The Time to Get Ready is Now!

5 things to do now for less taxesHere is an idea. Instead of waiting until April 13th, why not get ready for filing your next year’s tax return now. Doing this today and maybe make some changes today could make a significant difference on your ultimate tax bill due next April 15th.

Here are five things to do now:

1. Check your withholdings

If you have a big refund during the 2013 tax season, now is the time to consider lowering your income tax withholdings if your income and deductions will remain similar in 2014. Alternately, if you came owed a substantial sum when you fi led for 2013 taxes, you may want to consider increasing your tax withholdings.

2. Examine your information

Now is a good time to meet with your tax preparer —waiting until February of 2015 could add increased stress when you’re getting ready to file your 1040. Your tax preparer likely has time to meet with you now. Getting an appointment in April is nearly impossible. Get together and look at your tax situation and start planning ahead.

3. Get Your books and financial statements in order

If you’re doing anything beyond working, it’s time to start getting everything in order so that you aren’t rushing at the beginning of 2015. And if you’re a small business or have rental properties be sure to get prepared to issue 1099s or prepare other forms that you’ll need to complete your taxes.

4. Set aside receipts

Don’t wait until the end of the year to start thinking about deductions – be smart and start pulling together the records immediately so that they are close at hand come tax time. It’s amazing how many pieces of paper you will lose and how many thing you will forget between now and next April.

5. Spring Cleaning in the Fall

The Time to Get Ready is Now for Tax SavingsNow’s a great time to clear the clutter as the days fall shorter. Do some fall cleaning by gathering your old clothing and household items and donating it to a charitable organization before the end of the year. Be sure to get a receipt for your donation and when you prepare your taxes you can apply a ‘fair market value’ to that donation. Your generosity may be worth $25 to $35 in tax savings for every $100 of what you donated.

Need Help Doing It Now?

Wallace Associates Group is prepared to walk you through this process. The time to get ready is now. What you do between now and December 31st can have a much more significant impact on the amount you pay April 15th than anything you do January 1st or after.

Are Your “Independent Contractors” Really Employees to the IRS?

Believe it or not, some businesses have gone to great lengths to conduct business without employees, assuming that if you call a worker an “independent contractor” and you have the worker sign an Independent Contractor Agreement, that it’s all OK. It isn’t. As the author of Little Orphant Annie and The Raggedy Man, James Whitcomb Riley, is credited as saying, “When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”

Employee or Independent ContractorIf you tell a worker when and where to work, no matter what you call that worker, unless the situation fits specific exceptions, the Internal Revenue Service will call that worker an employee and it will want the required payroll taxes and withholding. If you happen to be one of those who has in the past called the duck something other than what it is, there is hope.

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program allows many businesses, tax-exempt organizations, and government entities that currently treat their workers, or a class or group of workers, as non-employees or independent contractors, to prospectively reclassify workers as employees under generous settlement terms. As the title clearly points out, participation in this program is voluntary, but by participating you will escape the fines and penalties that would otherwise be assessed if the Internal Revenue Service finds it on their own and forces you to do it.

Who Can Participate?

In order to participate, the taxpayer must meet the following requirements:

  1. They must have consistently treated the workers in the past as non-employees;
  2. They must have filed all required 1099 forms for the workers for the previous three years;
  3. They must not be currently under audit for employment taxes by IRS; and
  4. They must not be currently under audit by the federal Department of Labor or a state agency with respect to the classification of these workers.

What is Required?

Interested taxpayers apply for participation in the program by filing Form 8952, Application for Voluntary Classification Settlement Program. Taxpayers accepted into the program will pay an amount effectively equaling just over 1% of the wages paid to the reclassified workers for the past year.

Why Not Wait for the IRS to Find It?

Taxpayers who are accepted into the program are basically given what amounts to amnesty for their past deeds. Those accepted will not be audited for prior years on payroll taxes related to the workers they voluntarily reclassify.

Now is a Good Time to Take a Good Look at How You Classify your Workers

IRS examination employee classificationThe Affordable Care Act, common known as “Obama Care”, adds additional provisions on employers starting next year. The Internal Revenue Service will be looking for taxpayers trying to get out of these provisions, so classification of workers as independent contractors will be under the microscope like never before. If you’ve got anything to hide, now is the time to voluntarily give yourself up. It will cost you a lot less than it will if the IRS discovers it on their own.

We Can Help

Wallace Associates Group is here to help you ensure your worker classifications are correct and we can help you fix any past problems you might have.