is to begin contributing more to your IRA and other retirement accounts. Make sure you check the details of any retirement account you have; you may be able to deduct some or all of your contributions. That will reduce your taxable income because the amount you contribute will not be counted as taxable income.

Check your withholdings – You should check your withholdings if you received a big tax refund. If you are an employee, it likely means that you are withholding more than required. Paying too much in taxes is like giving a free loan to the government. If you withhold less, you get to keep more in your pocket throughout the year.

Account for job-hunting expenses – If you look for a job when you are unemployed, you can deduct the expenses incurred for transportation, food, and resume costs. Just keep in mind that if you are looking for a job in a new or different field of work, you cannot deduct job-hunting expenses.

Make charitable donations – If you make a charitable donation, remember to make it to a recognized charity to get the tax benefits.

Cost of moving to a new job – You can deduct the cost of the move if your new job is 50 miles or farther than your home and your old job.

There are other deductions as well such as those for a home computer used for business. Be sure to thoroughly research you options to save on taxes during the year that can really help on your next tax return.

For help with any income tax question and the new reporting rules, please call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

 

Use the “Where’s My Refund?” Tool

Taxpayers who have not yet received their income tax refunds can use “Where’s My Refund?” app to check the status. Find it on IRS.gov or the free IRS mobile app IRS2Go.

Here are five tips to know about “Where’s My Refund?”:

  1. Some Refunds Delayed. Beginning in 2017, certain taxpayers will get their refunds later. By law, the IRS cannot issue refunds before February 15 for any tax return claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS must hold the entire refund, not just the part related to the EITC or ACTC. The IRS began releasing delayed 2016 EITC and ACTC refunds on February 15.

These refunds likely won’t arrive in bank accounts or on debit cards until the week of February 27. This is true as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Banking and financial systems need time to process deposits, which can take several days.

Where’s My Refund? will be updated on February 18 for the vast majority of early filers who claimed the Earned Income Tax Credit or Additional Child Tax Credit. Before February 18, some taxpayers may see a projected date or a message that indicates the IRS is processing their return. “Where’s My Refund?” remains the best way to check the status of a refund.

  1. Timely Access. Information will normally be available within 24 hours after the IRS receives the taxpayer’s e-filed return, or four weeks for a paper return. The system updates once every 24 hours, usually overnight, so there is no need to check more often.
  2. Gather Basic Information. Taxpayers should have their Social Security number, filing status and exact refund amount when using “Where’s My Refund?”. Those without Internet access can call 800-829-1954 anytime, to access the audio version of this tool.
  3. What to Expect. “Where’s My Refund?” includes a tracker that displays progress through three stages: Return Received, Refund Approved and Refund Sent. When the IRS processes a tax return and approves the refund, taxpayers can see their expected refund date. Even though the IRS issues most refunds in less than 21 days, tax returns may need further review and take longer.
  4. When to Call: Taxpayers should call the IRS to check on a refund only when:
  • it has been 21 days or more since they e-filed,
  • more than six weeks since the return was mailed,
  • the “Where’s My Refund?” tool directs them to contact IRS.

A tax transcript will not help taxpayers find out when they will get their refund. The IRS notes that the information on a transcript does not necessarily reflect the amount or timing of a refund. While taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications, and to help with tax preparation they should use “Where’s My Refund?” to check the status of their refund.

For help with any income tax question and the new reporting rules, please call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

 

 

 

Things to Know About the Child Tax Credit

The Child Tax Credit is a tax credit that may save taxpayers up to $1,000 for each eligible qualifying child. Taxpayers should make sure they qualify before they claim it. Here are five facts from the IRS on the Child Tax Credit:

  1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:
  • Age. The child must have been under age 17 on Dec. 31, 2016.
  • Relationship. The child must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother or half-sister. The child may be a descendant of any of these individuals. A qualifying child could also include grandchildren, nieces or nephews. Taxpayers would always treat an adopted child as their own child. An adopted child includes a child lawfully placed with them for legal adoption.
  • Support. The child must have not provided more than half of their own support for the year.
  • Dependent. The child must be a dependent that a taxpayer claims on their federal tax return.
  • Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  • Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  • Residence. In most cases, the child must have lived with the taxpayer for more than half of 2016.

The IRS Interactive Tax Assistant tool – Is My Child a Qualifying Child for the Child Tax Credit? – helps taxpayers determine if a child is a qualifying child for the Child Tax Credit.

  1. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate a taxpayer’s credit depending on their filing status and income.
  2. Additional Child Tax Credit.  If a taxpayer qualifies and gets less than the full Child Tax Credit, they could receive a refund, even if they owe no tax, with the Additional Child Tax Credit.

Because of a new tax-law change, the IRS cannot issue refunds before Feb. 15 for tax returns that claim the Earned Income Tax Credit (EITC) or the ACTC. This applies to the entire refund, even the portion not associated with these credits. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS expects these refunds to be available in bank accounts or debit cards at the earliest, during the week of Feb. 27. This will happen as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Read more about refund timing for early EITC/ACTC filers

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

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