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Better Find Out Now!

Before The IRS Does

As a business owner, you would rather pay independent contractors than employees.  This allows you to avoid paying payroll taxes, unemployment taxes, and higher worker compensation insurance costs. As an Employee, you might rather be an independent contractor because of some very nice tax advantages. It can be win-win.

But be careful since the IRS looks closely at who is and who is not an independent contractor. The agency has stepped up its audits of small businesses, looking very closely at independent contractors as a means of collecting taxes and penalties.  When the IRS catches an employee who was categorized as an independent contractor, stuff really hits the fan for the employer.  There is the assessment of payroll taxes (12.5% of wages earned by the employee) PLUS Interest PLUS Penalties for not filing the required payroll forms.  When they are done you will end up paying way more than was due to begin with.  This does not include the additional costs of workers compensation insurance or unemployment insurance that will also result.

It is most common for these issues to come to the attention of the IRS when one of the following happens;

A routine examination of the return;

An independent contractor applies for unemployment benefits, triggering an inquiry;

An independent contractor file an SS-8 form claiming to be employee, usually after finding out what their tax bill is for not being treated as one by their employer;

There is a sudden change in the number of employees, especially if the amount spent on contractors’ swings in the opposite direction. (This happens when an employer suddenly decides to fire every employee, but to rehire them as independent contractors, but to do the same job.  Our states and various education departments are famous for this by allowing retired employees to work for the same entity as “Consultants”

There are 20 factors that must be considered to determine independent contractor status. No special credence is given to any one of the factors. This means that you will need to error on the side of caution, as the penalties for misclassifying an employee are steep.  It is my opinion that at least half of these conditions need to be met to even consider calling a worker an independent contractor.  It is also important to understand that these can mean different things in different situations.

1)      Who has the control over how, when and where the work is accomplished?

2)      How much actual training is provided?

3)      Are the Services provided integrated with the company's operations?

4)      Are you required to perform the services personally, or can you delegate?

5)      Who has the right to hire, supervise, and pay assistants?

6)      What is the relationship with the company and is it continuing?

7)      Who sets the hours of work?

8)      Does the individual work full-time for the company or is there other jobs they are doing?

9)      Does the individual work at the company's location?

10)  Does the individual set the steps in which the work will be done?

11)  Is the individual required to submit written or oral reports?

12)  Does the individual get paid by the job rather than by the week or month?

13)  Does the individual reimbursed for business or traveling expenses?

14)  Does the individual provide their own equipment and supplies?

15)  Does the individual invest in the facilities they use for doing the work?

16)  Does the individual realize a profit or suffer a loss as a result of their services?

17)  Does the individual work for many different companies at the same time?

18)  Are the individuals’ services available to the general public on a regular basis?

19)  Does the individual risk being fired as long as they produce the requested work?

20)  Is the individual able to terminate their relationship with the company prior to work completion without liability?

I AGAIN WANT TO MAKE THIS CLERAR:  THERE IS NO PREFERENCE GIVEN TO ANY OF THE ABOVE, EACH SITUATION IS DIFFERENT.  CONSULT YOUR OWN TAX ADVISOR, OR CALL ME IF YOU HAVE EVEN THE SMALLEST QUESTION OR DOUBT!

Children with investment income may have part or all of this income taxed at their parent’s tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income
This rule applies to children who have investment income of more than $1800 and meet one of three age requirements for 2008:
1. The child is younger than 18.
2. The child is 18 and has earned income that does not exceed one-half of their own support for the year.
3. The child is older than 18 and younger than 24 and a full-time student with earned income that does not exceed one-half of the child’s support for the year.
To figure the child’s tax using this method, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,800, and attach it to the child’s federal income tax return.
When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents’ Election To Report Child’s Interest and Dividends.
More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available on the IRS Web site at IRS.gov in the Forms and Publications section. You may also order them by calling the IRS at 800-TAX-FORM (800-829-3676).

Or better yet, give your Tax Guru a call, and get personalized advice. 203-421-0159

You’ve discovered an error or determined that you are entitled to a previously unclaimed credit or deduction, after your tax return has been filed. Do you need to amend your tax return?
The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.
However, you should file an amended return if any of the following were reported incorrectly:
• Your filing status
• Your dependents
• Your total income
• Your deductions or credits
You may also elect to amend your 2008 return if you are eligible to claim the new first-time homebuyer credit of up to $8,000 for a qualified 2009 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2008 return without waiting until next year to claim it on the 2009 return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ submitted electronically or by mail. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS processing center for the area in which you live. The 1040X instructions list the addresses for the centers.
The Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. There is an area on the back of the form where you explain the specific changes being made to the return and the reason for each change.
If the changes involve other schedules or forms, attach them to the Form 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Schedule EIC to show the qualifying person’s name, year of birth and Social Security number.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2008, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

Call me today to see if their is a need to Amend your return. and if there might be some money in it for you.

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With nearly 40 years of accounting and consulting experience, Mayer and Associates, CPA & Certified QuickBooks Pro Advisors, has guided numerous business owners to greater financial understanding and management through improved business systems, while keeping them compliant with all tax reporting requirements.

Come to Our Office….. 17 Woodland Road Or We can come to Yours… Your Computer
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Off of exit 61 off I-95 Your Coffee

3 Easy Ways to make an appointment:

PHONE: 203-421-0159 FAX: 866-509-4823 ONLINE: Info@maggiemayer.com

Instruction by a QuickBooks Pro Certified Adviser

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Dana Andrews is an IRS licensed tax practitioner with 10 years experience with the largest tax preparation firm in the country and is one of the funniest tax experts you will ever meet. Dana comes with experience in Tax Preparation, Management, Education and Small Business Development. His move to Mayer and Associates was motivated by the desire to do more for his clients on a year round basis. Dana began his career in taxation after several disappointing years of having his own taxes prepared incorrectly. Since his original training in 1997, Dana has served hundreds of clients in all income categories. Having the business experience, savvy and sense of humor makes an appointment with Dana a pleasure for his clients. When he has spare time, Dana enjoys playing games with his 3 year old triplets, reading science fiction, golfing and surfing on the internet to learn more useless information. Dana started his career as a genetic engineer after his 1988 graduation from the State University of New York, College at Fredonia, deep in the Lake Erie snow belt. After a stint at the University of Buffalo, doing research on deadly bacteria, he moved to Tarrytown in Westchester New York to work for General Foods as a Formulation Chemist. Soon after he became smitten with his now Wife and moved to Queens in NYC to become a science teacher. Not one to do just one thing at a time, and needing to be able to pay for a looming honeymoon, Dana also worked as a freelance lab technician doing the radiation research no one else wanted to do. This explains a lot. Dana completed his Masters Degree in Science Education with a perfect average and became one of the best (His Opinion) science teachers in NYC. Alas, his wife wanted to live in New England, and they were off to Connecticut. Dana simultaneously taught science to high school kids, worked his own construction business and became a tax preparer for several years in Connecticut. After several grueling years, he decided that the true passion was working with people, helping them save money. Dana determined that the tax world was where he wanted to be full time and forever. This confirmed his family’s suspicions that he was a little off his rocker. However, Dana has an excellent record as a tax professional, is licensed by the IRS and has a following of many wonderful clients. Mayer and Associates is exceeding glad that Dana has joined our team as he says “the Chief Taxation Officer”. We don’t have the heart to tell him that he is the only taxation officer. Sorry Dana

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