Contributed by Elizabeth A. Maxson, Lizzy Bee’s Tax & Accounting
So, being that this is the first month of this section, I’d like to just begin by sharing some tax and financial tips for the regular ole’ Joe and the busy small business professional. However, I will welcome any and all questions submitted to my email for all future articles and will provide answers within the subsequent edition.
Thank you October, it’s almost PFD season! That’s right, it’s that wonderful time of the year where the price of everything in Alaska goes up by 50%, (so you can get that 25% off PFD special, you know?). Did you ever notice though that taxes are never withdrawn from your PFD? That’s because you’re required to pay them at the end of the year.
I can’t tell you how many amended returns I have filed because my clients did not know that they needed to claim it as income. If you receive PFDs for your children or other dependents, those will need to be claimed with a special form as well, but do not count toward your income (they are still taxed however). The state of Alaska provides the appropriate federal forms you will need to bring to your tax preparer either online, if you applied via e-file, or by mail.
More excellent news. Typically, the IRS takes 21 days to process returns that were electronically filed. However, this year due to a large increase in fraud, they have announced that they will not issue refunds prior to February 15th if you are claiming earned income credit or the additional child tax credit. They still are anticipating the typical wait time for electronic filing without the previously mentioned credits, but are cautioning tax payers to not rely on their returns for bill payments and the like.
On a positive note, are you a seasonal employee looking for work? Great! There are lots of itemized tax deductions that’ll help you save on your tax bill at the end of the year. But, there are a few stipulations: it has to be within the same line of work you were previously in and there can’t have been a long period of unemployment since your last position. Your job title doesn’t have to be the same per se. But if you were, for example, a sawyer in the summer and now are a lumber mill laborer, that still can be under the general category - laborer.
What you put on your return as your occupation really does make a difference. (Another little tip, if you haven’t purchased a home and are attempting to obtain lending, having the same job title on your tax return will help you with the “2 years” stipulation that you will need to qualify.) You can write off the cost of preparing your resume as well as postage. You may also be able to deduct the cost of travel if you are looking for a new job. This deduction can be claimed if you are travelling outside of your city area and for more than a typical workday.
Here are 5 tips for starting a business:
1. Decide early on your business structure. The type of business you choose will determine which tax forms you file. There are many benefits, and some disadvantages to each. Be sure to contact a professional for your specific needs.
2. There are four general types of business taxes. There is income tax, self-employment tax, employment tax and excise tax. The type of tax you pay depends on the business structure you set up. You may need to make estimated tax payments.
3. You may need an employer identification number for your business. To see if you do, go to the IRS website at IRS.gov. You can also apply for it online there.
4. Choose an accounting method. There are two types: cash and accrual. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
5. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage that they offer their employees. You’re eligible for the credit if you have fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
And that’s it for this month’s Financial Corner!