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You can be self-employed as a sole proprietor/an independent contractor, or a member of a partnership or of a limited liability company. As such, you need to file an annual income tax return and pay estimated taxes throughout the year on your income. Also, you may have to remit self-employment (SE) tax payments as well with your estimated income tax payments. The SE tax is a Social Security and Medicare tax — being self-employed, you have to pay both the employer and employee portions.

You can be self-employed as a sole proprietor/an independent contractor, or a member of a partnership or of a limited liability company. As such, you need to file an annual income tax return and pay estimated taxes throughout the year on your income. Also, you may have to remit self-employment (SE) tax payments as well with your estimated income tax payments. The SE tax is a Social Security and Medicare tax — being self-employed, you have to pay both the employer and employee portions. The self-employment tax is 15.3 percent of your net earnings. As an employee, you and your employer split the burden, each paying half. This is why your first reaction to the SE tax may be dismay — but there are deductions from running a business to take into account. To offset your annual income and self-employment tax liability, you may be required to make quarterly estimated tax payments to cover the anticipated self-employment and income tax liability. Typically, the quarterly payments are due April 15, July 15, Sept. 15 and Jan. 15. Quarterly estimated tax payments can be made using Form 1040-ES, Estimated Tax for Individuals. The taxpayer may elect to pay electronically through the Electronic Federal Tax Payment System. If this is your first year being self-employed, you will need to estimate the amount of income you expect to earn for the year. If your net earnings from self-employment exceed $400 or more, you will be required to file a personal income tax return with a calculation for your self-employment taxes on Schedule SE. Net earnings are generally calculated by starting with gross income from the business and subtracting deductions and depreciation allowances.Generally, you'll have to file a Schedule C or Schedule C-EZ to report your income or loss from a business you operated or a profession you practiced as a sole proprietor. If your expenses add up to $5,000 or less, you can file Schedule C-EZ instead of Schedule C. You may operate as a married couples business — a qualified joint venture — and though you file a joint return, you can elect not to be treated as a partnership for federal tax purposes. You each can calculate your self-employment taxes separately, as well as account for your respective share on Schedule C. There may or may not be advantages to doing this, so again, consult with a professional before making a decision.For more help, consult the IRS's "," an online learning tool with nine interactive lessons designed to help you understand your tax rights and responsibilities. The IRS Video Portal contains video and audio presentations on topics of interest. Of course, that's just the beginning. Every business is different, and requires a separate tax strategy tailor-made to its situation. We can help you with your self-employment taxes, making sure you pay what is due while taking advantage of all the deductions and credits you're entitled to. Copyright 2018​

Employer-Sponsored Volunteer Programs

An Employee Volunteer Program (EVP), also often referred to as workplace volunteer program or employer-sponsored volunteer program, is becoming more and more prevalent in today’s world. I would argue that a program such as this is an essential addition to all employee benefit packages if a company wants to attract and retain the most talented recruits of the millennial generation. This emerging group of workers is unique as compared to previous generations in that they seek to blend their personal and professional lives in a remarkable way to find what we all strive for, job satisfaction.

6 Ways to Ensure Vital Documents Survive Disaster

Due to recent record rainfalls and flash flooding throughout the state of Wisconsin many residents have endured substantial damage and even loss of their homes, businesses, and vehicles. Disastrous events such as the recent flooding in Wisconsin thrust the notion of how important it is to have a disaster recovery plan in place to not only protect your major assets, but your vital documents as well.

Five Opportunities for Individuals Through the Tax Cuts and Jobs Act

With tax season fast approaching, here are five opportunities through the Tax Cuts and Jobs Act (TCJA) that individuals should consider for 2018. No. 5 – Standard Deduction vs Itemized DeductionPersonal exemption has been eliminated with the TCJA, but the good news the standard deduction increased from $6,350 to $12,000 for single filers and $12,700 to $24,000 for joint filers. Unfortunately, the TCJA has limited or taken away other itemized deductions. One of those limited deductions is the state and local tax deduction, which is now limited to $10,000 per year. This new cap will affect married couples who file jointly more than single filers because the cap is per return and not per person. Other changes to itemized deductions are miscellaneous deductions subject to 2 percent floor have been temporarily eliminated. TCJA limits the home mortgage interest deduction to home acquisition debt. No. 4 – Qualified Tuition PlansThe next opportunity is the qualified tuition plans. Prior to the TCJA any earnings could be taken out tax free when used for qualified education such as colleges, universities or other post-secondary schools. Now, qualified tuition plans can be used for tuition at elementary or secondary public, private and religious schools. This will allow up to $10,000 per year. No. 3 – Home Equity Debt InterestHome equity debt interest is no longer deductible. The good news is that interest paid on the home equity loans and line of credits are deductible. That is if these funds are used to buy or improve the home that secures the loans. This is limited to $750,000/$375,00 and is called home acquisition debt. Taxpayers that use the funds to pay off credit cards or personal debt won’t be able to use the interest as a deduction. Tracking how the funds are used is highly recommended. No. 2 – Charitable ContributionsThe limits for charitable cash contributions have temporarily increased from 50 percent to 60 percent of adjusted gross income. Unfortunately, with the changes to the standard deduction and other changes to itemized deductions, some taxpayers will not benefit from this as they will be unable to itemize. A way to help with this is to bunch or increase charitable contributions every other year. Another option would be to set up donor-advised funds. A donor-advised fund is like a charitable investment account, as it is created for the sole purpose of supporting charitable organizations. No. 1 –Qualified Business Income DeductionThe new qualified business income deduction allows taxpayers who own interest in a sole proprietorship, partnership LLC, or S corporation to deduct up to 20 percent of their qualified business income. Please click here to review the IRS guidelines and rules for this deduction.    Author:  Jack Lundsten, Kollath CPA

New Tax Law Brings Changes for 529 Plans

Have you heard the news?  Section 529 plans are not only being used for college education, but for elementary education as well.  The new tax law, Tax Cuts and Jobs Act (TCJA), will let you tap into a Section 529 plan to pay for many elementary and secondary schools starting in 2018. The TCJA is opening Section 529 plans to pre-college schooling to include tuition at elementary or secondary public, private or religious schools and 529 plans will no longer be available for home schooling expenses.  The new tax law will limit tax free distributions to $10,000 a year for private, elementary and secondary school expenses. Up until now, the only tax-free savings accounts that were offered for K-12 were Coverdell Education Savings Accounts (ESAs).  Now that the 529 Plans are being used for tax-free private, public and religious schools, those who are currently saving with the Coverdell ESAs and are wanting to switch to a 529 Plan can do a rollover with no tax consequences. It is recommended to open separate accounts, one education fund for college and one education fund for elementary school K-12, to keep track of which education fund you are paying for.  That way you can keep track of your investment goals for each account and take out the appropriate amounts when you need to.Author:  Julie Brickl, Accountant, Kollath CPA   ​

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