This blog is specifically for the person who is self-employed and isn’t familiar with one of the biggest refund killers in the tax world – self employment tax. When you work as an employee instead of free lance, your employer is required to withhold 6.2% social security tax and 1.45% medicare tax from your paycheck as well as federal and state income taxes plus any local or disability taxes. Then the employer has to match the social security and medicare tax, with the combined employer and employee taxes totaling 15.3% of your wages, of which each pays 7.65%. It is different when you are self employed. You are an independent contractor and your “employer” (actually customer since you are self employed) is not responsible for any taxes you might owe; they just pay you a lump sum. You have an advantage of being able to deduct your expenses against this income, but then you owe income tax on the net. You also owe self employment tax on the net, which is both halves of the social security and medicare taxes (the IRS allows half the self employment taxes paid as a deduction against this, so instead of 15.3% of the [...]
Burbank CPA Tax Musings: Start Planning Now for Next Year’s Taxes
So you have filed your federal and state income taxes for 2014 (unless you are on extension) and are breathing a sigh of relief. Well, now is the time to start planning for your 2015 taxes! Okay, stop looking at me like that. If you do a little at a time and gradually build up to the end of the year, you will have things done with a lot less stress. See this IRS tip with some specifics on 2015 planning ideas: http://content.govdelivery.com/accounts/USIRS/bulletins/100352b?reqfrom=share The sooner you get things done, the sooner you can relax and not worry about appointment scheduling with your preparer, getting things together and kicking yourself for forgetting anything. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa
Tax Musings of a Burbank CPA: So Why Can a Big Income Tax Refund Be a Bad Thing?
Well you have filed taxes for this year and are getting a big refund. What to do with this windfall? How about kicking yourself. You do realize that a “tax refund” is made up of two parts – you give your federal or state government YOUR hard earned money throughout the year and when you file your taxes, said government gives you YOUR money back. Effectively you are letting the government have it interest free for the year (so it gets the ‘float’ on the money!) then returns it to you. You are hiding your money under the IRS mattress (except you don’t have access to it.) Here is another idea. Say you get approximately a $4000 refund every year when you file your taxes. What would happen if you reduced your withholding $250 a month and put that into a savings account paying .75% a year. That means you have $3000 in the bank with about $15 interest by the time you would get your $1000 tax refund on Feb 28. Doesn’t sound like much does it? Well what if you put the money into a mutual fund paying about 5% a year in dividends? Now you have $100 in dividends [...]